Accounting, Economics, and Law: A Convivium
Ed. by Avi-Yonah, Reuven S. / Biondi, Yuri / Sunder, Shyam
3 Issues per year
In an article of just under 3,000 words, published on September 19, 1970 in The New York Times under the title The Social Responsibility of Business is to Increase its Profits, Milton Friedman strongly expressed a simple idea, summarized in its title, which quickly took off as a statement of the obvious.This article has achieved the wonder of making appear as obviously true inferences about the role of the firm and its executives which, in fact, are based on erroneous assertions. Friedman’s argument, in particular, is based on the claim that shareholders own the firm. This is totally false, as our article will show. But based on this assertion, the argument has been built that corporate executives are the shareholders’ agents, that they must maximize the shareholders’ interests -equated with a maximization of the profits- and that they should not pay attention to anything else and especially not to the impact the pursuit of this goal may have on other contributors to the firm or on its social and natural environments.