Has Business Left Milton Friedman Behind?

In his essay, he calls outspoken C.E.O.s “unwitting puppets of the intellectual forces that have been undermining the basis of a free society.” So how would he judge today’s corporate leaders, who increasingly disavow that view of profit as business’s only responsibility — and use their money and influence to back movements pushing for racial equality, addressing climate change or taking overt political positions?

Mr. Friedman’s view of business and politics is complicated. His general view is that the former should stay out of the latter, and certainly not use shareholder money to influence it. And yet, “I can’t blame a businessman who goes to Washington and tries to get special privileges for his company,” he wrote. “If the rules of the game are that you go to Washington to get a special privilege, I can’t blame him for doing that. Blame the rest of us for being so foolish as to let him get away with it.”

Of course, what Mr. Friedman leaves out is that “the rest of us” are often at a disadvantage to large companies’ massive lobbying efforts. But consider how, last year, the Business Roundtable, an industry group that includes the leaders of Apple, Amazon and Walmart, changed its “Statement on the Purpose of a Corporation.” What once had been an organizing philosophy heavily influenced by Mr. Friedman’s focus on profits for shareholders has since been replaced with one that espouses “a fundamental commitment to all of our stakeholders” — not just shareholders but employees, suppliers, customers and affected communities. This move was seen as a tipping point for corporate governance by some observers and a cynical public relations ploy by others.

The question in 2020 is: What exactly does it mean to be in favor of all stakeholders?

Despite social responsibility being in vogue among C.E.O.s, and the voices of those — like myself — who have encouraged business leaders to be more empathetic, there remains an inconvenient truth for everyone seeking a more cuddly version of capitalism: If a company isn’t making profits for shareholders, it is very hard to take care of its other constituents.

Marc Benioff, the chief executive of Salesforce, has long preached that broader stakeholder approach to governance and has publicly called for higher corporate taxes. But he still acknowledges that profits and growth must come first, something that in this age of heightened scrutiny many C.E.O.s are reluctant to say aloud.

Article source: https://www.nytimes.com/2020/09/11/business/dealbook/milton-friedman-anniversary-sorkin-essay.html