The Death of the Friedman Doctrine

Apr 17, 2021 1 Min Read
Shareholder meeting
Source:Leaderonomics Archives
2020 Marked The Death of the Friedman Doctrine & the New Corporate Order

Economics and economic theory are the foundation for business ethics. The Friedman Doctrine states that “an entity’s greatest responsibility lies in the satisfaction of the shareholders.” This is also called the Shareholder Theory developed by American economist, Milton Friedman.

The Friedman doctrine was developed as a theory of business ethics, or moral principles that act as guidelines for the way a business conducts itself.  The year 2020 marked the death of the doctrine. An entity’s greatest responsibility being the satisfaction of the shareholders is no longer ethical. Moving into 2021 will be the demarcation point from the shareholder centered company to the human centered workplace: or a Human Centered Doctrine.

A human centered workplace makes an entity’s greatest responsibility the satisfaction of the people, starting with the employees of a company who make the human connection to customers. And in 2020, humans were forced into disconnection. Companies have been one center for connection. It has catapulted the responsibility of every organization to be human centered as one central point in the preservation of a caring society. In a time where work is no longer a place separate from personal life, employees are burning out.  They are ill-equipped on how to set boundaries between the blurred lines of work and home.

Further, the pandemic is eating away at the backbone of society: working mothers, and especially women of color. The number of women opting out of the workforce is setting us all back significantly in creating a diverse, inclusive workforce and society. Women of color are most affected as three out of four are breadwinners for their families and most hard hit by pandemic jobs losses.

Where Do We Go From Here?

So, to create the organization that employees need and deserve - one that is centered on understanding, compassion, support and empathy, the question remains: how do we transition from the Friedman Doctrine, to the Human Centered Doctrine? How do we take what we have learned and make our cultures, offices and organizations more inclusive?

Inclusion is human centered. Inclusion is about fostering a culture and mindset in an individual enabling them to say, “I belong here,” “I feel valued here,” and “I can be myself here” – only then can they take part and contribute as their authentic self. Leaders create cultures and if they are inclusive, teams will feel inspired to perform better and drive organizational competitive advantage.

We are at the time of year when the voices of corporations are being heard because many public companies are releasing their year-end 2020 results. As reference, I cite Citigroup and the letter to shareholders from Jamie Dimon, Chairman and Chief Executive Officer. He noted that 2020 was a watershed year in change in business and perspective. 
Dimon wrote in his 2020 letter to shareholders that,

“Shareholder value can be built only if you maintain a healthy and vibrant company, which means doing a good job taking care of your customers, employees and communities. Conversely, how can you have a healthy company if you neglect any of these stakeholders? As we have learned in 2020, there are myriad ways an institution can demonstrate its compassion for its employees and its communities while still upholding shareholder value.”

Prior to the pandemic, the Business Roundtable wrote its Statement on the Purpose of a Corporation. It noted:

“Businesses play a vital role in the economy by creating jobs, fostering innovation and providing essential goods and services. Businesses make and sell consumer products; manufacture equipment and vehicles; support the national defense; grow and produce food; provide health care; generate and deliver energy; and offer financial, communications and other services that underpin economic growth.”

The Business Roundtable underscores that prior to 2020, corporations were realizing their responsibility extended far beyond shareholders to stakeholders. A starting point of stakeholder is not customer or shareholders, but the employees of a company.  It is the employees who assure that customers are satisfied and that shareholders receive a fair return on investment. And the number one investment a company needs to make is in its people.

Yes. 2020 marked the death of the Freidman Doctrine as we breathe life into a new corporate world order.

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Rob Wyse is an expert in communications. For thirty years, he has guided companies in creating compelling story arcs that connect brands to customers. At the heart of his storytelling has been the management of issues/policy to drive market opportunity. Companies he has worked with have had financial exits that exceed $16 US billion. Issues include AI, climate change, the future of work, diversity, and healthcare.


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