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The Friedman approach is merely to recognize that the executive’s responsibility is to execute the desires of the shareholders. The “profit at all costs” mantra

The Friedman approach is merely to recognize that the executive’s responsibility is to execute the desires of the shareholders. The “profit at all costs” mantra comes from the (sometimes false) idea that shareholders care only about profits, and not about using the corporation as a vehicle for social impact. In this case, BlackRock (the shareholder) is making its desires clear — profits are not the only standard by which its companies will be evaluated. This is fully in accordance with Friedman’s principles. In fact, this kind of shareholder activism is only possible if executives are held to Friedman’s standards. Otherwise, they could just tell the shareholders to piss off.

croon 9y ago
> The Friedman approach is merely to recognize that the executive’s responsibility is to execute the desires of the shareholders. The “profit at all costs” mantra comes from the (sometimes false) idea that shareholders care only about profits, and not about using the corporation as a vehicle for social impact. How do you reach this interpretation? Friedman himself explicitly used the word "profits". This is Friedman's own words, in the 1970 article he wrote in the NYT [1]: > That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits 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." Either we charitably interpret his writings as broadly as possible, and we get into a religious debate over which denomination under Friedmanomics is the "One Truth", or we can just recognize that maybe it's time to reconsider some things in supply side capitalism, and try another implementation of capitalism. I'm also very tempted to point out that the last point in his doctrine in practice likely is an unavoidable effect of supply side economics, thus incompatible with the idea behind the principle. [1] https://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html https://www.colorado.edu/studentgroups/libertarians/issues/f...
- FussyZeus 9y ago
  Especially in the current market though, profits are increased through numerous different levers. For awhile, it was price price price, and the lowest won. This built the Chinese outsourcing manufacturing engines and the Walmart stores, and now Amazon is eating them in the same way. Now however it's becoming more fashionable to not simply have the cheapest price, but to have things like socially responsible sourcing of products (coffee especially does this), low friction purchasing processes and easy returns (Amazon), companies that make note of being produced in the same country, companies that make efforts to take care of their own staff making it more palatable to pay more to ensure the people making what you consume are paid living wages, or subscription convenience allow products that are technically higher priced to compete in the market much more effectively than previous years. I.e. the drumbeat of the last few decades, where employees are paid the bare minimum possible, where corners are cut at every aspect, where service and quality take a backseat to just the lowest possible price, are going out of fashion. The rules of the game are changing, and so the players must also change.
- cirgue 9y ago
  > 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." This is also an enormous caveat. The type of fiduciary responsibility espoused by Friedman seems to be completely at odds with the type currently practiced.
  - croon 9y ago
    Indeed, that was what my last line was hinting at, although I could've phrased it less cryptically. Friedman also supported tax cuts and deregulation. Combining those two is like saying that the human body works fine as long as no organ malfunctions. While technically true, it's completely irrelevant to whether or not it's a scenario worth debating, and whether or not we in reality need doctors and medicine. We wouldn't need law enforcement if everyone followed the rules either. It's still not the case.
rectang 9y ago
> The “profit at all costs” mantra comes from the (sometimes false) idea that shareholders care only about profits Shareholders are detached from negative externalities of their investments unless they pay a financial price. We certainly can't count on shareholders to rein in a company like Equifax, no matter how much harm their investments might cause. There will always be plenty of investors who care only about profit.

croon 9y ago

> The Friedman approach is merely to recognize that the executive’s responsibility is to execute the desires of the shareholders. The “profit at all costs” mantra comes from the (sometimes false) idea that shareholders care only about profits, and not about using the corporation as a vehicle for social impact. How do you reach this interpretation? Friedman himself explicitly used the word "profits". This is Friedman's own words, in the 1970 article he wrote in the NYT [1]: > That is why, in my book Capitalism and Freedom, I have called it a "fundamentally subversive doctrine" in a free society, and have said that in such a society, "there is one and only one social responsibility of business–to use it resources and engage in activities designed to increase its profits 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." Either we charitably interpret his writings as broadly as possible, and we get into a religious debate over which denomination under Friedmanomics is the "One Truth", or we can just recognize that maybe it's time to reconsider some things in supply side capitalism, and try another implementation of capitalism. I'm also very tempted to point out that the last point in his doctrine in practice likely is an unavoidable effect of supply side economics, thus incompatible with the idea behind the principle. [1] https://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html https://www.colorado.edu/studentgroups/libertarians/issues/f...

FussyZeus 9y ago
Especially in the current market though, profits are increased through numerous different levers. For awhile, it was price price price, and the lowest won. This built the Chinese outsourcing manufacturing engines and the Walmart stores, and now Amazon is eating them in the same way. Now however it's becoming more fashionable to not simply have the cheapest price, but to have things like socially responsible sourcing of products (coffee especially does this), low friction purchasing processes and easy returns (Amazon), companies that make note of being produced in the same country, companies that make efforts to take care of their own staff making it more palatable to pay more to ensure the people making what you consume are paid living wages, or subscription convenience allow products that are technically higher priced to compete in the market much more effectively than previous years. I.e. the drumbeat of the last few decades, where employees are paid the bare minimum possible, where corners are cut at every aspect, where service and quality take a backseat to just the lowest possible price, are going out of fashion. The rules of the game are changing, and so the players must also change.
cirgue 9y ago
> 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." This is also an enormous caveat. The type of fiduciary responsibility espoused by Friedman seems to be completely at odds with the type currently practiced.
- croon 9y ago
  Indeed, that was what my last line was hinting at, although I could've phrased it less cryptically. Friedman also supported tax cuts and deregulation. Combining those two is like saying that the human body works fine as long as no organ malfunctions. While technically true, it's completely irrelevant to whether or not it's a scenario worth debating, and whether or not we in reality need doctors and medicine. We wouldn't need law enforcement if everyone followed the rules either. It's still not the case.

rectang 9y ago

> The “profit at all costs” mantra comes from the (sometimes false) idea that shareholders care only about profits Shareholders are detached from negative externalities of their investments unless they pay a financial price. We certainly can't count on shareholders to rein in a company like Equifax, no matter how much harm their investments might cause. There will always be plenty of investors who care only about profit.