Friedman Doctrine Vs Csr

Per Friedman’s doctrine, the only social responsibility of a business is to increase its profits. Friedman argues that the only way an executive is accountable to only its shareholders is by entirely focusing on the profitability of company to the exclusion of everything else. However, I believe that this argument is flawed and incomplete. A corporation solely focused on profitability with no regards to the environment in which it operates is being shortsighted. In today’s hyper connected business environment with aware and opinionated customers, profitability and corporate social responsibility (CSR) do not exist in silos. They are interconnected. Therefore, businesses should focus on their CSR along with their profitability.

Guided by these principles, if I was the CEO of Mylan in August 2016, I would have made the following three decisions. First, I would have offered the generic version of Epipen for $100, instead of $300. Second, I would have continued to sell Epipen for $608. In fact, I would have removed all rebates or discounts from the Epipen. Third, I would have continued the donations of Epipen to the schools. These three steps would have ensured that the company can be profitable and at the same time everybody would have access to the lifesaving drug despite their income level.

The critics of CSR and supporters of the Friedman’s doctrine would object to my decision of introducing a generic version of Epipen at $100. They would argue that this is not the profit maximizing strategy. Therefore, it is at odds with my responsibilities towards my shareholder. However, what they fail to see is that those unrealized profits are short-term profits. The reality is that a good percentage of the current customers can neither afford Epipen, nor its generic version offered at $300. They are desperate for an affordable alternate. And, Mylan may lose these customers to a competition that can offer the product at a lower price.  In the meanwhile, many innocent people may lose their life due to the lack of affordability. In the light of the controversy, these deaths will be blamed to the "greed of Mylan". This kind of brand destruction will be hard to fix. By reducing the price of the generic version, Mylan will reduce the risk of losing its customers to the competition.

It is an absolute truth that a business can’t exist without being profitable. However, Friedman’s claim that a corporation is compromising its profits if it is involved in any social activities other than its profitability is flawed. There are numerous examples in today’s corporate world that show a company with the CSR goals can be more profitable by being socially responsible. For example, General Mills that are committed to reducing their carbon footprints and reducing their energy usage are saving on their costs. These cost savings are a direct increase in company’s profitability. In 2015, General Mills has reduced their energy consumption by 20%.

Besides this direct benefit, there are other indirect benefits for the socially responsible company that drives profitability. Today’s customer is more aware. They want to associate with the companies that are socially responsible. This creates brand differentiation and brand loyalty. For example, customers pay a premium price for Tom’s shoes not only because they are comfortable. There are tons of comfortable shoes available at a cheaper price. However, Tom’s commitment to donate a pair for every pair purchased resonates with customers’ values. And, this commitment builds brand differentiation and brand loyalty.