Do Corporations Have Responsibilities to their Stakeholders?

Posted on Posted in Corporate Responsibility, Ethics


One of the worst ideas that Milton Friedman ever had, and that is saying a lot, was the idea that the only responsibility corporations have is to make as much money as possible for their shareholders, with the caveat that they not break the law.

I first caught wind that people take this notion seriously when I taught a business ethics class and there was a chapter on “shareholder vs. stakeholder” view of corporations. The shareholders are of course the people who own the corporation and the stakeholders are everyone else, the customers, the employees and everyone else in society who is affected by the activities of the corporations. And when we consider pollution from fossil fuels that really means everyone in society. In the textbook the issue was made out to be this really difficult and complex question with no obvious right answer.

To try and understand just how absurd this is let’s imagine that Jack gives John some advice about how to treat his wife. He tells him, “It is okay to treat your wife however you want as long as you don’t break the law. So, don’t hit her or rape her but you can be abusive in other ways that are not illegal if it benefits you.”

Now Jack decides to share some more wisdom with John, this time about parenting. He says, “As long as you don’t break the law don’t go out of your way to spend time with your child or do anything nice for them.”

His advice on helping old ladies across the street, “Don’t push them in front of a moving car but don’t help them either, unless it benefits you somehow.”

How would we think about Jack? We would think Jack was a psychopath.

As you can see this way of acting is totally unacceptable and seen as disgusting and terrible in every sphere of life outside of business. The only people that act that way are psychopaths.

So, do corporations have responsibilities to their stakeholders? Absolutely!

They have moral obligations just like every other member of society. Or more properly the people making the decision within corporations have moral obligations to all members of society.

Corporations need to function as decent members of society that contribute to the well being of the other members of society not psychopaths who don’t care about anyone except themselves.

As long as one takes the notion of moral responsibility seriously it become quite clear that yes corporations do have very significant moral responsibilities to all their stakeholders.

Of course Friedman doesn’t seem to get the whole notion of a moral obligations in the way most other members of society do, which is why he would say such a strange thing. As a libertarian he has very strange notions of what moral obligations individuals have.



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