A Response to ÒThe Social Responsibility of Corporate Management: A Classical CritiqueÓ

Frederick R. Post
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Frederick R. Post: University of Toledo

American Journal of Business, 2003, vol. 18, issue 1, pages 25-35

Abstract: The preceding article, ÒThe Social Responsibility of Corporate Management: A Classical Critique,Ó argues that the Shareholder Theory, which the authors refer to as the ÒFriedman ParadigmÓ represents the only intellectually and ethically meritorious model for assessing corporate social responsibility. This response argues that the 19th Century Shareholder Theory is based upon numerous factual and legal inaccuracies and fictions when evaluated in the context of the modern era. Requiring that management serve only the interests of the shareholders is morally untenable. The authorsÕ assertion that the competing theory, The Stakeholder Theory, is unworkable is based upon both a misunderstanding and misinterpretation of the theory. Refinements and clarifications about who qualifies as a stakeholder make the Stakeholder Theory both workable and a very useful way to improve corporate governance. Now is the time to apply the Stakeholder Theory as part of the ongoing process of improving the moral and social responsibility of corporation management.

Keywords: Business law; Stakeholder Theory; Friedman Paradigm (search for similar items in EconPapers)
JEL-codes: R00 Z0 (search for similar items in EconPapers)

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