The Friedman doctrine, also called shareholder theory, is a normative theory of business ethics advanced by economist Milton Friedman which holds that the social responsibility of business is to increase its profits.[1] This shareholder primacy approach views shareholders as the economic engine of the organization and the only group to which the firm is socially responsible. As such, the goal of the firm is to increase its profits and maximize returns to shareholders.[1] Friedman argued that the shareholders can then decide for themselves what social initiatives to take part in rather than have an executive whom the shareholders appointed explicitly for business purposes decide such matters for them.[2]
The Friedman doctrine has been very influential in the corporate world from the 1980s to the 2000s. It has also attracted criticism, particularly since the financial crisis of 2007–2008, caused by various financial institutions which engaged in excessive risk for profit maximization, causing the bubble and collapse of the American real estate market that triggered the crisis throughout the wider global economy.[3][4][5]
- ^ a b Smith, H. Jeff (15 July 2003). "The Shareholders vs. Stakeholders Debate". MIT Sloan Management Review (Summer 2003).
- ^ Friedman, Milton (13 September 1970). "A Friedman Doctrine: The Social Responsibility of Business is to Increase Its Profits". The New York Times Magazine. Retrieved 23 October 2024.
- ^ Sorkin, Andrew Ross (11 September 2020). "Has Business Left Milton Friedman Behind?". The New York Times. ISSN 0362-4331. Retrieved 11 January 2022.
- ^ "Opinion | Profits and Social Responsibility: Revisiting Milton Friedman". The New York Times. 3 October 2020. ISSN 0362-4331. Retrieved 11 January 2022.
- ^ Posner, Eric (22 August 2019). "It's Time to Rethink Milton Friedman's 'Shareholder Value' Argument". The University of Chicago Booth School of Business. Retrieved 11 January 2022.