Ignacio Ferrero is a Professor of Business Ethics, Department of Business, University of Navarra, Campus Universitario, Pamplona, Navarra, Spain. E-mail: email@example.com. W. Michael Hoffman is an Executive Director, Center for Business Ethics, and Hieken Professor of Business and Professional Ethics, Bentley University, Waltham, MA. E-mail: firstname.lastname@example.org. Robert E. McNulty is a Director of Programs, Center for Business Ethics, Bentley University, Waltham, MA. E-mail: email@example.com.
Must Milton Friedman Embrace Stakeholder Theory?
Version of Record online: 3 MAR 2014
© 2014 Center for Business Ethics at Bentley University
Business and Society Review
Volume 119, Issue 1, pages 37–59, Spring 2014
How to Cite
Ferrero, I., Michael Hoffman, W. and McNulty, R. E. (2014), Must Milton Friedman Embrace Stakeholder Theory?. Business and Society Review, 119: 37–59. doi: 10.1111/basr.12024
- Issue online: 3 MAR 2014
- Version of Record online: 3 MAR 2014
Milton Friedman famously stated that the only social responsibility of business is to increase its profits, a position now known as the shareholder model of business. Subsequently, the stakeholder model, associated with Edward Freeman, has been widely seen as a heuristically stronger theory of the responsibilities of the firm to the society in which it is situated. Friedman's position, nevertheless, has retained currency among many business thinkers. In this article, we argue that Friedman's economic writings assume an economy in which businesses operate under the protections of limited liability, which allows corporations to privatize their gains while externalizing their losses. By accepting limited liability, Friedman must also accept a view of business as embedded in social interdependency, which serves as the logical and moral foundation for corporate social responsibility (CSR). To achieve consistency with his economic principles, Friedman must either abandon limited liability or modify his doctrine on CSR and his related shareholder model of business.