Chapter 1: The phrase “Corporate social responsibility” refers to a corporation’s responsibility towards society. The topic is subjective, so naturally there is some disagreement about those “responsibilities”. Like do companies have a responsibility to donate money for charities or to give their employees higher wages and customers safer products? Or is their responsibility to maximize profit for their shareholders or stockholders?
Shareholder theory:
Milton Friedman argues that in a “free enterprise, private-property system” Corporate executives work for the “owners” of the company, and today these “owners” are the company’s shareholders. As their employees, the executives has a “direct responsibility” to run the company in according with their desires, which is of course making as much money as possible while confirming to the basic rules of the society, both embodied in law and ethical custom. On his view a company’s ONLY responsibility is to legally and ethically maximize shareholder’s returns. His view is the “shareholder’s view”.
The main reason he holds this theory is, in his view shareholders own the company. Since the company is their property and only theirs, only they have the right moral right to decide what it should be used for.
These “owners” hire executives to run the business for them, so the executives have a moral obligation to do what the stockholders want, which he claims is to maximize their profits.
However he doesn’t say, that there are no limits to what executives can do to make stockholders as much money as possible. They must operate within the “rules of society” including both rules of the “law” and “ethical custom”.
According to Friedman’s view, a manger has no right to give company money to social causes when doing so will reduce shareholder’s profits, because that money does not belong to the manager but to shareholders. Of