The Summary of "Social Resoinsibility of Business and Labor" by Friedman

No Social Responsibility for Corporations

Milton Friedman, an economics Nobel Prize winner, writes the article Social Responsibility of Business and Labor to reply to the generally accepted idea that corporations should have a “social responsibility” that goes beyond making profits. He clarifies the responsibilities of corporations, labor leaders and the society. Corporations’ sole responsibility is to maximize their profits. Labor leaders are responsible to serve their members’ benefits. Moreover, the responsibility of the society is to “establish the legal framework” of free market for business to operate within. Friedman maintains the claim of Adam Smith that the "invisible hand" would guide market participants to maximize individual interest as well as society’s benefits.

The “foundation” of our free society would be broken down due to the tendency of corporations to focus more on social responsibility rather than profit maximization. Friedman points out that it is impossible to define and judge the responsibility of serving the social interest. If corporation officials contribute shareholders’ money to “social interests”, their roles, in effect, change from decision makers of business to civil servants.

Additionally, unless it is a publicly company, in a free market, the government should not be involved in price setting. It is the right of corporation managers to set up the price for shareholders’ best interests. Enough historical evidence shows that the amount of money launched in the economy determines the average price. Artificial control of prices would certainly damage the economy. Friedman argues that corporation officials are going beyond their duties to make contributions to charitable activities. Shareholders have the rights to dispose their property. Insofar, as there is a corporate tax; it could never be justifiable to permit deduction for such contributions. Furthermore, the expected implementation of tax deduction of corporate...