- Only people can have “social responsibilities,” not corporations. A corporate executive is an employee/agent of the owners (shareholders), so their primary duty in that role is to run the business in line with the owners’ interests—typically to maximize long-run returns—while staying within the “rules of the game” (law and basic ethical customs like honest dealing).
- A Business should generate profit, why?
- More (and better/cheaper) goods & services for everyone
- Jobs, wages, and skill-building
- “Social responsibility” spending is usually disguised taxation and politics. If executives divert company resources to social goals (beyond what’s justified for profits), they’re effectively spending other people’s money—shareholders’, employees’, or customers’—and making public-policy choices without democratic accountability (acting like legislators and tax authorities).
- The right constraint is: compete hard, but play fair. Friedman argues the legitimate social contribution of business is producing goods/services efficiently in competitive markets, obeying the law, and avoiding fraud/deception. Broader social goals should be handled through government and individual choice, not by executives using corporate funds as a substitute for public decision-making.
Profit is the signal that a company is turning scarce resources (labor, capital, materials) into outputs people value more than their cost. That tends to raise productivity, improve quality, and lower prices over time through competition and innovation.
Profitable firms can hire and expand, invest in training, and sustain employment through downturns. Even when profits go to owners, the process of earning profits usually involves building capabilities—operations, technology, distribution—that increase worker productivity and (in competitive labor markets) compensation.
Profits > Cash > Growth > Investments > Expansaion > Hiring > Training
Capital formation and long-term growth
Profits fund reinvestment (R&D, new plants, better tools) and attract outside capital. That expands the economy’s productive capacity, which is a core driver of higher living standards. As a side effect, profitable activity also generates tax revenues (corporate, payroll, income, sales) that finance public goods—without requiring executives to “allocate” social spending ad hoc.
Friedman Versus Elizabeth Anderson:
In today’s world, I think Elizabeth Anderson provides the more complete diagnosis, while Milton Friedman provides an essential discipline that should not be abandoned? Not sure I agree
Question | Stronger argument | Why |
What should managers do with shareholders’ money? | Friedman | Managers should not use corporate resources to advance their personal political preferences. |
Can profit be the company’s only responsibility? | Anderson | Companies affect workers, consumers, communities, and institutions in ways that contracts and prices do not fully capture.
Interpretation: Profit will never be comapny’s only responsability. |
Are employment relationships genuinely voluntary? | Anderson | Employees often have less bargaining power and may be subject to extensive workplace authority.
Interpreation: But they are not obligated to work there. Companies are helping individuals grow, generate value and be benefit out its productivity. |
Should executives determine society’s priorities? | Friedman | Public priorities and redistribution generally require democratic legitimacy. |
Can private organizations threaten freedom? | Anderson | Governments are not the only source of coercion; employers and dominant corporations can also exercise arbitrary power.
[Interpreation]: yes that happens in societey, however individuals have their own freedom to choose whats best for them. |
Is profit still necessary? 100% | Friedman | Without profitability, a business cannot survive, invest, innovate, employ people, or sustain social commitments. |
Do markets solve every social problem? | Anderson | Markets are mechanisms, not complete moral systems. Some values cannot be reduced to willingness or ability to pay. |
A better principle for today would be:
A company should pursue sustainable long-term profit while respecting the rights and dignity of workers [100% if they don’t workers should strike], customers, communities, and shareholders—and remain accountable for costs it imposes on others.
This differs from Friedman because legal compliance alone may be insufficient. Laws can be incomplete, slow, or influenced by powerful interests. However, it also differs from an unlimited stakeholder model because management needs a clear objective and measurable accountability.
The most reasonable synthesis is:
- Profit is necessary but not morally sufficient.
- Managers must remain accountable to owners.
- Workers and customers must be protected from arbitrary corporate power.
- Government should establish clear rules for social and environmental obligations.
- Executives should not become unelected politicians who spend corporate resources according to personal preferences.
So, if I had to choose only one framework for understanding today’s economy, I would choose Anderson’s. If I were designing how companies should actually be governed, however, I would combine Anderson’s limits on private power with Friedman’s demand for clear objectives and accountability.