Gillian Tett’s overview of the new trend for corporations to seek to look away from profit maximising for shareholders and to other purposes quotes Milton Friedman (Life & Arts, FT Weekend, September 7). It is important to note that Friedman’s zeal for shareholder profits was not just driven by his free-market beliefs but also by a fundamental concern about power and accountability.

This is not a new debate. Friedman’s friend Friedrich Hayek wrote in “The Corporation in a Democratic Society” in 1960 that any extension of the purpose of management beyond shareholder value would “greatly . . . extend the powers of management of corporations over cultural, political and moral issues for which proven ability to use resources efficiently in production does not necessarily confer special competence; and at the same time to substitute a vague and indefinable ‘social responsibility’ for a specific and controllable task”.

Friedman and Hayek had no actual influence on the debate. What finished off extended management purpose was the management buyout boom of the 1980s when, working from suppressed shareholder values, some managers showed their enthusiastic responsibility to one stakeholder group — themselves.

Aidan Walsh
Dublin, Ireland

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