Americans were once deeply worried about the danger posed by powerful corporations. They may be useful, wrote James Madison to a friend in 1827, “but they are at best a necessary evil only.”11xJames Madison, The Writings of James Madison, 1819–1836, vol. 9, ed. Gaillard Hunt (New York, NY: G.P. Putnam’s Sons, 1910), 281. This was an old republican intuition: Concentrated power in whatever form threatened the body politic. In recent years, however, business leaders have come to believe that what Madison considered a “necessary evil” is actually the last great institution capable of making the world a better place. For Silicon Valley entrepreneurs no less than Fortune 500 CEOs, the bottom line is out, and amelioration is in. Call it conscious capitalism. Or corporate social responsibility or environmental, social, and corporate governance (ESG) investing. Many consumers, regulators, and activists expect big-business executives to act like responsible citizens and steer their firms accordingly—maybe more now than ever before. Even 92 percent of executives in a 2022 survey agreed that corporate leaders should take a stand on social issues.22x“State of Corporate Citizenship,” Boston College Center for Corporate Citizenship, 2022, https://ccc.bc.edu/content/ccc/research/reports/state-of-corporate-citizenship.html.
One imagines that Milton Friedman would be disappointed by all of this. Fifty-three years ago, the libertarian economist and eventual Nobel Prize winner wrote an article for the New York Times Magazine in which he took aim at the concept of corporate social responsibility.33xMilton Friedman, “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits,” New York Times Magazine, September 13, 1970, https://www.nytimes.com/1970/09/13/archives/a-friedman-doctrine-the-social-responsibility-of-business-is-to.html. His alternative to the social leadership of business executives became known as the Friedman Doctrine. Its core principle could not have been more emphatic: The sole responsibility of business is to maximize profits. Anything less, he argued, is a slippery slope toward the end of free enterprise and, after that, the collapse of democracy. Overstated and simplistic as it was, the doctrine had an undeniable elegance—attractive to its many adherents, crass and even insidious to its many critics.
Only having grown in notoriety since 1970, the Friedman Doctrine has served as a satisfying punching bag and a singular example of what not to think. At least that’s been the case for the hundreds of business school professors who regularly assign the article in classes on ethics and strategy. Generations of professional managers have been assured that Friedman’s ethical minimalism is out of step with the complicated world of modern business and the positive social role executives should play in it. And leading proponents of stakeholder capitalism in all its adjectival forms (conscious capitalism, just capitalism, sustainable capitalism, and caring capitalism, among others on a disconcertingly long list) continue to make the case for business reform with resolute renunciations of Friedman and all his works.
But if the Friedman Doctrine has apparently been booted from the realm of respectable opinion, the 1970 New York Times Magazine article itself has taken on an outsized role in the lapsarian stories we tell about the history of American economic life over the last half century. In this respect, it bears a resemblance to the so-called Powell Memo, written by jurist Lewis Powell in 1971 (a year before his appointment to the Supreme Court) for the US Chamber of Commerce, a confidential document that many scholars writing about the history of conservatism have identified as the smoking gun of a corporate plot, financed by dark money, to peddle ideas and influence whose effect would be to destroy democracy.44xLewis F. Powell Jr., Powell Memorandum: Attack on American Free Enterprise System, Washington and Lee School of Law Scholarly Commons, 1971, https://scholarlycommons.law.wlu.edu/powellmemo/. Historians and journalists tracing the rise of financialization and neoliberalism have conferred on the Friedman Doctrine a similar status: that it is a playbook for a Wall Street takeover of the economy and a manifesto for all of its financial vices.
The significance of Milton Friedman and his article is not so simple, and a true reckoning with this history is needed to clear up confusion not only about Friedman but about corporate capitalism. On the one hand, Friedman’s view of corporate responsibility was not nearly so radical or original as it is often made out to be. The notion that corporations are the property of shareholders and that management must act in their financial interest has been the default logic of US public policy going back at least to the New Deal era reforms of the stock market and the creation of the Securities and Exchange Commission. On the other hand, despite the almost ritualistic denunciation of the Friedman Doctrine, no comprehensive model for how to think about the large corporation has replaced the practical imperatives and tantalizing simplicity of the doctrine of shareholder value. Simultaneously entrenched and denied, the Friedman Doctrine has achieved the status of conventional wisdom. All of this suggests a question worth considering now, decades after the article’s publication: Can big business live without Friedman’s pronunciamento? The first step to answering that question requires a step back into the history of the article, the author, and the politics of corporate control.
By September 1970, Milton Friedman had been a public figure for some time. After a stint at the National Bureau of Economic Research beginning in the 1930s, he arrived at the University of Chicago in 1946, where he researched monetary theory and mostly wrote articles for academic journals. But his career took a decisive shift in 1962, when he and his wife, Rose Friedman, a fellow free-market economist, published Capitalism and Freedom; a year later, he and Anna Schwarz, a monetary economist at the National Bureau of Economic Research, published A Monetary History of the United States, 1867–1960. The two books made Friedman an academic star and public intellectual. By decade’s end, he was on the cover of Time, had a regular Newsweek column, and was the top economic adviser to President Richard Nixon.
The C-Suite Wavers
During the same years that Friedman cemented his reputation as a leading conservative economist, a movement of protest enveloped corporate America. It started in Rochester, New York, when a local black power organization demanded that the manufacturer Eastman Kodak provide job training for unemployed African Americans. The tactics the organizations used to pressure the company at Kodak’s 1967 annual meeting—purchasing stocks to gain access, collecting proxy votes of institutional shareholders, questioning the board, and staging demonstrations outside—spread among activists who targeted the most powerful corporations of the late 1960s and 1970s.55xLaura Warren Hill, Strike the Hammer While the Iron Is Hot: The Black Freedom Struggle in Rochester, NY, 1940–1970 (Ithaca, NY: Cornell University Press, 2021); R.D.G. Wadhwani, “Kodak, FIGHT, and the Definition of Civil Rights in Rochester, New York: 1966–1967,” The Historian 60, no. 1 (September 1997): 59–75; P. David Finks, “Crisis in Smugtown: A Study of Conflict, Churches, and Citizen Organizations in Rochester, New York, 1964–1969” (PhD diss., Union Graduate School, July 1975). They demanded changes to business conduct and reforms to corporate governance over issues ranging from civil rights and gender equality to environmental pollution and the war in Vietnam.
As Friedman watched all of this unfold, he expressed less worry about the social movements themselves than about the possibility that the managerial class had drifted from its role as custodian of efficiency and profit and into something potentially sinister. For years he had sounded the alarm that liberal-minded businessmen, for all their good intentions about social and environmental betterment, were introducing what he called in National Review a “subversive doctrine in a free society.”66xMilton Friedman, “Social Responsibility: A Subversive Doctrine,” National Review, August 24, 1965, https://www.nationalreview.com/2015/02/social-responsibility-subversive-doctrine/. As early as the 1950s, as the civil rights movement and the Cold War forced business leaders to rethink their obligations to society, Friedman in an academic seminar had condemned the idea that management had “social responsibilities in some sense other than to make as much money as possible.”77xQuoted in Friedrich A. Hayek, “The Corporation in a Democratic Society,” in Management and Corporations, 1985, ed. Melvin Anshen and George Bach (New York, NY: McGraw-Hill, 1960), 117. Now, in the face of unprecedented protests, the C-suite wavered. It was the Campaign to Make General Motors Responsible, launched in 1970 and organized by consumer protection activist Ralph Nader and a small team of young lawyers, that forced the hand of big business. The highest-profile protest against the largest corporation at the time, Campaign GM failed in its shareholder resolutions but succeeded in pressuring the company into a handful of concessions: appointing a black man to the board and an environmental expert as a vice president; depositing millions in black-controlled banks; funding pollution mitigation programs; and forming a public policy committee to advise on social issues.88x“G.M. Names 5 Directors as Public-Issue Advisers,” New York Times, September 1, 1970, https://www.nytimes.com/1970/09/01/archives/gm-names-5-directors-as-publicissue-advisers-5-directors-are-named.html; “G.M. Elects First Negro as Member of Its Board,” New York Times, January 4, 1971, https://www.nytimes.com/1971/01/05/archives/gm-elects-first-negro-as-member-of-its-board-gm-board-names-a-negro.html. See also Jessica Ann Levy, “Black Power in the Boardroom: Corporate America, the Sullivan Principles, and the Anti-Apartheid Struggle,” Enterprise & Society 21, no. 1 (March 2020): 170–209.
That was just the beginning. By 1975, 60 percent of the largest firms in the country had a high-level committee or executive who directed corporate social responsibility programs focused, for example, on the employment and training of disadvantaged workers or the mitigation of air and water pollution.99xVernon M. Buehler and Y.K. Shetty, “Managing Corporate Social Responsibility,” Management Review 64, no. 8 (August 1975): 4–17. On the changing relationship between business and the state in the 1960s and 1970s, see Joshua Zeitz, Building the Great Society: Inside Lyndon Johnson’s White House (New York, NY: Viking, 2018); Richard Flacks and Nelson Lichtenstein, eds., The Port Huron Statement: Sources and Legacies of the New Left’s Founding Manifesto (Philadelphia, PA: University of Pennsylvania Press, 2015). Over the last fifty years, the majority of large firms with well-known brands have learned the language of social change and embraced a long and still-growing list of causes. “Many people,” wrote business consultants Steve Hilton and Giles Gibbons in 2002, “would be amazed if they lifted the stone of contemporary business activity and saw the army of consultants, experts, charlatans and do-gooders scurrying around inside and outside companies trying to help them be more socially responsible.”1010xSteve Hilton and Giles Gibbons quoted in Jeremy Moon, Corporate Social Responsibility: A Very Short Introduction (New York, NY: Oxford University Press, 2014), 20.
Maybe Milton Friedman foresaw all of this when he worried about the possibility of executives capitulating to the “GM crusade.” Just as his article in the New York Times Magazine was framed by photos of Campaign GM activists, antipollution protestors, and African American job trainees, so also has corporate social responsibility has been historically flanked by activists and social movements demanding even more substantive concessions than big business is willing to make.
Mixing business and politics was a dangerous mistake, Friedman contended, that would have unpredictable consequences. Like other neoliberals, he thought of the market as a kind of game that unfolded according to rules set by the state. The conclusion neoliberals arrived at—that politics should be kept in the governmental sphere and sealed off from the market—may seem difficult now for many of us to accept. But it is worth remembering the context in which Friedman and the network of libertarian thinkers gathered in and around the Mont Pèlerin Society (a group formed in 1947 to recover and renew classical liberalism, of which Friedman was president from 1970 to 1972) developed these ideas.1111xAngus Burgin, The Great Persuasion: Reinventing Free Markets Since the Great Depression (Cambridge, MA: Harvard University Press, 2012), 67–78. They wanted to find ways to avoid and undermine the authoritarianism of fascism and communism that had so recently threatened (and continued to endanger) the flourishing of democracy. The problem, as Friedman saw it, was that the market could do the work of coordinating economic activity in a free society only if everyone played his or her part as a self-interested actor, which meant acting on the basis of prices rather than political motives or social responsibilities. Without the rule of profit seeking, the doors were open to the concentration of economic and political power by means of socialism, corruption, discrimination, and, ultimately, tyranny.
This way of thinking had important consequences for understanding the business corporation. The most important thing that you need to know about a corporation, according to Friedman, is that it is the private property of shareholders. Executives do not have the right to act in the interests of anyone else. “What does it mean to say that the corporate executive has a ‘social responsibility’ in his capacity as businessman?” Friedman wrote in the New York Times, “If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers.” The ideal that corporations would, in fact, act in the interest of the larger community was not so foreign as Friedman made it out to be. One hundred and fifty years or so before he wrote those words, state legislatures had a regular responsibility to judge whether it was necessary for a new corporation to be created, for what purpose, and for how long. This deliberation mattered because the corporation was granted special privileges that allowed it to amass capital and to enjoy legal protections available to no one else. By the end of the nineteenth century, the legal process for making a new corporation had become routine—more like opening a checking account than something esoteric such as asking the government to create a new legal person. By the time New Deal policymakers constructed the Securities and Exchange regime in the early 1930s, Americans had mostly given up the idea that corporations had robust social obligations or that they were concessions of state power. And by the time Friedman issued his doctrine, he was solidly within the mainstream of US public policy. The now ninety-year-old system by which shareholders oversee the power of management and boards of directors is a purely financial one—and it was built on the metrics of share price, quarterly earnings, and annual reports.
The Retrofitted Invisible Hand
The Friedman Doctrine has persisted in American intellectual life mostly because of people who disagreed with it. Over the past five decades, it was business ethicists who enshrined the Friedman Doctrine in dozens of textbooks and countless course syllabuses, at both the college and MBA levels. The 1970 article served as an animating in-class debating point and, for many business faculty, an example of what young managers should not think. That is not to say the lesson was always taken to heart. I spoke with one early-career professor who believes that, more often than not, students are convinced by Friedman’s persuasive reassurance that seeking profit above all else really is the most responsible and socially beneficial action. It is Adam Smith’s invisible hand retrofitted to corporate capitalism—much to the chagrin of ethics professors.
Perhaps no one has done more to put Friedman in his place than R. Edward Freeman, a longtime professor of business ethics and strategy at the University of Virginia’s Darden School of Business. In textbook chapters, public talks, popular books, and more than four decades as a business professor, Freeman has propounded a theory of stakeholder value as an alternative to the Friedman Doctrine and what the Virginia professor calls the fallacy of shareholder primacy. Freeman, who moonlights as a keyboardist and record producer, became something of a stakeholder guru during the mid-2000s when he was named the academic director of the Business Roundtable’s Institute for Corporate Ethics in the wake of the WorldCom and Enron scandals. His friendship with John Mackey, founder and former CEO of Whole Foods, has put Freeman’s name on the map as the theorist behind what Mackey has promoted for years as conscious capitalism.
Separating business from ethics is, according to Freeman, one of the mistaken assumptions of conventional ways of thinking about business—what he calls the “old story of business.” Instead of seeing the corporate institution in terms of power and hierarchy with shareholders at the top of a pyramid chart, he contends that business leaders ought to see their organizations in terms of collaboration among an intersecting cast of stakeholders. Getting business leaders to think ethically can be another way of getting them to think strategically about the relationships executives have with groups inside and outside the firm. “In principle, there is no conflict between shareholders and stakeholders,” he told me, “but finding the way to harmonize their interests is difficult.” Where history or even common sense might tell you that these different groups have divergent (and sometimes intensely conflicted) interests, Freemen calls business leaders to the hard task of reconciling those interests.
And they can be harmonized, Freeman insists, because they all have a stake in the success of a business. “Stakeholder interests are interdependent,” he says. “The real flaw in shareholder primacy is the idea that you can single out shareholders and maximize their interests to the neglect of other stakeholders.” Freeman distinguishes this idea from corporate social responsibility, whose advocates can be too quick to admit that ecological sustainability, for example, might eat away at profits. “Sometimes you have to make tradeoffs, but those times are failures of imagination,” he says. In the long run (though it’s hard sometimes to say how long), the success of the CEO and fellow executives entails aligning stakeholder interests in such a way that tradeoffs disappear.
The Doctrine of the Corporate Stakeholder
America’s leading executives bristled at Milton Friedman’s characterization of their proper role as little more than glorified errand boys for Wall Street. Even so, the publication of Friedman’s 1970 article coincided with revolutionary developments in managerial strategy, first pioneered by the Boston Consulting Group and McKinsey and Company, that would over the next decades transform the corporation into a lean, cost-cutting institution focused on short-term profits and shareholder value.1212xFor a discussion of how management consultants made use of new methods of financialization, see Louis Hyman, Temp: How American Work, American Business, and the American Dream Became Temporary (New York, NY: Penguin, 2018). The irony is that even as business leaders were becoming more accountable to Wall Street, they cloaked themselves in the language of corporate social responsibility.
Consider the Business Roundtable’s changing rhetoric. Back in 1981, the lobbyist group put out a statement saying that social responsibility and long-term business growth were two sides of the same coin. “More than ever, managers of corporations are expected to serve the public interests as well as private profit,” the statement read.1313xBusiness Roundtable, “Statement on Corporate Responsibility,” October 1981. Fast-forward to 1997, and the Roundtable put out a much different statement that strongly favored shareholder value and repudiated the notion that “the board must somehow balance the interests of stockholders against the interests of other stakeholders.”1414xBusiness Roundtable, “Statement on Corporate Governance,” September 1997. In 2019 the group put out yet another statement, in which its thinking seems to have come full circle, declaring its commitment to all stakeholders: customers, employees, suppliers, communities, and shareholders.
Intergenerational waffling? Perhaps. But these shifting stances also show the degree to which high-profile CEOs have sought to position themselves in response to changing public perceptions of the large business corporation. In recent years, the Business Roundtable found itself the subject of popular historical narratives that cast the group’s 1997 statement in support of shareholder value as a capitulation to the short-term interests of finance capital that, among other outcomes, led to the undermining of long-term growth and a stable job market. Jamie Dimon, CEO of JPMorgan Chase, spearheaded an effort as the chairman of the Business Roundtable to blunt these criticisms. Along with industry leaders such as Vanguard chairman William McNabb and BlackRock CEO Larry Fink, Dimon put together the new “Statement on the Purpose of a Corporation.”1515xBusiness Roundtable, “Statement on the Purpose of a Corporation,” August 19, 2019, https://system.businessroundtable.org/app/uploads/sites/5/2023/02/WSJ_BRT_POC_Ad.pdf. Released in August 2019 over the signatures of 181 CEOs, the one-page document indicates that the language of responsibility and stakeholder value has become indispensable to how contemporary business leaders explain and justify their powerful role in the American economy.
The idea of the corporate stakeholder was mostly unheard of before the 1980s. And it was primarily popularized by self-styled opponents of the Friedman Doctrine. So when the Business Roundtable statement came out four years ago, it was unsurprising that journalists perceived it by and large as a repudiation of Friedman’s idea of shareholder primacy—even if it was not explicitly explained in that way. Joshua Bolten, the president and CEO of the Business Roundtable, said it wasn’t intended as a rejection of Friedman. “It was not a demotion of the long-term shareholders, because, in our view, the interests of all the stakeholders align in the long-run success of the enterprise,” he told the New York Times.1616xPeter S. Goodman, “Shareholder Capitalism Gets a Report Card. It’s Not Good,” New York Times, September 22, 2020, https://www.nytimes.com/2020/09/22/business/business-roudtable-stakeholder-capitalism.html. As many defenders of stakeholder value maintain, the Friedman Doctrine can and should be reconciled with the ideals of ethics and responsibility.
Even so, corporate social responsibility, as Friedman saw it, is a harmful case of not minding your own business. It expects people to act in areas where they may have little expertise, elevating the executive to a status of all-purpose genius. Business leaders, after all, are trained and have experience in leading organizations. They are not experts in the environment or economic inequality or any number of other pressing social and political concerns. The sometimes messianic and often nebulous rhetoric of changing the world so zealously embraced by CEOs and especially by the tech culture of Silicon Valley can have unintended consequences. For instance, it can be distracting and sometimes even deceptive. Jennifer Burns, a professor of history at Stanford University and author of a new biography of Friedman, argues that there is something to be said for an organization focusing mainly on one thing and doing it well—one of the forgotten lessons of the Friedman Doctrine.1717xJennifer Burns, Milton Friedman: The Last Conservative (New York, NY: Farrar, Straus and Giroux, 2023).
Consider Juul, the e-cigarette company. A San Francisco Bay area startup, the firm gained widespread popularity and acceptance even at colleges and secondary schools because of its claims to provide a healthy alternative to traditional smoking. Due in part to this corporate social responsibility marketing, the company contributed to a new problem: growing nicotine addiction in teens for the first time in decades. Burns sees this as indicative of a larger problem in business culture. “Sitting in Silicon Valley, I have seen startup after startup justify themselves by a larger social claim,” she told me. “Many new tech companies are unwilling even to include the idea that they exist to make money as one of their rationales. I think that is deeply unhealthy.” Following the rules of profit seeking, in other words, would mean that everyone knew where the other person stood and what was motivating them.
Corporate Reform, at Home and Abroad
Friedman and his sympathizers have not been the only ones worried about managerial autonomy. After all, the occasion for the publication of his 1970 article was a popular campaign against General Motors, part of an anticorporate protest movement that sought to rein in managerial power. In recent years, the politics of corporate reform have made something of a comeback. Senator Elizabeth Warren’s Accountable Capitalism Act, introduced in 2018, represents an alternative vision of stakeholder capitalism that would establish a federal system of charters and, among other things, put worker representatives on boards of directors. In Warren’s mind, just as in the minds of seventies activists such as Ralph Nader, the interests of workers, consumers, suppliers, and communities don’t seamlessly flow into the operation of a successful business firm. Warren’s plan, developed by the Roosevelt Institute think tank, instead assumes that stakeholder interests are also political interests that have to be brokered through a system of checks and balances along the lines of what has been effectively implemented in other countries.
The centerpiece of the Accountable Capitalism Act was a requirement that workers be given a vote on 40 percent of a corporation’s directors, a proposal modeled on a system of codetermination that’s become institutionalized in Germany since the end of World War II. But it is unclear what effect other elements of the legislation, including one that enumerates new duties of directors toward stakeholders, would have on the day-to-day operations of a firm. “The Act creates a fiduciary duty of directors toward five or six additional stakeholders,” points out public policy analyst Matt Bruenig of the People’s Policy Project. Even if stakeholders initiated litigation in response to what they thought was a dereliction of those duties, he told me, “there would be no serious way to review this legally.” Under a court-honed doctrine known as the business judgment rule, most judges will give wide latitude to corporate executives and directors who are presumed in almost every case to act in good faith and according to their expertise.
Many corporate reform ideas have been around for a long time—some since the Progressive Era at least. And most of these proposals have been imagined as projects for developing new forms of countervailing power that will rein in management and shareholders and make big business more accountable to democratic interests. Senator Warren’s plan for codetermination, for example, holds out great hope that workers could stand up to management and Wall Street. It is a laudable goal, perhaps, but with labor union membership at an all-time low, it reflects assumptions about the contemporary labor movement and its ability to exercise power that are arguably obsolete at this point. (Although, if recent union actions by the Writers Guild of America and the United Auto Workers are any indication, we could be on the cusp of a labor movement revival.)
Even supposing a reversal in the decades-long misfortunes of labor unions, a more intractable problem lies with the legal standing of shareholders. Setting aside momentarily the stakeholder theorists’ confidence in the existence of a harmony of interests between investors and everyone else, any would-be corporate reform movement will inevitably break against the flood walls of shareholders and their financial interests. The more challenging task, then, might be to break down the wall between stakeholders and shareholders by redefining what shareholder interests are. Some have proposed marshaling the holdings of public pension funds to pressure big corporations into changing their behavior. Bruenig has proposed a similar plan on a much larger scale. Modeled on Norway’s Government Pension Fund (the largest sovereign wealth fund in the world) and the Alaska Permanent Fund, Bruenig’s idea is that the US government would create a fund that would gradually purchase the stocks of publicly traded firms, among other equities. In addition to redistributing wealth gained from investments and thereby easing economic inequality, the fund would give public representatives a substantial voice through shareholder votes at annual corporate meetings. Over time, state holdings in publicly traded corporations would weaken the iron grip of private investors and disrupt the financial machinations of Wall Street.
These proposals for transforming the way big business does business help explain the stubborn persistence of the Friedman Doctrine and what it means to America. The very possibility of quenching the supremacy of shareholders’ financial interests and making profit maximization subordinate to other social purposes depends on reimagining who gets to exercise power in the corporation—and how they do it. Indeed, a form of corporate governance that shares power among workers, managers, investors, and the broader community would so transform corporate capitalism that we might scarcely be able to call it capitalist anymore. Which suggests something that many critics of the Friedman Doctrine have been unable to countenance: that Milton Friedman expressed in a simple and straightforward, if polemical, way an idea that Americans had been content to accept for about thirty years at that point (and eighty or so years now): that publicly traded corporations ought to be responsible primarily to shareholders.
Great Democratic Expectations
Stock market supervision of corporations, of course, was not the bitter fruit of a neoliberal conspiracy. It was the New Deal (as it actually existed, not as many hoped it would be or as many have since imagined it was) that endorsed and entrenched in federal agencies such as the Securities and Exchange Commission and in institutions such as the New York Stock Exchange a system that treated corporations not as social and political institutions but as pieces of property owned by and for the benefit for shareholders.1818xI borrow this helpful concept from John J. Flynn, “Corporate Democracy: Nice Work If You Can Get It,” in Corporate Power in America, ed. Ralph Nader and Mark J. Green (New York, NY: Grossman, 1973), 94–110. It is perhaps inconvenient (or regrettable), but it is nevertheless true that Americans have, for a very long time, grounded the moral and political legitimacy of large corporations in the proprietary claims of shareholders. Big business depends on shareholders for the finance capital they provide, to be sure, but America’s own democratic sense of itself—that expects checks and balances and chafes against concentrated power—also depends on Wall Street for what it figuratively represents: a competitive market that, in something resembling a democratic fashion, exercises authority and projects accountability over the most powerful economic institutions in the land and around the world.
That Wall Street has plainly not fulfilled these democratic expectations only heightens the significance of the problem Friedman addressed fifty-three years ago. Those who would seek to do away with the Friedman Doctrine are raising significant questions about corporate governance—who gets to make decisions within the firm and how. But these questions will only lead to confusion if we are not clear about an important historical fact: Friedman’s viewpoint went far deeper and has been more lasting than the politics of 1970 or even the shareholder value movement of the last few decades. If we are going to find a way to live without it, we will have to return to even older questions not seriously considered in this country for generations: What is a corporation, and what is it good for?