The Social Responsibility of Corporations: A Reflection on
Friedman’s Doctrine
What role should businesses play in society beyond focusing on profit and making money?
This is a central question in the discussion of corporate social responsibility (CSR).On this
issue, Milton Friedman, in his doctrine “The Social Responsibility of Business is to Increase
its Profits,” argues that corporations are not moral agents but economic entities; their purpose
is to serve the interests of their shareholders.This essay focuses on the analysis of social
responsibility in business, ethical foundations, the difference between shareholders and
stakeholders, and the utility principle. It also examines Friedman’s doctrine and presents my
perspective, supported by a case study of Patagonia.
What Is Social Responsibility in Business?
Corporate Social Responsibility (CSR) refers to a company’s commitment to manage its
operations in ways that enhance the well-being of society and the environment. This goes
beyond legal requirements and includes voluntary efforts like sustainability initiatives, ethical
labor practices, community engagement, and philanthropy (e.g., donations, social programs).
In short, CSR is about doing business ethically while contributing to the public good.
CSR connects deeply with moral reasoning, which considers not just what is legal or
profitable, but what is ethically right. It reflects a form of volunteerism: companies are not
forced by law to give back or protect the environment, but many choose to do so because it
aligns with broader values and societal expectations. This responsibility also draws on ethical
theories such as utilitarianism, which promotes the greatest good for the greatest number—
suggesting that companies should consider the impact of their actions on all affected parties.
Ethics and Business: Moral Foundations of CSR
Business ethics involves applying moral principles like fairness, justice, and respect to
business decisions. Ethical behavior in business means thinking beyond self-interest and
short-term gains to include concerns like environmental impact, human rights, and
community well-being. When a company chooses to implement CSR policies, it is
engaging in moral reasoning— asking not only “What makes us more money?” but also
“What is the right thing to do?”
This kind of ethical behavior often takes the form of philanthropy, where businesses donate
resources or time to social causes, or sustainability, where firms reduce waste and carbon
emissions even when it may cost more. These actions are voluntary, but they demonstrate a
growing belief that corporations should be moral actors in society.
Shareholders, Stakeholders, and the Utility Principle
Understanding CSR also requires knowing who a business is responsible to. Traditionally,
companies are seen as responsible primarily to their shareholders—those who own shares and
expect a return on their investment. This is the core of Friedman’s argument: that executives
are employees of the shareholders, and their duty is to increase profits as long as they follow
the law and ethical customs.
In contrast, stakeholder theory argues that companies must also consider stakeholders—
anyone affected by the business’s actions, including workers, customers, suppliers,
communities, and even the environment. While shareholders care mainly about profit,
stakeholders may care about job security, health, sustainability, and fair treatment.
The utility principle (or utilitarianism) helps compare these views. From a narrow
shareholder view, utility means maximizing financial returns. From a stakeholder
perspective, utility means creating value for a broader group. CSR is often grounded in this
broader utilitarian idea.
Friedman’s Doctrine: The Profit Motive as Responsibility
Milton Friedman’s 1970 essay “The Social Responsibility of Business Is to Increase Its
Profits” is one of the most cited texts in business ethics. He argued that corporations are not
individuals and should not engage in social causes unless doing so directly increases profits.
For Friedman, corporate executives are agents of shareholders, and their job is to use
resources efficiently to generate profit, not to solve social problems. Otherwise, they are
imposing their own values and effectively “taxing” the shareholders without their consent.
Friedman did not oppose personal charity, but he firmly believed that using business funds
for social goals was a misuse of corporate power and an interference in democratic
processes. This is a view rooted in free-market capitalism, where the invisible hand of the
market, not businesses, should guide social outcomes.
Arguments Against Friedman’s Doctrine
While Friedman’s view is logically consistent, it faces key criticisms today:
1. Too Narrow: Businesses rely on society and public systems—ignoring social
responsibility risks damaging those foundations.
2. Short-Term Thinking: Focusing only on profit can lead to harmful practices that
hurt long-term success.
3. Power Requires Responsibility: Big corporations have the influence—and duty—to
contribute to the public good.
4. Public Expectations: Consumers and employees now expect ethical behavior. CSR
builds trust, loyalty, and even long-term profits.
Volkswagen Emissions Scandal: Consequences of Ignoring Ethics
Volkswagen’s 2015 emissions scandal revealed that the company manipulated tests to appear
environmentally friendly while continuing polluting practices. This case highlights the risks
of prioritizing profits or market position without ethical responsibility. The scandal led to
huge financial losses, legal penalties, and reputational harm—showing that ignoring broader
social responsibility can backfire.
Case Study: Patagonia – Profit and Purpose in Harmony
A powerful real-world example that challenges Friedman’s view is Patagonia, the outdoor
clothing company. Patagonia’s entire business model is based on environmental sustainability
and ethical responsibility. It uses recycled materials, supports fair labor, and gives 1% of its
revenue to environmental causes.
In 2022, Patagonia’s founder Yvon Chouinard transferred ownership of the company to a
trust and nonprofit, ensuring that all profits not reinvested in the company go toward fighting
climate change. This decision made global headlines and directly contradicted Friedman’s
idea that social responsibility undermines profitability.
Yet Patagonia is not just an ethical brand—it is also highly profitable. Its loyal customer base
supports its mission, and its transparency has built trust. Patagonia shows that ethical
responsibility and financial success can go hand in hand when companies commit to long-
term value creation rather than shortterm gain.
My Perspective: Rethinking Corporate Responsibility
In my view, Friedman’s doctrine made sense in the industrial economy of the 20th century,
where businesses were smaller and less interconnected. But today’s world is different. Global
corporations affect climate change, shape communities, and influence politics. With such
impact, a purely profit-driven model is not only outdated—it’s dangerous.
I believe that businesses should seek a balance: staying profitable while also acting as
responsible members of society. Social responsibility does not mean abandoning profit, but
rather pursuing it ethically. Companies like Patagonia prove that values-driven business is not
only possible, but sustainable and respected. As a consumer, I personally prefer to support
companies that care about their impact, and I know many people feel the same.
In conclusion, Milton Friedman’s idea that businesses should only focus on making profits is
important but not enough today. Companies affect many people and the environment, so they
need to act responsibly beyond just earning money. Examples like Patagonia show that caring
about society and the planet can also help a business succeed. In the end, businesses should
find a balance between making money and doing what is right for everyone.
