Corporations should still strive to maximize investor returns, but in some cases, other values should take precedence.
If America’s CEOs have learned one lesson over the last half decade, it’s this: Avoid politics. It is the right lesson — as usual, Milton Friedman was correct, the primary purpose of a business should be to increase its profits — but the rapidly changing nature of the economy calls for an update: Avoid politics whenever possible, but never when necessary.
The recent history of corporate activism is instructive. Just before the pandemic, the chief executives of 181 of the largest US corporations signed a pledge to “lead their companies for the benefit of all stakeholders,” not just shareholders. They essentially promised to pursue a better world beyond profits. It did not go well. After several prominent instances of companies or executives getting burned for taking political stances — just ask Budweiser or Elon Musk — most companies now just stick to business or at least stay silent.
But as data and data analysis become more valuable commodities, neutrality and apoliticism will become harder to maintain. Perhaps Friedman’s shareholder capitalism no longer makes sense in the modern economy — especially if your business is working with data. And especially if your software aids the military or helps governments monitor their citizens.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.
Photo by tbabasade/Getty Images
