Friedman’s Theory of Corporate Social Responsibility

Abstract

Milton Friedman's theory about the social responsibilities of business is an extremely important and influential position. Almost everyone who writes on the topic writes at least partly in reaction to Friedman. Friedman's position was first stated in Capitalism and Freedom1 A substantially different version is presented in his later essay Social Responsibility of Business.2 The first formulation (which I will refer to as Fl) says that the one and only obligation of business is to maximize its profits while engaging in and free competition without deception or fraud.3 The second formulation (which I will refer to as F2) says that business executives4 are obligated to follow the wishes of shareholders (which will generally be to make as much money as possible) while obeying the laws and the of the society. Maximizing profits while engaging in and free competition without deception or is not the same as maximizing profits while obeying the laws and ethical customs of one's society. Acts which involve fraud or deception or which do not constitute open and free competition are not necessarily contrary to a society's laws or ethical customs. Further, the laws or ethical customs of a society might prohibit certain actions which are permitted by the injunction to engage in and free competition without deception or fraud. Certain corporate actions permitted by Fl are not permitted by F2 and vice versa.

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