Cory Doctorow used a June 13 Pluralistic essay to attack one of corporate America's favorite escape hatches: the claim that managers must put shareholder returns above everything else. His target was Milton Friedman's 1970 New York Times essay, “The Social Responsibility of Business Is to Increase Its Profits,” which Doctorow says helped turn shareholder supremacy into a supposed universal rule.
Doctorow's argument is less about whether companies like money. They do. The problem, he writes, is the measurement trick embedded in the doctrine. A manager can be judged on whether a company made money. Judging whether that manager made as much money as possible requires information no board, investor, court, or pundit has at the time: the alternate timeline where every other decision was tried.
Friedman, as Doctorow summarizes him, rejected corporate social responsibility as too vague to evaluate. Profit maximization, by contrast, was presented as a clean test. Doctorow says that framing collapses as soon as it leaves the op-ed page. In a competitive market, one company will usually earn less than another. If lower profit proves management failed to maximize shareholder value, then the second-place company’s executives are guilty by definition, even after producing billions in profit.
Doctorow says the standard therefore shifts from “make as much money as possible” to “try to make as much money as possible.” That softer version is harder to falsify. It asks outsiders to read an executive's intent and predict what would have happened under different choices. Congratulations, corporate governance has acquired a fortune-teller requirement.
He illustrates the point with examples he casts as self-interested rather than altruistic. Target sold Pride merchandise, Doctorow writes, because it expected to sell products. BP marketed “green” gasoline for commercial reasons. Google backed employee causes tied to the environment, LGBTQ rights, and poverty, in Doctorow's telling, because the company’s old “don't be evil” image helped recruit scarce engineers who might otherwise work elsewhere. He adds that each engineer hired by a Silicon Valley company contributes an average of $1 million to the firm's annual bottom line.
The Target example does most of the mechanical work in his critique. A decision that looked profitable when Pride goods sold well could later look bad when the politics around such merchandise changed. Doctorow asks whether executives should be punished for failing to predict that turn. His answer is that shareholder supremacy demands either hindsight or clairvoyance.
The sharper claim is political. Doctorow argues that the doctrine's vagueness may be useful to executives because it can excuse ugly decisions after the fact. A leader can defend keeping a harmful employee, cutting ethical corners, or avoiding accountability by claiming shareholder duty left no choice. The doctrine then works less like a bright-line rule and more like an all-purpose liability sponge.
This story draws on original reporting from Pluralistic.
