The Business of Business is to Make Profits
By William Shughart • Saturday September 4, 2010 6:14 AM PDT • 3 Comments
In the debate triggered by Aneel Karnani’s essay on corporate social responsibility published in the Wall Street Journal (Aug. 23)—see the letters to the editor published on Aug. 30—a critical point was overlooked.
If, as the late Milton Friedman taught, the sole objective of business is maximize profits, then the managers of those private enterprises would not be able to substitute their own preferences for those of their shareholders as to what charities and other social objectives to promote. Why should corporate CEOs be free to donate some of their owners’ profits to, say, the local symphony orchestra, rather than to more pressing social needs?
Confining the objective of business to profit-maximization affords shareholders the freedom to spend those profits as they see fit, be it on themselves or on their favorite cause. That is why no one should invest in a corporation that claims to be “socially responsible”.