Sociology Index

Friedman Doctrine

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 argued that a company should have no "social responsibility" to the society because its only concern is to increase profits for itself and for its shareholders. Friedman Doctrine is discussed in the book Capitalism and Freedom. In it 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.

 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.