Fifty years after Milton Friedman’s seminal essay on corporate social responsibility, this chapter revisits his arguments in light of today’s financial ecosystem dominated by institutional investors and passive index funds. It examines the evolving role of asset managers as intermediaries between ultimate investors and corporations, questioning whether their push for ESG policies can still align with profit-maximization. While Friedman warned against private actors imposing political choices under the guise of responsibility, modern portfolio theory and systemic risk management reveal a growing overlap between shareholder value and socially responsible behavior—blurring the boundaries Friedman once drew.
Missing in Friedman’s Shareholder Value Maximization Credo: The Shareholders
Enriques, Luca
2020
Abstract
Fifty years after Milton Friedman’s seminal essay on corporate social responsibility, this chapter revisits his arguments in light of today’s financial ecosystem dominated by institutional investors and passive index funds. It examines the evolving role of asset managers as intermediaries between ultimate investors and corporations, questioning whether their push for ESG policies can still align with profit-maximization. While Friedman warned against private actors imposing political choices under the guise of responsibility, modern portfolio theory and systemic risk management reveal a growing overlap between shareholder value and socially responsible behavior—blurring the boundaries Friedman once drew.
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