Milton Friedman believed that the sole responsibility of corporations was to maximize shareholder value (Friedman, 1970). We have come a long way since then and have adopted a Stakeholder Model that recognizes the interests of employees and their families, the community, suppliers and customers, and even the competition, the government and everyone in the region in which the company is located. .

Many years ago, Henry Ford lost the lawsuit in which some of his shareholders (notably the Dodge brothers) sued for failing to distribute the profits to shareholders. The Michigan Supreme Court held that Ford should distribute its profits to its shareholders rather than build a smelter plant (Dodge v. Ford Motor Co., 204 Mich. 459 (1919)). Ford had said that “My ambition … is to employ even more men, to extend the benefits of this industrial system to as many as possible, to help them build their lives and their homes” (Id. At 505).

The Michigan Supreme Court held, “A business corporation is organized and operated primarily for the benefit of shareholders” and that “it was their duty to distribute on or about August 1, 1916, a very large sum of money to the shareholders”. “(Id. At 505, 509). He ordered Ford Motor Co. to pay $ 19,275,385.96 in additional dividends (Id. At 491). As a result, Henry Ford took the company privately and bought the other shareholders to have control Total, obviously I would not agree with Friedman.

We now recognize that Milton Friedman was wrong; that the most socially responsible way with long-term positive results for the company and society is to take into account the interests of all stakeholders.

References:

Dodge v. Ford Motor Co., 204 Mich. 459, 170 NW 668; 1919 Mich LEXIS 720; 3 ALR 413 (1919).

Friedman, M. (1970, September 13). The social responsibility of companies is to increase profits. New York Times Magazine [electronic version]. Retrieved February 21, 2009, from http://www.colorado.edu/studentgroups/libertarians/issues/friedman-soc-resp-business.html