Friedman doctrine

[2]Friedman argued that the appropriate agents of social causes are individuals—"The stockholders or the customers or the employees could separately spend their own money on the particular action if they wished to do so.

"[2] In Capitalism and Freedom, Friedman had argued that when companies concern themselves with the community rather than profit it leads to corporatism,[6] consistent with his statement in the first paragraph of the 1970 essay that "businessmen" with a social conscience "are unwitting puppets of the intellectual forces that have been undermining the basis of a free society".

[2] The Friedman doctrine was amplified after the publication of an influential 1976 business paper by finance professors William Meckling and Michael C. Jensen, "Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure", which provided a quantitative economic rationale for maximizing shareholder value.

It has led to a set of behaviors by many actors on a wide range of topics, from performance measurement and executive compensation to shareholder rights, the role of directors, and corporate responsibility.

[10] In November 2020, the Stigler Center of the University of Chicago Booth School of Business published a compendium of 28 articles on the legacy of Friedman.

[13] The Friedman doctrine is controversial,[1] with critics variously saying it is wrong on financial, economic, legal, social, or moral grounds.

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.

"[8] The Economist said in 2016 that a focus on short-term shareholder value has become "a license for bad conduct, including skimping on investment, exorbitant pay, high leverage, silly takeovers, accounting shenanigans and a craze for share buy-backs, which are running at $600 billion a year in America".

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.

[33] In January 2022, billionaire hedge fund manager and investor Paul Tudor Jones attributed the opioid epidemic in the United States as a product of the Friedman doctrine.