The ONLY goal of the corporation - Research Paper Example

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The principle that the ‘only goal of the corporation is to increase shareholder value’ is a phrase coined by Milton Friedman in his article in the New York Times in 1970. There are those who have dismissed it as the world’s dumbest idea, and others have taken it up and…
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s The Only Goal of the Corporation by Milton Friedman The principle that the ‘only goal of the corporation is to increase shareholder value’ is a phrase coined by Milton Friedman in his article in the New York Times in 1970. There are those who have dismissed it as the world’s dumbest idea, and others have taken it up and applied it in their businesses. The focus of this principle is on the corporate executive as an employee of the shareholders. It is about how the decisions he makes in regard to how the corporation money will be spent for social responsibilities affects the employees, customers as well as the shareholders.
This principle means to say in a nutshell that a company’s sole interest is to maximize profits. According to Milton Friedman, a company should not focus on issues of social responsibility, but should focus on the welfare of the shareholders, as well as its profits. When it tends to concentrate on improving the society in matters such as reducing inflation, it can lead to autocracy. The social responsibility of the business is to use its resources to maximize its profits so long as it does so within the set rules.
Milton comes out strongly to oppose any move that would seem to spend the shareholders money in a way that is not in their interest. The reason for this is that the stockholder is not able to decide how the corporate executive spends his money, for which projects and the amount to spend for such projects. Even charitable activities that are not geared towards generating revenue should not be taken up.
This view by Friedman suggests that an enterprise should only undertake a certain activity because it is good economically and not because ethics dictates so. Though this view has been criticized by many, it has been taken up by business enterprises.
Work Cited
Friedman, Milton “The social responsibility of business is to increase its profits.” The Newyork Times Magazines 13 Sep. 1970: 32. Print. Read More
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