The Economist gave Yale management professor Jeffrey Sonnenfeld a column this week, in which--as usual--he presents a rosy view of corporate social responsibility. In it, he quotes Milton Friedman:
Milton Friedman, the American economist, acknowledged as much in a famous article published in 1970. “It may well be in the long-run interest of a corporation that is a major employer in a small community to devote resources to providing amenities to that community or to improving its government. That may make it easier to attract desirable employees, it may reduce the wage bill or lessen losses from pilferage and sabotage or have other worthwhile effects.” Friedman never said the only social responsibility was “the bottom line”, and neither do today’s responsible ceos.
This is not the first time Sonnenfeld has misrepresented what Friedman said. See Bruce Nelson's letter to the WSJ in response to a WSJ op-ed by Sonnenfeld:
Mr. Sonnenfeld quotes Milton Friedman’s brilliant essay on corporate social responsibility out of context. Friedman plainly states that “the use of the cloak of social responsibility and the nonsense spoken in its name by influential and prestigious businessmen does clearly harm the foundations of a free society.”
It should not be surprising, then, that Mr. Sonnenfeld assumes the mantle of spiritual awakening. Friedman and God in one essay? The purview of our intellectual elites is often quite breathtaking.
(I also criticized Sonnenfeld's WSJ editorial.)
Back to Sonnenfeld's latest nonsense: "Friedman never said the only social responsibility was 'the bottom line.'" Really? Friedman's famous essay was entitled "The Social Responsibility Of Business Is to Increase Its Profits," not "A Social Responsibility ...." When Friedman spoke about an employer "providing amenities" to its community, he wasn't talking about being socially responsible, he was talking about corporations generating "goodwill as a by‐product of expenditures that are entirely justified in its own self‐interest." In other words, Friedman thought the purpose of making such contributions was to increase profit not do good. The disparity between what Friedman actually thought and Sonnenfeld's characterization is made clear by a portion of the former's essay Sonnenfeld leaves out: “there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception fraud.” In other words, the bottom line is the only social responsibility of business.
