Stakeholder Value: A New Story About Business

In 1970, Milton Friedman outlined what is now known as the Friedman Doctrine in a New York Times article titled, The Social Responsibility of Business Is to Increase Its Profits. In it, he argued that it was not only inefficient, but immoral for a corporation to do anything other than maximize shareholder value, staying within the bounds of the law and cultural norms. In essence, Friedman noted that the road to hell is often paved with good intentions, and while this doctrine silenced many of the proponents of so-called “Corporate Social Responsibility,” other related ideas have been ascendant in recent years. Whole Foods CEO John Mackey, for example, promotes “Conscious Capitalism.” Others tout inclusive capitalism, social entrepreneurship, or sustainable development.

It has been several decades since legendary business theorist R. Edward Freeman coined the term “stakeholder capitalism,” which challenges the idea that a company’s first responsibility is to maximize profits. The Darden Business School professor joins me this Sunday to discuss his new book The Power of And (co-authored with Kirsten E. Martin, and Bidhan L. Parmar), defending a broader pursuit of purpose as a long-term strategy.

While Friedman forced his debaters to think in terms of trade-offs, Freeman suggests this can often create false dichotomies. If putting values first and foremost actually enhances the bottom line, perhaps companies should hone their social conscience as part of their fiduciary responsibility.

Do Freeman’s idea pose a challenge to my laissez-faire outlook, or is it an illusion?

Is there a danger in merging the goals of “society” with the business of business, or is Friedman’s doctrine more like tired dogma?

Either way, I look forward to discussing his book, and learning about the apparently libertarian roots of his theory.


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