Has the Friedman Theory eroded in time?

Yesterday, was he 50th anniversary of the publication of Milton Friedman’s essay titled “The Social Responsibility of Business is to Increase Its Profits” that came to be known as the “Friedman Doctrine” or the “Stockholders Capitalism Doctrine” and which was widely adopted for many years by the corporate world.

In recent years, we have seen an evolution of such doctrine that recognizes that the purpose of business must be to create value for shareholders but also for other stakeholders. This idea has materialized in very important statements issued by the Business Roundtable and the World Economic Forum, with its 2020 Davos Manifesto, in 2019.

The NYT’s DealBook and The Times Magazine put together a special issueto mark the anniversary, which is a ‘must read’ The issue opens the debate on the validity of this doctrine in today’s world, at a time when inequality and inequity between groups and even countries have become more evident than ever and when more voices demand a profound change in traditional forms of capitalism, as the only way to ensure a sustainable future for our and future generations.

Dealbook’s editors placed also some questions to readers: Should businesses have any priorities more important than profits? Can companies serve shareholders and other stakeholders equally? Here are my thoughts:

Profits should be an important consideration for companies when making business decisions, but not at the expense of disregarding other stakeholders’ needs.

Companies can operate sustainably by balancing the needs of shareholders and other stakeholders. In order for this to work, I believe that senior management must incorporate two factors into their decision-making process:

•  An analysis of the situation with a ‘long-term vision’ that considers its relationship with all stakeholders and how the decision may impact them; and

•  Asking themselves ‘WHY?’ is the company taking this decision and assessing whether it is consistent and congruent with the mission and values that the company stands for.


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