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Friedman is of course right, whether lawmakers and jurists have tried to codify rules allowing directors to betray shareholder interests. A single business is

Friedman is of course right, whether lawmakers and jurists have tried to codify rules allowing directors to betray shareholder interests. A single business is not responsible for externalities, any more than a single citizen is. We are ALL responsible for negative externalities like pollution and have to solve those problems together, using the political process and sharing the costs among everyone. And his statement isn't specific to the short term. Increasing profits is maximizing total profits. Making of ton of profits today and none thereafter is in no way as good as making a ton more profits over time. Imagine you can invest your life savings of $100,000 and a lot of sweat equity to build a business (including the opportunity cost of giving up your $100k a year job). You estimate it will fail half the time and you will lose your life savings. But the other half of the time you estimate will make $500k a year in profit, after paying all employee compensation, taxes and other costs. Then you are told that if you succeed, you can't have the $500k a year. That half of that has to go to the employees who risked nothing and got market wages from you for helping build the business (and quit whenever they pleased for better compensation elsewhere). And another half has to go to the "community" to help support the arts, or some other noble cause that did nothing to help you start or grow your business. You still want to risk your life savings? Companies are owned by shareholders. Property rights are one of the most fundamental liberties we have. I don't go into your house and raid your fridge whenever I feel like it. Why should you be able to go into my business and tell me how I need to spend my money?

sbov 10y ago
Your post reads a bit contradictory. The only way we can all be responsible for negative externalities is if we each individually choose to be responsible, or if lawmakers force us all to be responsible. I honestly don't know what your view on this subject is, because you seem to be deriding any possible solution to the problem of negative externalities.
- valuearb 10y ago
  Well, one example would be if you are CEO of a car manufacturer. Your engineers design two catalytic converters, one that meets all government regulations/requirements, and another that does substantially better, but reduces horsepower and drivability significantly. If you are environmentally conscious and decide to standardize all your cars on the cleaner catalytic converter, and consumers react poorly and sales suffer, you aren't serving your shareholders. It's not a problem your company can or should solve, you are part of a shared organizations and your ownership doesn't trump your shareholders. Instead you should take your share of the profits and your massive paycheck and work to get cleaner and more intelligent exhaust standards put into law, so that all new cleaner catalytic converters are as clean as you think they should be. Or find alternative and better ways to reduce emissions. But you can't steal profits from your shareholders to fit your own agenda.
  - deleted 10y ago
    [deleted]
  - carapace 9y ago
    But in practice, what we get is VW. It is "contra-survival" to poison the air. You cannot breath profits. The world is bubble-shaped, and we are all trapped together sandwiched between hard vacuum and molten rock. Poisoning in the short-term to make money to make laws to stop poisoning in the long-term is a poor strategy, and I think we as sentient human beings can do better. "Never let ideological purity interfere with effective action."
    - valuearb 9y ago
      VW's approach clearly wasn't business optimal, given it almost bankrupted them.
      - carapace 9y ago
        I'm suggesting that overemphasis on the "profit motive" affected the strategic judgement of the VW corporation as a whole. Whether your metric for this disaster is cash or clean air I think the proximate cause was profit-seeking to the exclusion of other values.
ryanbrunner 10y ago
You're correct that ultimately, at the end of the day, the shareholders are the owners of the business, and should have ultimate control over how their resources are allocated or spent. That doesn't mean that the shareholders interests are necessarily for profit above all else. If your shareholders were perfectly happy with being ecologically conscious and providing an above-average place of business for employees irrespective of profit, wouldn't demanding focus on profit above all else be working against the shareholder's interests? I think this is especially true in the case of Etsy, which as the article points out, is registered as a B corporation and so arguably has agreement from the shareholders that benefiting society is part of the mandate of the company.
- valuearb 10y ago
  If you are a shareholder and want to spend some of your profits on ecologically conscious activities, no one can stop you. But that doesn't mean you should force the other shareholders to do the same. And Etsy isn't a B corporation. It's CEO tried to make it one and failed.
  - ryanbrunner 10y ago
    Etsy is currently a B corporation. They're likely to not remain one. The article clearly points this out, but it's easily verifiable as well: - https://www.bcorporation.net/community/etsy https://www.bcorporation.net/community/etsy - https://blog.etsy.com/news/2012/etsy-joins-the-b-corporation-movement/ https://blog.etsy.com/news/2012/etsy-joins-the-b-corporation... - https://www.etsy.com/ca/mission https://www.etsy.com/ca/mission
    - valuearb 10y ago
      It's a process the CEO tried to start, never became binding because they are incorporated in Delaware which doesn't recognize B corps, and can't finish because he doesn't have buy-in from the owners of the company. So it's temporary status doesn't belie the fact it's not going to be one and shouldn't be treated as one.

sbov 10y ago

Your post reads a bit contradictory. The only way we can all be responsible for negative externalities is if we each individually choose to be responsible, or if lawmakers force us all to be responsible. I honestly don't know what your view on this subject is, because you seem to be deriding any possible solution to the problem of negative externalities.

valuearb 10y ago
Well, one example would be if you are CEO of a car manufacturer. Your engineers design two catalytic converters, one that meets all government regulations/requirements, and another that does substantially better, but reduces horsepower and drivability significantly. If you are environmentally conscious and decide to standardize all your cars on the cleaner catalytic converter, and consumers react poorly and sales suffer, you aren't serving your shareholders. It's not a problem your company can or should solve, you are part of a shared organizations and your ownership doesn't trump your shareholders. Instead you should take your share of the profits and your massive paycheck and work to get cleaner and more intelligent exhaust standards put into law, so that all new cleaner catalytic converters are as clean as you think they should be. Or find alternative and better ways to reduce emissions. But you can't steal profits from your shareholders to fit your own agenda.
- deleted 10y ago
  [deleted]
- carapace 9y ago
  But in practice, what we get is VW. It is "contra-survival" to poison the air. You cannot breath profits. The world is bubble-shaped, and we are all trapped together sandwiched between hard vacuum and molten rock. Poisoning in the short-term to make money to make laws to stop poisoning in the long-term is a poor strategy, and I think we as sentient human beings can do better. "Never let ideological purity interfere with effective action."
  - valuearb 9y ago
    VW's approach clearly wasn't business optimal, given it almost bankrupted them.
    - carapace 9y ago
      I'm suggesting that overemphasis on the "profit motive" affected the strategic judgement of the VW corporation as a whole. Whether your metric for this disaster is cash or clean air I think the proximate cause was profit-seeking to the exclusion of other values.

ryanbrunner 10y ago

You're correct that ultimately, at the end of the day, the shareholders are the owners of the business, and should have ultimate control over how their resources are allocated or spent. That doesn't mean that the shareholders interests are necessarily for profit above all else. If your shareholders were perfectly happy with being ecologically conscious and providing an above-average place of business for employees irrespective of profit, wouldn't demanding focus on profit above all else be working against the shareholder's interests? I think this is especially true in the case of Etsy, which as the article points out, is registered as a B corporation and so arguably has agreement from the shareholders that benefiting society is part of the mandate of the company.

valuearb 10y ago
If you are a shareholder and want to spend some of your profits on ecologically conscious activities, no one can stop you. But that doesn't mean you should force the other shareholders to do the same. And Etsy isn't a B corporation. It's CEO tried to make it one and failed.
- ryanbrunner 10y ago
  Etsy is currently a B corporation. They're likely to not remain one. The article clearly points this out, but it's easily verifiable as well: - https://www.bcorporation.net/community/etsy https://www.bcorporation.net/community/etsy - https://blog.etsy.com/news/2012/etsy-joins-the-b-corporation-movement/ https://blog.etsy.com/news/2012/etsy-joins-the-b-corporation... - https://www.etsy.com/ca/mission https://www.etsy.com/ca/mission
  - valuearb 10y ago
    It's a process the CEO tried to start, never became binding because they are incorporated in Delaware which doesn't recognize B corps, and can't finish because he doesn't have buy-in from the owners of the company. So it's temporary status doesn't belie the fact it's not going to be one and shouldn't be treated as one.