Examples Of Friedman's Shareholders Theory

Decent Essays
According to Friedman (1970) shareholders theory believes that businesses do not have any moral responsibilities or social responsibilities at all, other than to maximize their own profit. The goal of most businesses is the profit. Typically, a business that does not profit will not be a business for very long.
Shareholders are the people who hold a business or part of a business. For example, they could hold shares of stock in a company. As owners, the shareholders of the company have used some managers to run their business for them. Friedman argues that there is only one goal they have set for these executives to achieve profit. The main purpose of a business is profit, if a company does not profit, inevitably fails. Therefore, since the sole purpose of a business is profit, and since the only desire of those holding companies is that their business profit, Friedman concludes that employees of each company is obliged to make one and only one Thing to maximize the profits of that enterprise.
According to Friedman’s statements there are three fundamental assumptions underlying the opinion of shareholders. The first, according to this view, is to maximize shareholder value as the goal of the business is the most effective means to achieve the best outcome for society (Jensen, 2001). Revenue maximization, cost minimization and risk reduction are main targets. One way to reduce the cost by outsourcing this by means such as environmental contamination. On the other one way to
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