Over the last several decades the field of business ethics has become very popular in colleges and universities, including business schools, around the world. Actually, other professional ethics courses have also gained entry into the medical, legal, engineering, and other curriculums. (Oddly, though, the ethics of education and scholarship have not joined this trend!)

In the field of business ethics the focus has tended to be on what has come to be called the theory of Corporate Social Responsibility (CSR). This view takes it as a given, not in need of a lot of argument, that what corporations ought to do, first and foremost, is to benefit society and not those who own the firm. One explanation of this focus is that in the field of economics, which is regarded a social science, it is widely accepted that what corporate managers will do—not so much what they ought to do—is to improve the company’s bottom line.

Back in 1970 the late Milton Friedman did write a widely reprinted article for The New York Times Magazine, “The Social Responsibility of Business Is to Increase its Profits,” insisting that the moral responsibility of corporate managers is to strive to make the company profitable. Up until that time it was simply taken for granted that this is what corporate mangers would be doing—this follows from the general assumption in economics that in the marketplace everyone embarks upon the maximization of utilities, which is pretty much the same thing as trying to make a profit. But Friedman changed the account somewhat by claiming that this is not only what corporate managers do but it is also what they are morally obliged to do. Why? Because that is what they promised to do to the company’s shareholders and investors.

In response to Friedman a great many people who came from the field of philosophical ethics began to write extensively about business ethics and insisted that, on the contrary, what corporate managers ought to do is to manage companies so they would benefit stakeholders. In other words, the moral responsibility of corporate managers is not to improve the bottom line but to help all those who could benefit from what the company is doing, all those who have a stake in the company’s fortunes. This became the CSR movement. And today there are journals, magazines, conferences, and many books that advance the idea that the moral responsibility of corporate managers is to benefit society, not the owners—shareholders, investors, stockholders—of the company.

This line of thinking is a not altogether subtle attack on the nature of the capitalist economy. In a capitalist system, companies are owned by those who buy shares and invest in them, and their managers’ purpose is to make them succeed in the marketplace. Such success is measured, naturally, by how profitable they are, how good a return they bring in from their owners’ investment. The details depend on the kind of firm in question, obviously, but this is the general understanding of capitalist business.

Of course, from the beginning the idea of capitalism—a term first used by critics!—has been demeaned by many people because it treated profit-making as a good thing. Going into the marketplace with the intention of bringing home a good return on one’s investment just appeared too greedy, too avaricious. Never mind that, in fact, once one makes a good return on one’s investment, it is an open question as to what one will do with the wealth one has accumulated. So the practical impact of rejecting the capitalist model is not so much a rejection of wealth but a rejection of the private allocation of wealth. Critics of capitalist business, in other words, do not want private individuals to be in charge of spending the profits made in business. They would like society or the public—which for practical purposes translates into government—to decide what happens to the wealth.

This used to be called socialism, but by now that grand experiment as a political economic system has had innumerable setbacks across the globe, so the term “socialism” has been dropped. Instead we have CSR or stakeholder theory. If such an idea can catch on, it will have the same impact that socialism does—to undermine the rights of individuals to allocate their own wealth and place this power into the hands of politicians and bureaucrats. All this without having to fess up to favoring socialism.

What needs to be debated in the field of business ethics is whether ownership confers the rightful authority to allocate resources. There should be no question-begging presumption that companies must serve society (all others in the realm)—after all, if they do their business well, they do that anyway while they are seeking to make profits. How profits should arguably be used should be left to those who earned them.

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Tibor R. Machan, Ph.D., Professor of Business Ethics and Free Enterprise, gave a speech at Franklin College on June 6, 2007, entitled “Business Ethics and Corporate Responsibility: Shareholders versus Stakeholders.” Professor Emeritus of Philosophy at Auburn University, he also holds the R. C. Hoiles Chair in Business Ethics & Free Enterprise at the Argyros School of Business & Economics, Chapman University, in Orange, CA. He is the author, most recently, of The Morality of Business, A Profession for Human Wealthcare (Springer, 2007). He also co-authored, with James E. Chesher, The Business of Commerce: Examining an Honorable Profession (Hoover Institution Press, 1999). In the autumn of 1983 and again in 1985-1986 Dr. Machan was the Harwood Professor at Franklin College.