In a modern corporation, shareholders rely on management to oversee dayto- day operations. In this relationship, stockholders are principals and management their agents. Accordingly, the first duty of a corporation’s management team is to maximize shareholder wealth. What role should social responsibility––that is, consideration of broader societal goals like slowing climate change––play in corporate decision making?
In a famous New York Times essay, Milton Friedman (winner of the 1976 Nobel Memorial Prize in Economic Sciences) argued corporate executives have no social responsibility. Their sole aim should be serving the pecuniary interests of their employers, the shareholders (subject, of course, to the constraints of the law). When executives use corporate resources to pursue other ends, they are spending someone else’s money. Because it is practically impossible to guess exactly how individual shareholders would like to see their money spent to better the world––which specific social goals to pursue and how much to spend on each––management should focus exclusively on maximizing shareholder wealth and let shareholders use the proceeds to address social concerns on their own. Friedman would acknowledge an exception to this doctrine. If use of corporate resources to pursue a social goal actually does more for stockholders financially than any alternative project (such as investment in a marketing campaign or new factories), then social responsibility is consistent with maximizing shareholder wealth. This may have been a consideration when Exxon Mobil––the world’s largest publicly traded international oil and gas company––published its position on climate change: We have the same concerns as people everywhere––and that is how to provide the world with the energy it needs while reducing greenhouse gas emissions. The risk of climate change is clear and the risk warrants action. Increasing carbon emissions in the atmosphere are having a warming effect. There is a broad scientific and policy consensus that action must be taken to further quantify and assess the risks. ExxonMobil is taking action by reducing greenhouse gas emissions in its operations, helping consumers reduce their emissions, supporting research that leads to technology breakthroughs and participating in constructive dialogue on policy options. Addressing climate change, providing economic opportunity and lifting billions out of poverty are complex and interrelated issues requiring complex solutions. There is a consensus that comprehensive strategies are needed to respond to these risks.

How would Friedman view a sole proprietor’s use of firm resources to pursue social goals?