Maximizing Shareholder Value Still Matters the Most
Reexamining the Friedman Doctrine, that The Social Responsibility of Business is to Increase its Profits
On a scale of 1(strongly disagree) to 5 (strongly agree), how would you rate the following statement: “The primary goal of every public company should be to maximize shareholder value?” We recently posed this question to almost 300 undergraduate students at a prominent business school. The results: less than half, only 44 percent agreed or strongly agreed, while 34 percent disagreed or strongly disagreed (22 percent were neutral) — in my opinion, not a resounding vote of confidence for capitalism. I wondered if Milton Friedman, the University of Chicago Nobel laureate and original champion of shareholder value maximization, would be turning in his grave. Should executives of public companies put shareholders first? The answer matters to investors.
The Social Responsibility of Business is to Increase its Profits
It’s been over 50 years since Friedman made the case for shareholder maximization in his seminal 1970 New York Times Magazine article titled The Social Responsibility of Business is to Increase its Profits, a piece that I think should be mandatory reading in every business school, if for no other reason than to encourage a lively debate. Friedman was…
