How CEOs Became Beholden to Shareholders

December 5, 2014 at 12:58 AM UTC

This article is for subscribers only.

This article is part of the December 8, 2014 issue of businessweek.

How CEOs Became Beholden to Shareholders

1970 Milton Friedman’s essay “A Friedman Doctrine—The Social Responsibility of Business Is to Increase Its Profits” appears in the New York Times Magazine.

When Jack Welch came out in 2009 against the concept that the purpose of a corporation is to maximize value for shareholders, it was like the pope attacking Catholicism or Tiger Woods dissing golf. “On the face of it, shareholder value is the dumbest idea in the world,” the former chief executive officer of General Electric told the Financial Times. “It is a dumb idea. The idea that shareholder value is a strategy is insane.”