"Friedman doctrine" OR "shareholder theory"

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Bad Company

by Megan Greenwell  · 18 Apr 2025  · 385pp  · 103,818 words

Capitalism and Freedom, but it was his New York Times essay eight years later that popularized his “shareholder theory,” revolutionized MBA curricula across the country, and set the stage for the rise of private equity. “The social responsibility of business is to increase its profits,” the headline announced; the three thousand words that followed warned that

the Local (Cambridge: Cambridge University Press, 2024), 26. The sole interest: Milton Friedman, “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits,” New York Times, September 13, 1970, https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. Between 2013 and 2023: Yang Liu and Lue Xiong, “Leverage in

.org/10.2139/ssrn.3423290. Even Berle and Means: Appelbaum and Batt, Private Equity at Work, 46. “The manager of such a corporation”: Friedman, “A Friedman Doctrine.” “When [private equity]”: Feldman and Kenney, Private Equity and the Demise of the Local, 30. One: Liz Charles Lazarus: The sections of this chapter about

, 118th Cong., 2nd sess., April 3, 2024, https://www.govinfo.gov/content/pkg/CHRG-118shrg55874/pdf/CHRG-118shrg55874.pdf. “No individual can coerce”: Friedman, “A Friedman Doctrine.” More than half of Republicans: “Americans and Billionaires Survey,” Harris Poll Thought Leadership Practice, August 2024, https://theharrispoll.com/wp-content/uploads/2024/07/Americans

, 91 September 11 terrorist attacks/effects, 15 Serota, Kenneth, 122–1123 Service Employees International Union, 222 7 Habits of Highly Effective People, The (Covey), 186 shareholder theory, xv, xxi, 34, 200, 235 Sheen, Charlie, 80 Shell, Eric description/character, 186–187 Riverton new hospital and, 186–189, 191, 195 Shemesh, Avi, 61

The Key Man: The True Story of How the Global Elite Was Duped by a Capitalist Fairy Tale

by Simon Clark and Will Louch  · 14 Jul 2021  · 403pp  · 105,550 words

consensus of the modern era. Shareholder theory had ruled Western capitalism since the American economist Milton Friedman formulated it in the 1960s. The sole purpose of a company was to make as much money as possible for shareholders, he said. “There is one and only one social responsibility of business—to use its resources and engage

in activities designed to increase its profits,” Friedman wrote, “so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.” The problem with shareholder theory’s exclusive focus

, data.worldbank.org/indicator/NY.GDP.PCAP.CD?locations=PK for shareholders: Milton Friedman, “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits,” New York Times, September 13, 1970, www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html “a new alternative”: Nick O’Donohoe, Christina Leijonhufvud, and Yasemin Saltuk

The Glass Half-Empty: Debunking the Myth of Progress in the Twenty-First Century

by Rodrigo Aguilera  · 10 Mar 2020  · 356pp  · 106,161 words

illegally, particularly when the amoral nature of laissez-faire means your only moral duty is to your bottom line. “There is one and only one social responsibility of business”, declared Milton Friedman in 1970, “to use its resources and engage in activities designed to increase its profits”.29 Add to this that such behavior

do so at the expense of shareholders themselves. This “principal-agent problem”7 has been extensively documented in economics, and while many economists take the shareholder-theory view that executive pay is designed to align with shareholder incentives (such as through stock options linked to firm performance) in order to address this

York Times, 30 Apr. 2014, https://www.nytimes.com/2014/05/04/magazine/only-one-top-banker-jail-financial-crisis.html 29 Friedman, M., “The Social Responsibility of Business is to Increase its Profits”, New York Times Magazine, 13 Sep. 1970, http://umich.edu/~thecore/doc/Friedman.pdf 30 Wolf, N., “This Global Financial

The Quiet Coup: Neoliberalism and the Looting of America

by Mehrsa Baradaran  · 7 May 2024  · 470pp  · 158,007 words

of responsibility, then we are concerned.”21 Two weeks after GM made its announcement, The New York Times Magazine ran an article titled “A Friedman Doctrine: The Social Responsibility of Business Is to Increase Its Profits.” On the page opposite Milton Friedman’s words, the Times placed a picture of James Roche at a podium under

puppets of the intellectual forces that have been undermining the basis of a free society.” Friedman moved from one insult to another. He dismissed the “social responsibility of business,” a phrase he continually put inside quotation marks despite its clear meaning in the law and the business community, as empty “nonsense,” faddish and unscientific

History of the United States, 1867–1960, 63 “Neoliberalism and Its Prospects,” xxxix, 46 “The Role of Government in Education,” 221 Friedman, Rose, 91 “Friedman Doctrine, A: The Social Responsibility of Business Is to Increase Its Profits,” 79–80 fringe lending, 212, 213, 215 Fritz, Harrison, 332 Frontera, Ernesto, 337 FTX, 342–45 Fukuyama, Francis, 38

, xxiv, 320–21 social problems, using markets to solve, 165 social programs, 238, 270, 316 “Social Psychology of the World’s Religions, The” (Weber), 219 Social Responsibilities of Business, Company, and Community, 1900–1960 (Heald), 83 Social Responsibilities of the Businessman, The (Bowen), 83 social responsibility, 82–84 social security, 15, 19, 57, 184

Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State

by Paul Tucker  · 21 Apr 2018  · 920pp  · 233,102 words

Watanuki, Crisis of Democracy. 3 The Purposes and Functional Modes of the Administrative State MARKET FAILURE AND GOVERNMENT FAILURE There is one and only one social responsibility of business—to use its resources to increase its profits so long as it stays within the rules of the game. —Milton Friedman, New York Times, 19701

on Banking and Currency, 1133–78. Washington, DC: US Government Printing Office. ________. The Optimum Quantity of Money. New Brunswick, NJ: Transaction Publishers, 1969. ________. “A Friedman Doctrine: The Social Responsibility of Business Is to Increase Its Profits.” New York Times, September 13, 1970. Friendly, Henry J. The Federal Administrative Agencies: The Need for Better Definition of Standards

Evil Geniuses: The Unmaking of America: A Recent History

by Kurt Andersen  · 14 Sep 2020  · 486pp  · 150,849 words

written by Milton Friedman, the University of Chicago libertarian economist, and published across five pages of The New York Times Magazine under the headline A FRIEDMAN DOCTRINE—THE SOCIAL RESPONSIBILITY OF BUSINESS IS TO INCREASE ITS PROFITS. Friedman had become famous during the 1960s, as the decade of free speech and anything-goes outlandishness made his

do their own thing, including selfish businessmen angry about the intensified suspicion of business. For those readers, seeing the righteous candor and militancy of the Friedman Doctrine in The New York fucking Times a year after Woodstock was thrilling, liberating. Capitalists of the world, unite! You have nothing to lose but your

. But they distort him. Smith also argued in favor of sensible government intervention to improve and optimize free markets. Within a few years of the Friedman Doctrine, elite executives-in-training internalized and felt free to espouse it. Asked in a class in the late 1970s at Harvard Business School about a

American Institutions.” He reused the “system is under broad attack” meme as well as the Milton Friedman quote and added his own version of the Friedman Doctrine’s class-suicide trope. “One of the bewildering paradoxes of our time is the extent to which the enterprise system tolerates, if not participates in

, Charles Koch published a stylish-looking San Francisco–based magazine called Libertarian Review. In it he wrote an essay that reiterated the gists of the Friedman Doctrine and the Powell Memo but went further, arguing that their “movement…for radical social change” must seek to take over American conservatism, radicalize it. Businesspeople

was skeptical of Social Security and government unemployment benefits and even generous health insurance provided by employers. A decade after the Times Magazine delivered the Friedman Doctrine and eight months before Reagan was elected president, it published a long, gushing profile of Feldstein for its 3 million Sunday readers, headlined SUPERSTAR OF

and neighbors and classmates who happened to work at banks or in real estate or the vicinity of C-suites. Starting in the 1970s, the Friedman Doctrine and its extrapolations freed and encouraged businesspeople and the rich to go ahead and conform to the left-wing caricatures of them, to be rapacious

what worked for the U.S. economy for its first century, before modern corporations existed, was how things should work today. It was like the Friedman Doctrine, which turned a reasonable capitalist truism (profits are essential) into a simple-minded, unhinged, socially destructive monomania (only profits matter). As movements, originalism in the

the USA! In just four minutes, Gekko summarized and incarnated the U.S. political economy’s new doctrine. It was Libertarian Economics for Dummies, the Friedman Doctrine dramatized, a stump speech for money and its manipulation as the root of all glory. And in the movie, Gekko’s audience responds with wild

as square while risk-taking and self-gratification were celebrated. In finance, starting in the 1970s, fusing if it feels good, do it with the Friedman Doctrine meant that the pursuit of maximum profit for oneself as well as for one’s company trumped every other value or motive, so recklessness and

of Chicago’s Hertz, a libertarian professor specifically commissioned two business school colleagues, both University of Chicago–trained, to write a paper elaborating on the Friedman Doctrine.*7 That became, when it was finally published in 1976, “Theory of the Firm,” which made the new callousness seem scientific and which became the

are other ways that increasing insecurity and increasing inequality got built into the political economy and became features of the system more than bugs. The Friedman Doctrine in 1970 begat the shareholder supremacy movement in the 1980s, which begat an unraveling of all the old norms concerning loyalty and decency of businesses

industry will be. Here again is a case that seems to me to illustrate the suicidal impulse of the business community. Three decades after his Friedman Doctrine condemned decent executives for indulging a “suicidal impulse” by pledging their companies would try to serve the public good, he was still at it: businesspeople

of the Business Roundtable felt obliged to issue a new “Statement on the Purpose of a Corporation,” more or less disavowing their adoption of the Friedman Doctrine decades before. The force awakened. And now? Perhaps the pandemic and/or the resulting recession and/or the protests against racist policing will become triggering

Tailspin: The People and Forces Behind America's Fifty-Year Fall--And Those Fighting to Reverse It

by Steven Brill  · 28 May 2018  · 519pp  · 155,332 words

free market privatization of longtime governmental functions, such as education—famously wrote an article in The New York Times Magazine in 1970 declaring that “The social responsibility of business is to increase its profits.” The management of a corporation, he argued, worked for its shareholders and only its shareholders. If managers paid attention to

Social Responsibility of a Business Is to Increase Its Profits,” September 13, 1970, http://www.nytimes.com/​1970/​09/​13/​archives/​a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. “Theory of the Firm”: Michael Jensen and William Meckling, “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure,” Journal of

Power and Progress: Our Thousand-Year Struggle Over Technology and Prosperity

by Daron Acemoglu and Simon Johnson  · 15 May 2023  · 619pp  · 177,548 words

published in September 1970 in the New York Times Magazine, immodestly titled “A Friedman Doctrine.” Friedman argued that the “social responsibility” of business was misconstrued. Business should care only about making profits and generating high returns for their shareholders. Simply put, “The social responsibility of business is to increase its profits.” Friedman articulated an idea that was already in the

air. The previous decades had witnessed stinging criticisms of government regulations and more voices in favor of the market mechanism. Nevertheless, the impact of the Friedman doctrine is hard to exaggerate. At one

created for shareholders. This meant giving managers big bonuses and stock options in order to focus them on boosting the company’s stock price. The Friedman doctrine, along with the Jensen amendment, brought us the “shareholder value revolution”: corporations and managers should strive to maximize market value. Unregulated markets, combined with the

sorts of efforts at moneymaking, for boosting profits was in alignment with the common good. Some companies pushed this even further. The combination of the Friedman doctrine and the lavish stock options to top executives motivated several executives to venture into gray areas and then into the red. The journey of the

high wages, by social norms of sharing the benefits of growth, and even by ideas of “welfare capitalism,” as we saw in Chapter 7. The Friedman doctrine pushed in a different direction: good CEOs did not have to pay high wages. Their social responsibility was solely to the shareholders. Many high-profile

CEOs, such as General Electric’s Jack Welch, heeded the advice and took a tough stance against wage raises. Nowhere can the impact of the Friedman doctrine be seen more clearly than in business schools. The 1970s were the beginning of the professionalization of managers, and the share of managers trained in

business degree. By 2020, this number exceeded 43 percent. Many faculty at business schools embraced the Friedman doctrine and shared this vision with aspiring managers. Recent research shows that managers who attended business schools started implementing the Friedman doctrine, especially when it came to wage setting. They stopped wage growth in their firms, compared

pay themselves more handsomely than other managers. Resistance to the New Deal, accompanied by the antiregulation, antilabor philosophical stances of some business executives and the Friedman doctrine, was not enough, however. In the early 1970s, wholesale deregulation and dismantling the labor movement were fringe ideas, even if more businesses were becoming vocal

interpreted as a failure of the existing system and signs that the US economy was not working anymore. A course correction was needed, and the Friedman doctrine and its bolstering of the power of businesses against regulations and organized labor came to be seen as the answer. Ideas that used to be

of the last several decades meant that this was not likely to happen: the eclipse of worker power. A Lost Cause The effects of the Friedman doctrine on wage setting may have been as important as its direct impact. If managers maximizing shareholder value were on the side of the angels, then

anything standing on their path was a distraction or—worse—an impediment to the common good. Hence, the Friedman doctrine gave an additional impetus to managers to campaign against the labor movement. Despite American unions’ important role in the shared prosperity of the decades that

direction of technology would also have to move in an antilabor direction. This is where digital technologies enter the story, in a big way. The Friedman doctrine encouraged corporations to increase profits by whatever means necessary, and by the 1980s, this idea was embraced by the corporate sector. Executive compensation, in the

Andersen also pushed cost cutting. As these ideas were increasingly preached by articulate management experts, it became harder for workers to resist. Just like the Friedman doctrine, Reengineering the Corporation crystallized ideas and practices that were already being implemented. By the time the book came out, several large US corporations had used

. US technologies and business strategies spread more broadly, even if countries differed in how they adopted and configured automation technologies, as we have seen. The Friedman doctrine and ideas related to the use of digital tools in order to cut costs influenced business practices in the United Kingdom and the rest of

understood unless we recognize the new digital vision that emerged in the 1980s. This vision combined the drive to cut labor costs, rooted in the Friedman doctrine, with elements of the hacker ethic, but abandoned the philosophy of early hackers such as Lee Felsenstein that was antielitist and suspicious of corporate power

in Chapter 8 that managers with business-school educations tend to reduce wages and cut labor costs, presumably because of the lingering influence of the Friedman doctrine—the idea that the only purpose and responsibility of business is to make profits. A powerful new narrative about shared prosperity can be a counterweight

workflow inside an Amazon fulfillment center. 30. Digital surveillance with Chinese characteristics: a machine for checking social credit scores in China. 31. Milton Friedman: “The social responsibility of business is to increase its profits.” 32. Ralph Nader: “The unconstrained behavior of big business is subordinating our democracy to the control of a corporate plutocracy

views at the University of Chicago and Stanford’s Hoover Institution can be found in Appelbaum (2019). On the Side of Angels and Shareholders. “A Friedman Doctrine” is the title of Friedman (1970). Background and context for Friedman are in Appelbaum (2019, Chapter 1). For what we call the Jensen amendment, see

-self-driving-car-chief-wants-tech-on-the-market-within-five. Friedman, Milton. 1970. “A Friedman Doctrine—the Social Responsibility of Business Is to Increase Its Profits.” New York Times, September 13. www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. Gaither, Sarah E., Evan P. Apfelbaum, Hannah J. Birnbaum, Laura G. Babbitt

Stakeholder Capitalism: A Global Economy That Works for Progress, People and Planet

by Klaus Schwab and Peter Vanham  · 27 Jan 2021  · 460pp  · 107,454 words

. It was the one put forth by University of Chicago economist and Nobel Prize winner Milton Friedman starting in 1970. He held that the “only social responsibility of business is to increase its profits”20 and that free markets are what matters above all else. (This is discussed further in Chapter 8.) The result

/12/davos-manifesto-1973-a-code-of-ethics-for-business-leaders/. 20 “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits,” Milton Friedman, The New York Times, September 1970, https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. 21 The New York Times Magazine, “What Is Fukuyama Saying

. An invisible hand ensured that markets would always have an optimal outcome, maximizing utility for society. It meant that “there is one and only one social responsibility of business,” Friedman wrote in a 1970 New York Times essay.43 It is “to use its resources and engage in activities designed to increase its profits

, Socialism and Democracy”, Joseph Schumpeter, Harper Brothers, 1950 (first published 1942) 43 “A Friedman Doctrine—The Social Responsibility Of Business Is to Increase Its Profits,” Milton Friedman, The New York Times, September 1970, https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. 44 Global Income Distribution From the Fall of the Berlin

make the world a better place, and they must therefore be left to their own devices. But it was also a consequence of the Milton Friedman doctrine on competition. It held that market concentration and monopolies in themselves were not bad; only their likely effect in increasing consumer prices. This view on

Big,” Kevin Fagan, San Francisco Chronicle, October 2018, https://www.sfchronicle.com/bayarea/article/Benioff-comes-out-strong-for-homeless-initiative-13291392.php. 30 “The Social Responsibility of Business,” Marc Benioff, The New York Times, October 2018, https://www.nytimes.com/2018/10/24/opinion/business-social-responsibility-proposition-c.html. 31 “We can

of, 193, 214–215, 249, 250–251 See also specific company; Stakeholder companies Competition EU's anti-competition ruling against Microsoft, 139–140, 141 Milton Friedman doctrine on, 209 Thiel's editorial on problem of, 208–209 See also Monopolies “Competition is for Losers” Wall Street Journal editorial (Thiel), 208–209 Connective

–202 taking the road toward, 247–251 See also Capitalism; Stakeholder model Stakeholder Capitalism Metrics, 193, 214–215, 249, 250–251 Stakeholder companies adopting Milton Friedman doctrine on competition, 209 A.P. Møller–Maersk (Denmark) as a, 167–168, 199–201, 202–207, 208, 213, 215 rebuilding public trust in business sector

The Heart of Business: Leadership Principles for the Next Era of Capitalism

by Hubert Joly  · 14 Jun 2021  · 265pp  · 75,202 words

customers and the common good. Hubert makes a compelling case that pursuing a company’s purpose is superior to Milton Friedman’s dictate that “the social responsibility of business is to increase its profits.” He believes, and I agree, that sustainable profits are the successful outcome of organizations that are mission driven and focus

’s perspective has one obvious advantage: it is simple. There is just one constituency to please—shareholders—and one performance metric that matters—profits. The Friedman doctrine remained business gospel for decades. In 1997, the Business Roundtable, which includes the CEOs of the largest and most influential companies in the United States

new CEO of the global group, based in Texas. He was presenting the company’s strategy. This presentation only strengthened my growing conviction that the Friedman doctrine was wrong. The CEO’s entire approach was focused on profit. I felt uninspired. When he asked for feedback, my contribution was to point out

, and the world around us. The company was in serious trouble, but our approach was to look after all stakeholders. No “either/or” here. No Friedman doctrine. Our plan was not perfect, but it was good enough. Internally, it reminded everyone what we were good at, highlighted our shortcomings, and outlined a

.com/4327419/american-capitalisms-great-crisis/; and https://www.economist.com/open-future. 3. Milton Friedman, “A Friedman Doctrine,” New York Times, September 13, 1970, https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. 4. The Business Roundtable, “Statement on Corporate Governance,” September 1997, 1, http://www.ralphgomory

) Financial Stability Board, 241n12 Fink, Larry, 60, 74–75 Forbes, 164 Ford, 42–44, 115, 153–154 Fradin, Russ, 226 Frankl, Viktor, 27 Friedman, Milton/Friedman doctrine, 4, 51, 55, 61, 72 Furman, Matt, 114, 214 Gallup, 28, 148, 149, 189 Gandhi, 217 General Electric, 28, 81, 189, 213 George, Bill, 29

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