Related:
Milton Friedman was wrong
“In a new Stigler Center paper, Harvard Professor and
Nobel laureate Oliver Hart and University of Chicago Booth School of Business
Professor Luigi Zingales (Faculty Director of the Stigler Center and one of the
editors of this blog) take a novel perspective to this question. While agreeing
with Friedman’s premise that managers should care only about shareholders’
interest, Hart and Zingales reject the view that shareholders only care about
money. A company’s ultimate shareholders are ordinary people who, in addition
to caring about money, are also concerned about a myriad of ethical and social
issues: They purchase electric cars to lower their carbon footprint, they buy
free-range chicken or a fair trade coffee because they view this as the
ethical—albeit more expensive—choice. They are, in other words, prosocial in
their day-to-day life—at least to some effect. “If consumers and owners of
private companies take social factors into account and internalize
externalities in their own behavior, why would they not want the public
companies they invest in to do the same?” Hart and Zingales ask.”