Law in the Marketplace: Your business and its moral obligations

For the Monitor
Published: 9/21/2020 9:54:15 AM

Milton Friedman, the Nobel-Prize winning University of Chicago economist, wrote a famous essay in the New York Times in 1970 in which he said – or so he has been construed – that the only duty of public company CEOs is to maximize profits and that they have a duty not to waste the resources of their companies addressing social needs.

Professor Friedman’s article was enormously influential; when you read in a current newspaper about coal companies paying hundreds of thousands of dollars to lobbyists to obtain the repeal of safe water regulations – a task at which lobbyists have been extremely successful in recent years – you may well be seeing Friedmanism in action. Indeed, shareholders of public corporations have sued their own companies for devoting even a small part of their resources to the public good – and they’ve won.

But the times seem to be changing. The most dramatic evidence is a statement last year by the Business Roundtable – sometimes characterized as a far-right pro-business lobby – in which the Roundtable stated in effect that public corporations have not just one main stakeholder but five – the other four being their employees, their suppliers, their distributors and their communities. Indeed, some economists and business leaders contend that Friedman himself has been unfairly interpreted; that he intended his “profits only” position to apply only on a short-term basis; and that as to the long term, he would entirely agree with the Roundtable statement.

So who is right – Friedman I or Friedman II? The question has been debated among lawyers, economists and CEOs for decades, with no clear outcome. But to me, the answer is clear: Every business (including my own solo law practice) should view itself as having all of the above five stakeholders, and it should do all it reasonably can for each of them. I can’t prove this view; like so many basic philosophical and ethical views, it’s a matter of deep feeling – nudged a little, perhaps, by the Sermon on the Mount.

But, just for a moment, assume I’m right: What does this mean for New Hampshire business owners?

Clearly, their first duty is to provide every benefit they reasonably can to their customers.

Indeed, if they don’t, they won’t be in business for long. But in my view, these business owners also have a duty to go on an ethical retreat from time to time; they have to consider on their own, and they have to talk with their pastors or with other community leaders whom they respect, about what they should be doing to benefit each of their other stakeholders. And then they have to act.

In my own case, my first duty is obviously to my clients, and I also have serious duties toward the McLane law firm, of which I’m of counsel. But in addition, I feel a duty – though it’s a very enjoyable one – to write these Law in the Marketplace columns in the hope they will somehow benefit readers; and when I can, I write op ed pieces attacking white supremacism and anti-Black racism. And I feel a duty to do pro bono work from time to time for clients who need my services but can’t afford to them.

If you’re a New Hampshire business owner and, in one way or another, you’ve gone on the ethical retreat I advocate, what have you concluded? And what have you done?

John Cunningham is a Concord tax and businesses lawyer and estate planner. He has published Drafting Limited Liability Company Operating Agreements and Maximizing Pass-Through Deductions under Internal Revenue Code Section 199A. Both are the leading books in their fields. If you have business or tax questions you’d like addressed in this column, call John at (603) 856-7172 or e-mail him at

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