²ÝÁñÉçÇø

In the roughly five decades following the publication of Milton Friedman’s iconic  of profitability as the single normative goal of managers of public companies, innumerable articles and editorials have been written criticizing Friedman’s thesis. Even President Joe Biden publicly  the argument that a corporation’s primary responsibility is to its shareholders.

The primary criticism of Friedman’s position is that a sole focus on profitability ignores the social responsibility that businesses have to other constituents (besides shareholders) including consumers, employers, suppliers of inputs, the broader communities where companies do business and, for many, the environment. Today, this critique is associated with environmental, social, and governance (ESG) initiatives, which prioritize broader social goals even if they harm the financial interests of shareholders.

-----------------------------------------

Column by ²ÝÁñÉçÇø CBE emeritus professor Steven Globerman