What’s the Purpose of the Corporation? The Revolutionary Business Roundtable Statement Two Years Later

Almost 51 years ago, on September 13, 1970, Milton Friedman published an essay in The New York Times with a title that captured his thesis that “The Social Responsibility Of Business Is to Increase Its Profits.” This shareholder value maximization metric for evaluating the legal and financial fiduciary duties of corporate officers has served as the dominant paradigm for defining the purpose of the corporation both before and certainly for the fifty years since Friedman’s influential essay was published. Yet on August 19, 2019—now nearly two years ago—the powerful Business Roundtable attempted to effect a dramatic shift away from defining the purpose of the corporation by the single metric of shareholder wealth maximization. It released what it called a “new Statement on the Purpose of a Corporation signed by 181 CEOs who commit to lead their companies for the benefit of all stakeholders—customers, employees, suppliers, communities and shareholders.” This move was received with a mixture of applause and condemnation, both of which continue two years later.

In light of this anniversary, the Law & Economics Center at George Mason University Antonin Scalia Law School will host an event titled Business Roundtable v. Milton Friedman: Reflections on the Second Anniversary of "Redefining" the Purpose of the Corporation. The event will take place on August 18, 2021, from 11:45 am to 1:00 pm at The National Press Club in Washington, D.C. A balanced panel of corporate governance experts will evaluate the economic and legal arguments involved in the debate over the proper purpose of the corporation and reflect on the state of the debate two years after the Business Roundtable’s attempt to leave behind the Friedman doctrine and redefine corporate purpose.

Those interested can register here. Lunch will be provided. The panelists are: Lisa Fairfax (Presidential Professor and Co-Director, Institute for Law and Economics, University of Pennsylvania Carey Law School), Donald J. Kochan (Professor of Law and Deputy Executive Director, Law & Economics Center, George Mason University Scalia Law School), Robert T. Miller (F. Arnold Daum Chair in Corporate Finance and Law, University of Iowa College of Law), and Roberto Tallarita (Lecturer on Law, and Associate Director of the Program on Corporate Governance, Harvard Law School). The panel will be moderated by The Honorable David J. Porter (Judge, U.S. Court of Appeals for the Third Circuit), and welcome remarks will be given by Ken Randall (Allison and Dorothy Rouse Dean and George Mason University Foundation Professor of Law).

 

 

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