Milton Friedman Analysis

Decent Essays
Who should benefit, and at whose expense when running a business? Milton Friedman maintains that profit is the only true goal, benefitting the stockholders. However, R. Edward Freeman proposes that the needs of all a business’s stakeholders must be balanced when acting. I support Freeman’s view because the environment has changed since the time of Friedman.

Milton Friedman believes the idea of businesses having some sort of responsibility to society is a baseless notion, and describes discussions encouraging it as lacking meaningful analysis or precision. “What does it mean to say that ‘business’ has responsibilities? Only people can have responsibilities” (Friedman, p.218)1. Corporations are led by executives which are chosen by the owners
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Maintaining an archaic business model would be foolish. Friedman argues that an executive should not take profits away from the company to donate to the poor due to his own responsibilities. He then uses this to state that business should never perform any sort of act benevolent to society if it would not further the pursuit of profits. Unfortunately for Freidman’s point of view, the blind pursuit of profits is more often viewed as wicked and immoral (Friedman, p.222). Government regulation is much more prevalent. Focusing on profits in today’s market would soon lead your business on a sharp decline. Moving from solely focusing on the duty to stockholders, Freeman suggests treating all stakeholders of a business as more than a means to an end (Freeman, p.233). This can also benefit the stockholders, as by focusing solely on increasing profits, firms can often incur the wrath of government, forcing their hand, much like with the separation of AT&T into eight separate companies (Freeman, p.234). Stockholders are the primary beneficiary of corporation, and their money should not be spent frivolously, but it would be difficult to turn a profit if your suppliers, employees and customers all desert you. Each group of stakeholders has their own desires, which must be weighed and considered, for should one leg of business fall, the entire firm will come tumbling to the ground.

The view that profit is the only responsibility for corporations is outdated. Friedman’s argument may have been valid in the past, but no longer applies. Regulation and law have increased the influence of other stakeholders. To ignore that fact would be corporate
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