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Being Done With Milton Friedman

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  • Robé Jean-Philippe

    (Ecole de droit de Sciences Po, Paris)

Abstract

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.

Suggested Citation

  • Robé Jean-Philippe, 2012. "Being Done With Milton Friedman," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(2), pages 1-33, June.
    • Handle: RePEc:bpj:aelcon:v:2:y:2012:i:2:n:3
    DOI: 10.1515/2152-2820.1047
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    References listed on IDEAS

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    1. Michael C. Jensen, 2010. "Value Maximization, Stakeholder Theory, and the Corporate Objective Function," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 32-42, January.
    2. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    3. R. H. Coase, 1972. "Industrial Organization: A Proposal for Research," NBER Chapters, in: Economic Research: Retrospect and Prospect, Volume 3, Policy Issues and Research Opportunities in Industrial Organization, pages 59-73, National Bureau of Economic Research, Inc.
    4. Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
    5. Berle Adolph A., 2012. "Accounting and the Law," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 2(1), pages 1-11, March.
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    Cited by:

    1. Emilie Bonhoure, 2021. "An Original Solution to Agency Issues Among PreWWI Paris-Listed Firms : The Statutory Rule of Profit Allocation," PSE Working Papers halshs-03107869, HAL.
    2. Emilie Bonhoure, 2021. "An Original Solution to Agency Issues Among PreWWI Paris-Listed Firms : The Statutory Rule of Profit Allocation," Working Papers halshs-03107869, HAL.
    3. John Gerard Ruggie, 2018. "Multinationals as global institution: Power, authority and relative autonomy," Regulation & Governance, John Wiley & Sons, vol. 12(3), pages 317-333, September.
    4. Butzbach Olivier & Rotondo Gennaro & Desiato Talita, 2020. "Can banks be owned?," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 10(1), pages 1-21, March.
    5. Dominique Méda, 2017. "The Future of work: The meaning and value of work in Europe," Working Papers hal-01616579, HAL.
    6. Clarke Thomas, 2013. "Deconstructing the Mythology of Shareholder Value: A Comment on Lynn Stout’s “The Shareholder Value Myth”," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(1), pages 15-42, January.
    7. Ruggie, John Gerard, 2019. "Corporate Purpose in Play: The Role of ESG Investing," Working Paper Series rwp19-034, Harvard University, John F. Kennedy School of Government.

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