The Libertarian Conception of Corporate Property: A Critique of Milton Friedman's Views on the Social Responsibility of Business
David Bourget (Western Ontario)
David Chalmers (ANU, NYU)
Rafael De Clercq
Jack Alan Reynolds
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Journal of Business Ethics 7 (12):891 - 906 (1988)
A critique of Milton Friedman's thesis that corporate executives have a fiduciary responsibility not to pursue socially desirable goals at the expense of profitability. The author argues that even under a libertarian conception of the nature of corporate property, Friedman's thesis does not follow. In particular, an executive's decision to prize "socially responsible behavior" above profit maximization does not necessarily violate the contractual rights of dissenting stockholders. Whether executives have obligations to refrain from such behavior depends entirely on the content of the contract which actually exists between stockholders and executives. After an examination of the body of legal precedent which informs the content of that contract, the author concludes that there are clearly recognizable circumstances in which executives may legitimately pursue corporate altruism at the expense of profits, stockholder protestations notwithstanding. Since this contractual relationship with management is one in which stockholders have voluntarily engaged, libertarians have no grounds for complaining that the behavior of such executives constitutes a form of theft of the stockholders' property.
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Citations of this work BETA
Jim Wishloff (2009). The Land of Realism and the Shipwreck of Idea-Ism: Thomas Aquinas and Milton Friedman on the Social Responsibilities of Business. [REVIEW] Journal of Business Ethics 85 (2):137 - 155.
Ned Dobos (2011). Non-Libertarianism and Shareholder Theory: A Reply to Schaefer. [REVIEW] Journal of Business Ethics 98 (2):273 - 279.
Dominic Martin (2013). The Contained-Rivalry Requirement and a 'Triple Feature' Program for Business Ethics. Journal of Business Ethics 115 (1):167-182.
Ignacio Ferrero, W. Michael Hoffman & Robert E. McNulty (2014). Must Milton Friedman Embrace Stakeholder Theory? Business and Society Review 119 (1):37-59.
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