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The debate between a shareholder-centric perspective and a stakeholder-centric one dates back at least to the early 1930s, when Adolf Berle and E. Merrick Dodd argued these two positions in the Harvard Law Review. Yet, a crucial milestone in this debate has been set by Milton Friedman who, fifty years ago almost to the day, wrote in the New York Times Magazine that the only social responsibility of business is to increase its profits.
Friedman espoused the contractarian view of the corporation—i.e., that corporations are just a nexus of contracts freely drawn by the various parties involved. According to this perspective, corporations are no different from a collection of individuals. Hence, they should not have any social responsibility different from that of individuals. It is important to emphasize, thus, that this does not mean “no responsibility.”
You may not like subsidizing airlines, their shareholders, or creditors but we do it all the time. The entire financial services industry runs on government money with losses backstopped by Treasury and the Fed. It makes no sense to pretend that the airline industry is more of a free market business.
Eccieuser, First, I don't actually know that much about Friedman. I've read a couple of his essays, but never one of his books, but did find out enough about him to develop a man crush. I emphatically never wanted to bang him, like I wanted to bang Margaret Thatcher when I was a little tyke, but I believe he's got it right. In the future if you want to call on someone about economic theory LustyLad is a better bet.
However, I shall comment anyway.
From your first link:
"Friedman makes clear that corporations have the social responsibility to play within the rules of the game, “which is to say, engage in open and free competition without deception or fraud.” Thus, Friedman believes that companies have not just a legal, but also a social responsibility to not collude, deceive, or defraud."
And,
"Friedman would not object to the goals contained in the 2019 Business Roundtable Report, from “delivering value to our customers” to “investing in our employees,” from “dealing fairly and ethically with our suppliers” to “supporting the communities in which we work,”
The best system is where you have owner (shareholder) control of companies, and government provides reasonable, logical, efficient regulation, so they don't for example pollute the environment or defraud consumers. Also workers should be allowed to decide to organize unions (or not organize unions) and IMHO minimum wages make sense too.
This system of private ownership and control has produced tremendous prosperity in our world. Looking at the alternatives, state and worker control just don't measure up. Look at the economies of the USSR, eastern European countries, and China before they adopted capitalism, which were based on a combination of worker and state control. Compare state owned enterprises today (many Chinese companies, Petrobras, Pemex, etc.) to their competitors in the private sector. They're often inefficient and big money burners. You don't see ejidos and Kibbutz's (agricultural workers collectives in Mexico and Israel respectively) dominating agri-industry the way private businesses do.
I don't like Sanders' and Warren's proposals btw to enforce partial collectivization of private businesses, which was mentioned in your link. Sanders would transfer 20% ownership to workers in any public company, and any private company with over $100 million revenues or $100 million in assets. And require that 45% of board members be appointed by employees. This would represent expropriation of assets, would reduce wages, hurt economic growth, and basically put us 20% of the way towards where China and the USSR used to be.
As to your second link, if the government allowed the airlines to go into Chapter 11 and wipe out the investments of the shareholders, bondholders and banks, I don't think I'd have a problem with that. Airlines go bankrupt all the time, and investors should know and be prepared for that. The downside would be that well run companies with primo quality employees like Southwest that didn't have their debt taken out through bankruptcy would be at a disadvantage.
A little off the topic, but I feel pretty comfortable flying, with my N95 mask and goggles. A lot of people don't though, and that's a large part of why the airlines are suffering. One thing that would help would be requiring better quality masks while flying than the one layer cotton ones a lot of people wear. And if the bozos who nurse their drinks through the entire flights so they don't have to wear their masks and the other bozos who wear their masks below their noses would just stop.
As to support for airline workers who would be laid off or are laid off and can't find other work which is mentioned in the article, yeah, I guess the government should do something to help. It wouldn't have to do as much if not for the aforementioned bozos.
Eccieuser, First, I don't actually know that much about Friedman. I've read a couple of his essays, but never one of his books, but did find out enough about him to develop a man crush. I emphatically never wanted to bang him, like I wanted to bang Margaret Thatcher when I was a little tyke, but I believe he's got it right. In the future if you want to call on someone about economic theory LustyLad is a better bet.
I know better than that. You and the Lad are numbers guys. I never found money sexy. Power? Yes. Who doesn't?
However, I shall comment anyway.
From your first link:
"Friedman makes clear that corporations have the social responsibility to play within the rules of the game, “which is to say, engage in open and free competition without deception or fraud.” Thus, Friedman believes that companies have not just a legal, but also a social responsibility to not collude, deceive, or defraud."
And,
"Friedman would not object to the goals contained in the 2019 Business Roundtable Report, from “delivering value to our customers” to “investing in our employees,” from “dealing fairly and ethically with our suppliers” to “supporting the communities in which we work,”
The best system is where you have owner (shareholder) control of companies, and government provides reasonable, logical, efficient regulation, so they don't for example pollute the environment or defraud consumers. Also workers should be allowed to decide to organize unions (or not organize unions) and IMHO minimum wages make sense too.
This system of private ownership and control has produced tremendous prosperity in our world. Looking at the alternatives, state and worker control just don't measure up. Look at the economies of the USSR, eastern European countries, and China before they adopted capitalism, which were based on a combination of worker and state control. Compare state owned enterprises today (many Chinese companies, Petrobras, Pemex, etc.) to their competitors in the private sector. They're often inefficient and big money burners. You don't see ejidos and Kibbutz's (agricultural workers collectives in Mexico and Israel respectively) dominating agri-industry the way private businesses do.
I don't like Sanders' and Warren's proposals btw to enforce partial collectivization of private businesses, which was mentioned in your link. Sanders would transfer 20% ownership to workers in any public company, and any private company with over $100 million revenues or $100 million in assets. And require that 45% of board members be appointed by employees. This would represent expropriation of assets, would reduce wages, hurt economic growth, and basically put us 20% of the way towards where China and the USSR used to be.
As to your second link, if the government allowed the airlines to go into Chapter 11 and wipe out the investments of the shareholders, bondholders and banks, I don't think I'd have a problem with that. Airlines go bankrupt all the time, and investors should know and be prepared for that. The downside would be that well run companies with primo quality employees like Southwest that didn't have their debt taken out through bankruptcy would be at a disadvantage.
A little off the topic, but I feel pretty comfortable flying, with my N95 mask and goggles. A lot of people don't though, and that's a large part of why the airlines are suffering. One thing that would help would be requiring better quality masks while flying than the one layer cotton ones a lot of people wear. And if the bozos who nurse their drinks through the entire flights so they don't have to wear their masks and the other bozos who wear their masks below their noses would just stop.
As to support for airline workers who would be laid off or are laid off and can't find other work which is mentioned in the article, yeah, I guess the government should do something to help. It wouldn't have to do as much if not for the aforementioned bozos.
Thank you for your points.
I just got some myself.
I know better than that. You and the Lad are numbers guys. I never found money sexy. Power? Yes. Who doesn't?
You're modest. If you're not a numbers guy how come you're the odds on favorite right now to win the Covid death guess game? That was a shrewd pick -- you staked out everything between 300,000 and 950,000. That's a huge range compared to all the rest of us, except for adav8s28. He'll win if it's anywhere between about 950,000 and infinity, but my guess is that he guessed high.
You're modest. If you're not a numbers guy how come you're the odds on favorite right now to win the Covid death guess game? That was a shrewd pick -- you staked out everything between 300,000 and 950,000. That's a huge range compared to all the rest of us, except for adav8s28. He'll win if it's anywhere between about 950,000 and infinity, but my guess is that he guessed high.
Maybe I should change my handle to ecciewinner950,000. The range of time and the incompetence of our president, multiplied by the exceptionalism we hold so dear, I couldn't see the number being so low. I remember lowering it at one point, then reassessed.
It was somewhat of an arbitrary number. I've questioned weather or not I should post my question to you: May I make George Floyd as my plus one? Ooohhh! Too soon? No. It's not.
Tangent.
Rant: when you've seen, and been a victim of, police brutality, you can say it. Post it. Even make 'em laugh, make 'em laugh, make 'em laaauuugh.
The range of time and the incompetence of our president, multiplied by the exceptionalism we hold so dear, I couldn't see the number being so low. I remember lowering it at one point, then reassessed.
Exceptionalism???? In the words of another poster, BAHAHAHAHAHA. If we were truly exceptional, like Taiwan, our GDP would be down 0.6% in the second quarter instead of 9.1%. And we'd have 100 deaths right now instead of 180,000. The lower figures are for Taiwan. Taiwan has only had 7 deaths, but I ramped it up to 100 to account for the difference in population.
You can't pin it all on Trump. There's the CDC, the FDA, many of the governors, hospitals, state departments of health, the health care system, and most of all the American people who are too ignorant to do easy things that would save the economy and lives like wearing masks, social distancing, and washing their hands.
Notice how I give top billing to saving "the economy", not to "lives"? I had to consciously think about that to avoid disappointing you, LOL.
I don't actually know that much about Friedman. I've read a couple of his essays, but never one of his books...
Start with this one...
Here's a good clip from another era, back when liberal and conservative economists treated each other with professional respect. Walter Heller was the Chairman of the Council of Economic Advisors under JFK/LBJ and chief architect of the 1964 tax cuts, which are widely regarded as one of the best historical examples of successful Keynesian macro-economic "fine-tuning". But this success was quickly derailed in the late '60s by LBJ's inflationary over-spending on both the Great Society and the Vietnam War. By 1978 (two recessions later), economists like Friedman and Heller were debating how to break out of Jimmy Carter's stagflation.
For Tiny, why Friedman was misguided
