The Friedman doctrine is controversial, It has been criticized by proponents of the
stakeholder theory, who believe the Friedman doctrine is inconsistent with the idea of
corporate social responsibility to a variety of
stakeholders. They argue it is morally imperative that a business takes into account all of the people who are affected by its decisions. They also argue that taking into account the interests of stakeholders can benefit the company and its shareholders; for example, a company donating services or goods to help those hurt in a natural disaster is not acting in the direct interest of its shareholders, but in doing so builds community allegiance to the company, ultimately benefitting the company and its shareholders. In 2019, influential business groups such as the
World Economic Forum and the
Business Roundtable updated their
mission statement, leaving behind the Friedman doctrine in favor of "stakeholder capitalism", at least on paper if not in widespread practice. Friedman's characterization of moral responsibility has been questioned. Ronald Duska, in a 1997 article in the
Journal of Business Ethics, as well as in his 2007 book
Contemporary Reflections on Business Ethics, argued that Friedman failed to differentiate two very different aspects of business: (1) the
motive of individuals, who are often motivated by profit to participate in business, and (2) the socially sanctioned
purpose of business, or the reason why people allow businesses to exist, which is to provide goods and services to people. Duska said of a hypothetical businessperson's belief that there is no
business ethics beyond making a profit: "Does that mean [the businessperson] is likely to give you a faulty product if he can get away with it and make more profit? If he really believes what he says, aren't you a fool to do business with him?" In contrast to such criticism of Friedman's business ethics, some scholars have pointed out that Friedman emphasized respect for the liberty of other people, respect for the law, and various duties of companies, so the Friedman doctrine does not advocate unconstrained pursuit of profit, and that the Friedman doctrine overlaps with, or even entails, corporate social responsibility. Left-wing social activist
Naomi Klein argued in her 2007 book
The Shock Doctrine that adherence to the Friedman doctrine has impoverished most citizens while enriching corporate elites. Other scholars argue that it is unhealthy and counterproductive to the companies that practice it.
Harvard Business School professors Joseph L. Bower and Lynn S. Paine said in 2017 that the Friedman doctrine is "distracting companies and their leaders from the innovation, strategic renewal, and investment in the future that require their attention", puts companies at risk of "activist shareholder attack", and puts "managers ... under increasing pressure to deliver ever faster and more predictable returns and to curtail riskier investments aimed at meeting future needs." and prominent
Democratic Senators
Chuck Schumer and
Bernie Sanders writing in
The New York Times, argued that shareholder theory, which promoted a rise in
stock-based compensation, has led executives to enrich themselves by implementing
stock buybacks—often to the detriment of the companies they work for. The critics argued this diverts company funds away from potentially more profitable or socially valuable avenues, like research and design, reduces productivity, and increases inequality by delivering money to higher-paid employees who receive stock-based compensation and not to lower-paid employees who do not.
Lawrence Mishel, distinguished fellow of the
Economic Policy Institute, argued in 2020 that wages have been kept low in the United States because of the Friedman doctrine, namely the adoption of corporate practices and
economic policies (or the blocking of
reforms) at the behest of
business and the
wealthy elite, which resulted in the systematic
disempowerment of workers. He argued that the lack of worker power caused wage suppression, increased
wage inequality, and exacerbated racial disparities. Notably, mechanisms such as excessive
unemployment,
globalization, eroded
labor standards (and their lack of enforcement), weakened
collective bargaining, and corporate structure changes that disadvantage workers, all collectively functioned to keep wages low. whilst the earnings of the top 1 percent and 0.1 percent increased 158 percent and 341 percent, respectively. Notably, the theory of corporations having the only objective of
profit maximization (without any consideration of other
stakeholders), led
Purdue Pharma and the
Sackler family to engage in unethical corporate practices of increasing revenue, by abetting doctors to dispense prescription
opioids, without any legitimate medical purpose. ==See also==