Brewer 1
Chmesa Brewer
Professor Laing
Milton Friedman and R. Edward Freeman
In reviewing the literature on Freeman and Friedman, we see the two men held very different
views on how businesses should operate, and the responsibility businesses should have while
performing in a free market society. Freeman believed in the Stakeholder theory, whereas any
person or organization that has a “stake” in the company should also have a say in the business’s
actions and decisions. To Freeman, the term shareholder encompassed customers, suppliers,
employees, communities, and financiers. “The basic idea is that businesses, and the executives
who manage them, actually do and should create value for customers, suppliers, employees,
communities, and financiers (or shareholders). And, that we need to pay careful attention to how
these relationships are managed and how value gets created for these stakeholders (Freeman).”
For Freeman, stakeholders held direct or indirect links; to the success of the business and its
outcomes. How Freeman’s theory worked are employees receive wages from the corporations
and try to do an excellent job at their work. Of course, suppliers provide the business with raw
quality goods, which in turn allows the company to operate and function and provide consumers
with a great product or service, and so forth. All of these “shareholders” are intrinsically linked
and dependent on each other for overall success. However, Friedman believed in the shareholder
theory that companies are only responsible for those that own stock in the company, for example,
the owners or stockholders of the business. Friedman’s shareholder theory says that the purpose
of a business is to make money for the owner or the stockholders of the corporation. Friedman
felt the primary purpose of a company is to increase profits for the shareholders, and businesses
Brewer 2
more concerned with responsibilities other than profit is akin to socialism. “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. (Freidman)”
I see benefits to both theories, but I feel Freeman more aligns with what I value. I don’t know
how businesses cannot understand the interdependency and responsibility that it has to ensure
that people are paid living wages, and the environment is taken care of at the cost of business.
They’ve been so many studies that show if you get the buy-in and treat your employees fairly
with a good wage, you get better outcomes. In my assessment, Friedman’s theory is more
shortsighted and only focuses on the here and now of the corporation so short term gains versus
long term successes. In a short time, will the company make a profit under Friedman’s theory-
