Sociology Index

Friedman Doctrine

The Friedman Doctrine is a normative theory of business ethics advanced by economist Milton Friedman which holds that a firm's only responsibility is to its shareholders. Milton Friedman introduced the theory in a 1970 essay for The New York Times. Milton Friedman argues that a company has no "social responsibility" to the public or society; its only responsibility is to its shareholders. Milton Friedman justifies this view by considering who it is a company and its executives are beholden to. Milton Friedman states that social responsibility for the community rather than focusing on profits leads to totalitarianism.

Milton Friedman Doctrine takes a shareholder approach to corporate social responsibility or CSR as it is known worldwide. Milton Friedman argues that an executive spending company money on "social causes" is, in effect, spending somebody else's money for their own purposes. It is more than fifty years since Milton Friedman presented what is now known as the Friedman Doctrine, in his book Capitalism and Freedom. Friedman Doctrine is discussed in the book Capitalism and Freedom. Milton Friedman is widely recognized as one of the most influential economists of the twentieth century. Milton Friedman and Economic Debate in the United States is the defining narrative on the famed economist, the first to grapple comprehensively with Friedman’s research output, economic framework, and legacy.

Friedman Doctrine views shareholders as the economic engine of the organization. The shareholder approach of the firm is to maximize profits and reward shareholders for the risk they took in investing in the firm. According to Milton Friedman there is one and only one social responsibility of business and that is to use its resources and engage in activities designed to increase its profits.

The idea of the stockholder theory is inconsistent with the idea of corporate social responsibility at the cost of the stakeholder. A company donating services or goods to help those hurt in a natural disaster may be considered not taking action in the best interest of the shareholder.

Milton Friedman argues that shareholders should themselves decide how much and to whom they would like to make donations. Some argue that goods provided to society in a time of need build goodwill for a corporation and meet the stockholder theory of the best interest of the stockholder.

The Friedman doctrine is controversial. Naomi Klein's book The Shock Doctrine criticizes the theory. According to her, most citizens become impoverished while corporate elites gain enormous wealth.