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The place of businesses and business owners in the economic sense and socio-economic sense have long sparked ethical debates over the role that a business should play in society and, in particular, whose interests it should so act. Many theories and hypothesis have been created surrounding this topic, most with valid argumentative logic with discussion over soundness of the normative elements in them going under subjective scrutiny. One such hypothesis is that “the social responsibility of a business is to increase its profits” stated by Milton Friedman. This is more commonly known as the shareholder primacy in which the primacy surrounds itself with the fact that a business should prioritize the use of its resources in order to maximize its shareholder’s wealth which sparks questions over the moral obligations of a business in a free and competitive market.
This essay will take a position of disagreement with the above statement and will attempt to substantiate against the primacy and develop this hypothesis in line with current sustainability theory. It will do so by, firstly elaborating on Friedman’s hypothesis and what it encompasses, with direct referral to works done by Friedman. Then by analysing the arguments both for and against the hypothesis in a critical manner with objections to both being elaborated on throughout the essay. Lastly, the essay will analyse alternative possibilities for such a hypothesis in today’s age and economy which will widen the view from the narrow beginning.
Friedman’s position of the shareholder primacy or otherwise known as the ‘narrowest view’ is not accurately portrayed in the above quote. With the morality of a business in question, Friedman accepts that, were the business to act solely and only in the interests of the shareholders, there would likely be some unethical and possibly illegal acts committed by the businesses in question, and seeing as there are things that a business should not do when pursuing profits, a downgrade from the ‘only’ moral obligation to the ‘primary’ moral obligation in which allows the business to act far more ethically in its monetary pursuits.
Another addition to this quote by Friedman is that “so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud”. With this addition, a moral minimum is found. This moral minimum would be the lowest ethical point to which a business may drop in order to increase its profits. By admitting to the fact that business is not free of ethics and therefore not amoral entities, Friedman agrees that there should be some ethical behaviour that dictates what a business may or may not do in pursuit of its profits.
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