This report is a reflective writing and
will attempt to outline the events that transpired during the course of the struggle
at Plachimada, which took place at two levels: the grassroots and the
judiciary. It shall then further attempt to answer questions pertaining to the
ethical responsibilities of the firm to the community around it and to the
society at large.
Milton Friedman said “there
is one and only one social responsibility of business – to use its resources
and engage in activities designed to increase its profits so long as it stays
within the rules of the game, which is to say, engages in open and free
competition without deception or fraud”
statement, for a long time, had been the steadfast belief of the corporations
across the world. The notion of firms as economic entities with sole objective
of profit maximization has been prevalent for as long as one can remember.
Viewed this way there are
no “responsibilities” for the firm except to produce economic value for its
shareholders. Therefore, it must lead us to believe that a firm certainly has
no ethical responsibilities but only legal obligations. His argument elaborated
on the basic idea that being mere agents of shareholders, managers have the
sole duty to increase their wealth.
This argument has been
attacked by many scholars on different counts. Firstly, it seeks to completely
ignore any ethical obligations. In other words, so long as they stay within law
they need not worry about any other impact their actions may have on their
stake holders other than the shareholders.
Second it is not cleat
that the shareholders have in fact given such a mandate to the management. They
might have invested purely with a speculative motive. In fact, some surveys
carried out on shareholders in US revealed that the majority did not want pure
maximization of profits by the firms to the exclusion of all other
Thirdly, if it is
accepted that maximizing shareholder value is the mandate, then this has to be
a long-term initiative. This is achieved only by adopting sustainable proactive
and developing a long-term relationship with stakeholders and the community.
The case of Plachimada vs Coca Cola showcases this belief. It further
goes and examines about the repercussions of not taking into account the well
being of the community in which it thrives