The Governance Revolution

Chapter 5 Shifting Dynamics from 1970 to 2000

Coming as it did near the end of what had been a long period of optimism which allegedly included a spirit of sharing, Milton Friedman’s much discussed 1970 New York Times essay, “The Social Responsibility of Business Is to Increase Its Profits,” and its emphasis on shareholder value as virtually the sole criterion by which corporate performance should be judged seemed far out of the mainstream. He roundly denounces corporate “social responsibility” as a socialist doctrine and takes shareholders’ ownership of the corporation as a given. He asserts that “the manager is the agent of the individuals who own the corporation” and, further, that the manager’s primary “responsibility is to conduct the business ...