Question

Does the Enron scandal demonstrate the disastrous consequences of the full implementation of the Friedman/libertarian classical model of corporate social responsibility? Or is the Enron scandal the kind of thing that could have been prevented if we were to adhere to the strict rules of free market economics à la Friedman?

Your answer should (a) explain what you take to be the essential aspects of Freidman’s model of free market economics as they bear on the Enron scandal, and (b) develop in some detail the reasoning behind your answer concerning the downfall of Enron.

Answer 1

The Enron scandal mirrors the disastrous aftermaths of the complete execution of the libertarian classical framework of corporate social responsibility

Ans a) Liberal economists have provided some of the most severe criticism of CSR. They cite Friedman’s popular maxim that ‘there’s just one social responsibility of corporations: to utilize its resources to augment its profits, as long as it remains within the rules of the game’ . Businesses, that pursue CSR aims, risk overlooking the profitability motive, at the cost of the long run health of the business sector &, by extension, of the economy as a whole

Ans b) There’s no universally recognized definition of CSR, nor is there any accord on a final list of the concerns it encompasses. It’s usually agreed that CSR is neither business philanthropy nor strict conformity with the law. But, we can simply identify ‘events’ that don’t fit in the CSR framework. The fall of energy broker  Enron Corp. has been explained as the largest business surprise of the last ten years. It was a surprise which all of a sudden left 20000 staff members in a truly compromised safety of their pension monies. The idea of CSR is underlined by the notion that businesses can no more act as isolated economic bodies functioning in detachment from wider society. Traditional viewpoints regarding competitiveness, survival & profits are being removed. The increasingly negative & quite pervasive effect of global firms in all facets of social life & in the environs has been the stimulus in the emergence of a multiplicity of stakeholders wanting accountability about the influence of business activity in the complete aspects of its influence