Milton Friedman wrote one essay in 1970 that governed corporate behavior for fifty years.
On September 13, 1970, the New York Times Magazine published an essay by economist Milton Friedman titled "The Social Responsibility of Business Is to Increase Its Profits." The argument was blunt. A corporate executive is an employee of the shareholders. That executive’s responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible.1
Friedman had previewed the argument in his 1962 book Capitalism and Freedom, where he warned that corporations pursuing social responsibility would become unwitting puppets of intellectual forces undermining free society.2 The 1970 essay crystallized the idea into a doctrine. In 1976, finance professors Michael Jensen and William Meckling published "Theory of the Firm," providing a quantitative framework that made shareholder value maximization the measurable standard against which executives would be judged.3
The doctrine reshaped executive compensation. Stock-based pay, designed to align management incentives with shareholder returns, rose from a minor component of CEO compensation in the 1970s to the dominant one by the 2000s. In 2016, The Economist called shareholder primacy the biggest idea in business.4 The 2008 financial crisis, driven partly by institutions pursuing short-term profit maximization, prompted the first sustained backlash.
In August 2019, the Business Roundtable, a group of 181 American CEOs, issued a new statement on the purpose of a corporation, explicitly rejecting the principle that shareholders’ interests should come first and embracing responsibility to employees, customers, suppliers, and communities.5 Fifty years after Friedman’s essay, the doctrine he formalized remains embedded in corporate law, compensation structures, and the assumptions that govern how organizations define success.