Defined by the Friedman Doctrine, where Milton Friedman famously argued that the sole social responsibility of a business is to increase its profits. This narrow model states that executives must focus on maximizing shareholder returns within the law, viewing extra-legal social allocations as an unauthorized tax on investor returns.
- The Friedman Doctrine Constraint: Limits corporate purpose to maximizing investor returns while operating within standard legal boundaries and basic ethical customs.
- The Unauthorized Taxation Premise: Argues that when corporate managers spend company funds on unmandated social or environmental causes, they are effectively imposing an unauthorized tax on shareholders, employees, and customers.
- Agency Theory Enforcement: Dictates that corporate executives are direct agents of the business owners and owe an absolute, uncompromised fiduciary duty to execute those owners’ financial desires.