No, Maximizing the Stock Price Is Not Job 1 for Company Directors

Martin Shkreli, the ousted pharma executive, used to scoff at people who criticized him for raising the price of a pill of Daraprim, a drug for toxoplasmosis, from $13.50 to $750 overnight. “In capitalism you try to get the highest price you can for a product,” he told Bloomberg TV in 2016. “No one wants to say it, no one’s proud of it, but this is a capitalist society, capitalist system, and capitalist rules, and my investors expect to me to maximize profits,” he said at a Forbes conference in 2015. “I could have raised it higher and made more profits for our shareholders. Which is my primary duty.”

Is Shkreli (who's on trial now on an unrelated matter) correct that the primary duty of a company's executive and board is to maximize profits and the share price? Even some people who don’t like the “Pharma Bro” are inclined to concede that maximizing shareholder value is, after all, a company’s Job No. 1. The authority on this is the late Milton Friedman, a conservative giant of the Chicago School of economics, who preached that executives should “make as much money as possible while conforming to the basic rules of the society.” If people want to do good in society, Friedman argued, they should do it through personal charity, not through companies they manage, direct, or invest in.