Miton Friedman on Social Responsibility

Milton Friedman Was Right Corporate mixer responsibility is bunk. by HENRY G. MANNE Friday, November 24, 2006 12:01 A.M. EST Milton Friedman famously declared that the sole business of the managers of a publicly held corporation was to maximize the value of its outstanding shares. Any sweat to use corporate resources for purely altruistic purposes he equated to socialism. He proposed that corporation legality should prevent managers from straying off the stockpile to join the altruists, a power like a shot almost universally granted them by state legislation. At a conference 34 years ago, celebrating Friedmans 60th birthday, I presented a paper questioning that dictum by noting that the vast part of simply nonprofit-oriented behavior by corporate managers was really--and necessarily--a profit-maximizing response to business, social or political pressures dressed up to look homogeneous something else. For such a strategy to be successful, the behavior had to come on to be nonprofit maximizing, and, of course, had to be called something like social responsibility.

Since it was touchy or impossible to distinguish a profit condition from a charitable motive in any point corporate action, a strong influence against corporate altruism, as Friedman was advocating, would invite judges to examine the propriety of a meaningful set of managerial decisions. I argued that American corporation law had traditionally had a strong business judgment rule whose principle aim was to prevent judges from even benignant in that kind of examination, which they were perhaps more likely to arrive wrong than to get right. Thus, if any plausible basis existed for a bona fide managerial decision, no matter how charitable it looked, I argued, we did not want a stronger rule that would invite judges to insurgent guess managers. The assembled audience of Friedmanites, as we were sometimes called--Are we all Friedmanites now?--was aghast that I dared to counter one of the masters most pointed... If you want to get a full essay, order it on our website: Orderessay

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