Milton Friedman said that companies’ sole social responsibility is to make profits and put their shareholders first. But fights for social and economic equality are playing out across the United States, and companies are finding it near impossible not to weigh in.
Chicago Booth’s Steven Neil Kaplan argues that the pursuit of profits has helped shareholders, but it has also played a part in lifting billions of people around the world out of poverty. It would be hard to measure companies’ performance by any other gauge, he notes.
But Chicago Booth’s Luigi Zingales, director of Booth’s Stigler Center for the Study of the Economy and the State, says that being a good steward of employees, communities, and the environment can help maximize shareholder value. But he further argues that shareholders are concerned about more than just making money, and that companies should focus on maximizing shareholder welfare, not shareholder value.
What looks like corporate altruism is frequently something else, finds Chicago Booth’s Marianne Bertrand. Her research demonstrates that corporate charitable giving is often designed to curry favor with influential politicians.
In this excerpt from the Capitalisn't podcast, Luigi Zingales describes the different ways in which we can view corporate responsibilities.
Luigi Zingales: If you think that a corporation is simply a group of individuals who decide together how they want their business to be conducted, going the direction of the shareholder primacy is pretty obvious.
If you think that the corporation is a superior entity that is given a superior power, the power of limited liability, by special permission of the state, then it's a completely different business because you can argue that the government has a right to demand some greater goal to a corporation, because with greater power comes greater responsibility.
Discover these stories and much more at Chicago Booth Review.
Shareholder value maximization has been extremely successful globally in the way that matters most because, in many cases, maximizing shareholder value is in harmony with delivering for stakeholders.
The Enduring Wisdom of Milton Friedman
Demand for corporate social responsibility is forcing companies to value more than money.
Are Profits Passé?
Companies spend almost three times the amount on politically motivated charitable giving than they spend trying to influence politicians through PACs.
How Corporations Use Charitable Giving to Wield Political Influence
A year of crises has heightened the debate about what corporations owe society.
Is the Friedman Doctrine Still Relevant in the 21st Century?Through their data-driven insights, our researchers are tackling some of the world's biggest global issues. Explore more research from Booth.
Booth researchers are exploring how discrimination gets embedded in algorithms—and how to address that.
Can Artificial Intelligence be Biased?
Booth researchers are investigating how cultural norms and expectations affect women’s progress.
Why Is the Glass Ceiling So Tough to Crack?
Booth researchers are questioning if our personal data is making tech giants too powerful.
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The Stigler Center promotes and disseminates research on regulatory capture, crony capitalism, and the various distortions that special interest groups impose on capitalism.
George J. Stigler Center for the Study of the Economy and the State
How has CSR changed since Milton Friedman ignited the debate 50 years ago? Watch what leading thinkers had to say during a global conference hosted by Chicago Booth.
Corporate Social Responsibility Revisited Highlights
The influence and impact of Chicago Booth faculty, students, and alumni extends throughout North America.
Booth in North America
Booth brings our MBA degree and Executive Education offerings and our own renowned faculty members to our new campus in London, the financial heart of Europe.
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Building Connections in AsiaThe Executive MBA Program is registered under the Hong Kong Education Bureau. Registration No.: 262427. It is a matter of discretion for individual employers to recognise any qualification to which this course may lead.
The award honors researchers whose creativity, innovation, and accomplishments make them stand out as the next generation of scientific leaders.
Professors Alex Imas and Yueran Ma Named Sloan Research Fellows
Booth’s Economic Outlook series continued with an expert panel discussing the future of Asia’s economies as COVID rages on and the US welcomes new leadership.
What challenges will Asian economies face in 2021?
When it comes to educating students in his marketing classes, Booth professor Oleg Urminsky has one primary goal: get them beyond thinking with their gut.
Going beyond Intuition
