What Is Milton Freedman’s Argument Against Companies Having an Overtly Ethical Policy? Essay

1. What is ethics Every task or job that being done daily required ethics. Not only in business, teaching, studying and others, it required ways of doing that job according to the job description set. By that, ethics means is a way of doing thing, either doing thing right or wrong based on the job requirements. Sometimes, people had mistake understanding between ethics and law. In ethics, generally it’s more on moral, behavior, manner which been done when doing a task given. While law mean a set of rules and regulation that been set on how to do the thing/task correctly.

However, ethics and law is related. When someone did not follow the ethics stated, such as, cheated or doing the wrong ways to complete the task given, when caught, that person will be charged as breaking the law. That why ethics and law each connected. As for business and companies, there are Code of Ethics that been set by the management to be follow by the employees. In this code of ethics, there are rules that employees that work under same companies must follow. Example of rules is that “never take gifts or money from companies that this company had an agreement on it”.

In this examples, the companies stated that never take any kind of gifts or money given by the client, this is because, sometimes, it can be misunderstanding of bribes is being done by that client. If there employees that break that code of ethic, that employee can be fired from the companies. That why ethics is important not only in business, daily routine also can be infused with good ethical way of doing thing. 2. What is ethics in business As stated above, ethics can be either daily routine task or in business daily operation.

Above, Code of Ethics is one of the examples of ethics in business that had implement in very companies widely. By this code, employee in that company must follow that set of rules, if else, punishment will be given because brake the rules. But ethics in business have extra view and understanding in term of ethics issues. In business, in involve lot of people in wide environment of business. Example of environment of business is production, technical, marketing, management, consultant and other business environment.

This means, not only the employee in one companies is involve in a business, to become successful, the companies must interact with other companies, cooperate with each other to became stronger. Not only interact between other companies involve with ethical issues, dealing with single customer also involve, such as day to day operation in factory, cashier also involve in this ethical issues. Because there are many connection happen in business, many factors must be consider whether the job that being done is follow ethics or not.

If there are company that involve in the connection doing the unethical task, does other companies involve in that connection also became unethical also? That why, many factors involve must be consider when this happen in business. The management, middle and lower employee, agreement, lawyer, supplier and other items that involve when making connection between two or more companies must be take note and review deeply to prevent unethical ways of doing business from happen. That why ethics in business is important to be done/implement in a companies nowadays to prevent many unethical ways of doing business from happen or repeating again.

Although some unethical ways is being done or already happen in an companies, but not yet been discover, eventually the secret of doing the wrong ways will be exposed, and with that also, the reputation of that company suspend from society. This will bring major impact towards the production and revenues of that company. Unethical in business not only happen in small companies, big company and MNE (Multinational Company) also involve with this problem. Lately, many downfall of big company happen because of unethical in business.

Examples of unethical methods that been done is bribery, cheating on revenue statement, and other ways of doing business is became regular practice for some company to became successful immediately. One big example that involving big company is Lehman Brother case in unethical ways of doing business that causes the bankrupt of the companies. This will be discussed in next topic in this essay. 3. Arguments made by Milton Friedman regarding on ethic in a business Milton Friedman is one of the American worldwide known economists, statistician, and academic and also author that teach at University of Chicago.

Before Friedman became instructor at the university, he got a permanent place in business-ethics literature for New York Times Magazine. As for this assignment, one of the world knows article that Friedman been produce is being research. Milton Friedman has produce one article regarding one ethics issues in business. The famous article name, “The Social Responsibility of Business is to Increase its Profit”. This article had be the famous article among other economist until now. In this article, it tells mainly about the responsibilities of executive or management in a business to gain profit for the companies.

But to achieve that, the executive must consider all the environment effect, the employee itself, the client, the action made by the executive and the decision made that include the companies. In this article, there are arguments that state by Fried Milton regarding on ethical issues in business. The first arguments stated by Friedman, that corporate executive and directors are not qualifies to do anything other than maximize profit for companies. And the other arguments that Friedman stated in the article are, corporate officers have not right to do anything other than maximize profit for companies.

As stated argument made by Friedman, the top management only concern on getting profit for the companies and maximize performance for companies, but they lack of social responsibilities. Although there are ethical standard that been set for business, sometimes the top management might used unethical thing/ways that can be used to increase the companies profit. Example of thing that might be used by the top management is that using the employee money, or in term of companies resources to do other thing that can improve the companies.

Although there are argument that stated that behavior of using that kind of ways is an unethical ways, because using the money that the employee should get is being used to increase companies performance is wrong, without the knowing of employee about that matter, but to other, that ways is a good ways of increasing a good social relationship between employee and executive and top level management. Executive might used that money to improve the company’s facilities that can improve the employee work. 4.

Opinions on Milton Friedman arguments and alternative view Overall, in the article made by Friedman, is state generally on the responsibilities of people regarding on the social responsibilities to business to increase its profit. Firstly, the meaning of social responsibility is duties to contribute to business on benefit to the employee also, not only to the profit only. Differ from the Milton Friedman understanding on social responsibilities, it state that social responsibilities is focuses only at the profit.

Friedman stated arguments that the executive and the top level management only focusing on how to increase the benefit of the companies without notice the social responsibilities towards the employee. With the power as the top level management of the companies, they have authorities on decision that include the company’s interest. With that authorities, all the decision made will that be implement for that companies without having the approval from lower level employee. This is because their main job description is focusing only in making money and profit for company.

That why they don’t involve in social activities in that companies. As for my opinion, I might agree with the arguments made by Milton Friedman. This is because, in all business, businessman is a person to. Not that they don’t want think about the social responsibilities in the companies, but their solely function in the company is to focus on making profit to the company. Although there are many people might don’t agreed with Friedman arguments, but this is the reality that will be faced in every companies, both small and big companies will having this matter in their companies.

From my study and research regarding this topic, there might be an alternative ways that can be done to improve the social responsibility in business. One of the alternatives is that as the executives and top level management, they might need to involve directly on social environment, not only focusing directly on making profit. As a person, businessman also a person that have social needed. They can include their emotion and feeling as ordinary person when making that decision that will include the company’s interest. With that, all the decision made will be approved for all employees in those companies. . Example of business/company that have overtly ethics issues in the business As state above, to demonstrate the effect of unethical issues that play as the main role in downfall of business, the Lehman Brother downfall can be used as the subject to show the effect of the unethical ways of doing business. Before further investigation is being done to determine the unethical issues that been done in the company until its downfall, let take brief information about Lehman Brother regarding on the business purpose. Before the bankruptcy of Lehman Brother in 2008, this company was a global financial service.

Source form Wikipedia, it stated that “Lehman Brother was nominated as the fourth largest investment bank, before the downfall”. It provides business in investment banking services, equity and fixed-income sales and trading, research, investment management, private equity and private banking. This is the services the Lehman Brother provides in their business. In year 2008, it started the downfall of the Lehman Brother. There are many causes that give impact towards the downfall. One of the main causes that can be made as study that refers to this assignment title is the wrong doing that been done in Lehman companies.

After the year of bankrupt of this company, an investigation has been made to determine the main causes. In the investigation, the director of Lehman during that downfall, CEO Richard Fuld denying all the accusation made towards him. He stated that he only signed all the documents provide for him because all other officer has agreed on the item stated. That why he agreed on all the decision made, although there are unethical ways have been done in making the financial report for the company. Without knowing the truth, as the CEO that has the authorities, he agreed all the decision made based on the majority on other officer decision.

Because of the wrong doing from certain employee, it has become one of the major causes that made the Lehman Brother companies downfall. This has show proof the arguments made Milton Friedman regarding on the social responsibilities in making profit is true. 6. Conclusion from the example given From the examples on ethical issues, the Lehman Brother cases is show that when unethical ways of doing business, it can causes impact towards the companies downfall. Only by manipulate the financial report for the company, the effect give extremely effect towards the companies performance.

Follow on the other causes that Lehman Brother faced, more and more problem has happen towards that company. Only by having unethical problem when preparing the financial statement, Lehman Brother faced the impact until the company declared bankrupt. This show that ethical issues play as important item that company must focus on more. Its truth that every company wants to gain more profit and good reputation towards other companies, but by doing the wrong ways of business, sometimes the company will faced the great impact and eventually need to stop business because to many problem have occur in the company.

Not only big companies that must focus on ethic issues in business, small company also can focus on this ethic issue. If any companies practices good ethic practice in their company from early start, the company might save their business someday from having an unethical issues. 7. Overall conclusion for this assignment After all the research that been made on the question regarding on ethical issues, conclusion can be made. On ethic issues, generally it focuses on the way of doing thing. Ethics include doing the wrong way, the good ways of doing thing whether in daily routine or in business.

As for business, there are ethics in business that must be followed in companies. Usually, top level management set all the rules and regulation on the ethics that can be used in that company. Code of Ethics is one of the rules that been implement in every companies nowadays. In business, usually the business made is between two or more business to make the connection. In this connection, there must be ethics that must be following by the companies that involve in the connection. Either one of the company that made an unethical ways, both of the companies will get effect with that.

That why ethical issues is important in doing business. As for article made by Milton Friedman, on “The Social Responsibility of Business is to Increase its Profit”, this article focus on executive and officer in companies only known and main objective is to gain profit for companies. Not only have that, this article also showed that executive did not participate directly in social environment in the companies because just focusing on the profit and the reputation of the companies. This article always plays as argument until nowadays between economists worldwide.

Lehman Brother case is one of the examples of ethical issues that play as the important aspect that been the causes of the bankruptcy of the company. This is happening because of the cheating of the yearly financial statement that made by other parties that responsible produce that report for Lehman Brother companies. Because of the unethical ways of doing job, the effect is big for Lehman Brother. The top level management of that company is the player that causes of this problem. By that, all the employees for that company take the effect from this problem.

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