Milton Friedm Article Analysis

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Milton Friedman posted an article in The New York Times magazine back in 1970 that discusses Goal of the Firm. The article basically talks about social responsibilities of business in a free-enterprise system and that business is not concerned with just profit but also with promoting desirable social ends. That business has a social conscience and takes seriously its responsibilities for providing employment, eliminating discrimination, and avoiding pollution. Milton calls businessmen who talk this way unwitting puppets of the intellectual forces that have been undermining the basis of a free society (Friedman, 1970). Friedman also argues that corporate executives are spending someone else’s money for a general social interest. If his actions are in accordance with his social responsibility it reduces returns to the stockholders and is spending their money. If his actions raise the price to customers he is spending their money. If his actions lower the wages of some employees, then he is also spending their money. The corporate executive is exercising a distinct social responsibility rather than serving as an agent of the stockholders, customers, or employees, especially if he is spending the money in a different way than they would have spent it themselves (Friedman, 1970). …show more content…
Firms began turning executives into major shareholders which would entice them to cater to shareholders because they would also gain more money (Denning, 2013). Shareholder value caught on and became the conventional wisdom and the status quo of large firms. The magic of shareholder value worked, however, financial tricks were eventually made public which caused a decline in the rate of return on assets and on invested capital of US firms. Sure executive compensation was skyrocketing but corporate performance declined (Denning,