Milton Friedman’s World Is Dead and Gone

The annual conclave of the rich and powerful this month in Davos, Switzerland, put the longstanding debate about the social responsibility of corporations front and center by proclaiming its official theme as “stakeholders for a cohesive and sustainable world.”

By using the word “stakeholders,” the World Economic Forum confirmed that it’s taken sides in a debate rekindled last year by the Business Roundtable, a lobbying group representing chief executives of major U.S. corporations. The Roundtable had issued a statement highlighting a “fundamental commitment to all of our stakeholders,” including shareholders, clients, employees, suppliers and communities, thereby situating itself in opposition to the view of corporate responsibility made popular half a century ago by the economist Milton Friedman. Friedman had famously stated in a 1970 New York Times magazine essay that business executives who diverted corporate assets toward social goals were betraying their obligations to shareholders.