TAMING G.M. – Chairman James Roche of General Motors replies to members of Campaign G.M. at the corporation’s stockholders’ meeting in May. Representatives of the campaign demanded that G.M. name three new directors to represent “the public interest” and set up a committee to study the company’s performance in such areas of public concern as safety and pollution. The stockholders defeated theproposals overwhelmingly, but management, apparently in response to the second demand, recently named five directors to a “public-policy committee.” The author calls such drives for social responsibility in business “pure and unadulterated socialism,” adding: “Businessmen who talk this way are unwitting(involuntarios) puppets of the intellectual forces that have been undermining(socabar) thebasis of a free society.”
When I hear businessmen speak eloquently about the “social responsibilities of business in a free-enterprise system,” I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned“merely”(simplemente) with profit but also with promoting desirable “social” ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are—or would be if they or anyone else took them seriously—preaching pure andunadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.
The discussions of the “social responsibilities of business” are notable for their analytical looseness and lack(carece) of rigor. What does it mean to say that “business” has responsibilities? Only people can haveresponsibilities. A corporation is an artificial person and in this sense may have artificial responsibilities, but “business” as a whole cannot be said to have responsibilities, even in this vague sense. The first step toward clarity in examining the doctrine of the social responsibility of business is to ask precisely what it implies for whom.
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1 Milton Friedman is a professor ofeconomics at the University of Chicago.
Presumably, the individuals who are to be responsible are businessmen, which means individual proprietors or corporate executives. Most of the discussion on social responsibility is directed at corporations, so in what follows I shall mostly neglect the individual proprietor and speak of corporate executives.
In a free-enterprise, private-propertysystem, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied(consagrados) in law and those embodied in ethical custom. Ofcourse, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose—for example, a hospital or a school. The manager of such a corporation will have money profit as his objective but the rendering of certain services.
In either case, the key point is that, in his capacity as a corporate executive, the manager is the agentof the individuals who own the corporation or establish the eleemosynary institution, and his primary responsibility is to them.
Needless to say, this does not mean that it is easy to judge how well he is performing his task. But at least the criterion of performance is straightforward, and the persons among whom a voluntary contractual arrangement(acuerdo) exists are clearly defined….
