IESE Research Papers,
IESE Business School

Abstract: In January 2005, The Economist published a survey on corporate social responsibility (CSR), joining a long-running debate on the meaning and need for CSR in a market economy. The British weekly's thesis, widely accepted among economists, was first stated years ago by Milton Friedman (1962): a firm that maximizes its profits while acting within the law and the ethical rules that are intrinsic to a market economy is fulfilling all of its social and moral responsibilities and need not abide by any other type of constraint or demand. However, this thesis is disputed by many other authors. This article seeks to answer the question of whether there is a role for CSR in the economic paradigm. Obviously, it does not pretend to give a final answer but simply to set forth the reasons that will enable each person to arrive at his or her own answer. The first part discusses the economic arguments about maximizing value for the owner and society and viewing the firm as a nexus of contracts. The second part discusses the different arguments about the possible role of CSR in the economic paradigm. The article ends with the conclusions.

Keywords: Contracts; Corporate social responsibility; Efficiency; Ethics; Value maximization

20 pages, July 21, 2005

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