Until the 1950s and 1960s, businesses generally conducted their operations according to the theory of economist and Nobel Laureate Milton Friedman, who maintained that a corporation's sole purpose was to maximize profits for the benefit of its shareholders (Davis 28-33). Consequently, any expenses for social causes that reduced that profit necessarily violated the corporationÆs mission. However, during the second half of the twentieth century, many business experts began to argue that corporations had a contract with the societies in which they did business. Today, corporations are expected to conduct their business activities in a manner that is responsible to both its internal stakeholders, such as shareholders and employees, as well as external stakeholders, those people outside the company who will be directly or indirectly affected by this activities.
Initially, the concept of a contract between a corporation and its social environment was limited to the belief that a corporation would not harm society by operating outside the law. But as the social movements of the 1960s agitated for greater social equity, this increasingly socially aware mindset began to affect consumer opinions of not just social and governmental responsibility, but corporate responsibility as well. In particular, interest groups such as the civil rights and feminist movements, brought into the public eye the way in which complying with the law could actually serve to harm numerous social groups and global concerns. Companies were encouraged to look beyond the law to the effect that their business practices had on society.
Thus, the new social contract contended that social responsibility should weigh into a corporationÆs consideration of its business responsibilities. (Lantos 595-630). Given the sometimes adverse effects of business decision making on society as well as corporate reliance on society, the notion of an implied corporate social c...