Corporate Obligation

Milton Friedman in a 1970 New York Times article wrote that “there is one and only one social responsibility of business—to use its 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.”

I’ll concede that Freidman is correct in believing that corporate success is fundamentally valuable to society: it provides for cheaper and more efficiently manufactured products and, in a more global sense, distributes goods to the areas in society most equipped to handle them. However, societal betterment can arise more profoundly when corporations acknowledge that their obligations are not just to their shareholders, but to all the constituent parts of their existence: their employees, their costumers, their community, and the natural environment.

The truth is, despite conjectures, there is no way to truly quantify the impact of a corporation on the community in which it resides: it can be negative or positive. However, just as an individual’s higher economic status is only morally justified if that inequality provides for the better existence of the lowest members of his or her community, the same holds true for corporate America. A company’s philanthropic obligations are not unlimited, but they’re not zero. There’s an important line of obligation to all the stakeholders in a company, not just shareholders.

Friedman makes the point that the “activities designed to increase profit” which companies, he argues, are morally obligated to engage in, are intimately tied to a corporation’s benevolence to its community, its employees, and its environment. Making value by (say) donating money to the local community is reciprocally connected to making profit, he claims. Friedman therefore warns that, “in practice the doctrine of social responsibility is frequently a cloak for actions that are justified on other grounds rather than a reason for those actions.” Claiming that community outreach is often not “social responsibility” at all, but a ploy to increase profit margins, he quips that chastising these corporations for hiding profiteering under the guise of social philanthropy would be hypocritical if in fact they obtain the profits they desire, which, in his mind, is their only moral duty.

The difference, however, which distinguishes “activities designed to increase profit” from “philanthropic obligations” it’s not a rhetorical difference, it’s a fundamental philosophical difference. To Friedman, social outreach is the means to an end (which is profit). To me, the opposite is true. The profit is the means in which to fulfill a responsibility to the environment and the community (the ends); human happiness is the ends, not the means. Philanthropy isn’t just good business (as Starbucks and Whole Foods can attest and Friedman might claim), it’s moral obligation.