Milton Friedman’s pathbreaking essay on corporate purpose was published on September 13, 1970. How much has management thinking evolved?
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The pre-1970 conversation
Even before Friedman’s essay published, the social responsibility of business was a topic of discussion. McKinsey, for example, was part of the early conversation about corporate purpose, which centered on the idea of improving performance and a belief that healthier corporations meant a healthier society. The firm’s earliest formal expression of its objectives spoke of the value of “advancing the profitableness and welfare of American business and hence the welfare of the country as a whole” (1937).
The discussion of corporations’ role in society continued to unfold in the 1950s and 1960s, when Columbia University and McKinsey presented a lecture series in which executives discussed the challenges of large organizations. Many of those talks became books that addressed the issues Friedman would soon take on.
Friedman’s seminal 1970 essay
On September 13, 1970, when Friedman published his landmark piece, “The social responsibility of business is to increase its profits,” in the New York Times, he wrote:
In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.
Like many businesses and thinkers, McKinsey has grappled with such ideas over the years. A 1971 statement of the firm’s goals highlights the role of profitability but acknowledges that it isn’t the sole social responsibility of business; consultants can also “do worthwhile things for society as well as to earn substantial financial rewards.”
Marvin Bower—McKinsey’s managing director from 1950 to 1967, who remained a vocal leader even after stepping down—also continued to emphasize the importance of enduring business values, which could be translated into societal as well as business impact:
Outside the service for which we are compensated, each of us has an opportunity, through the firm, to serve the society of which [we are] a part. Our knowledge of the problem-solving process enables us to contribute disproportionately to the welfare of our communities.
The 1980s and 1990s: An expanded global view
Management attention started to go global in the 1980s. The business world examined how Japanese companies in particular were revolutionizing manufacturing to compete against once-dominant Western players. Political and social changes were also afoot, and the shift toward globalization took hold.
McKinsey managing director Fred Gluck (1988–94) called on the firm to raise its sights and expand its horizons:
Beginning with a memo not two weeks before the Berlin Wall came down, he urged his partners to expand their vision beyond their usual business clients. As the world’s best problem solvers, he argued, McKinsey should aspire to advise national and world leaders on global issues like poverty, European integration, and the environment. It should help design and implement the reforms that were certain to follow in the wake of the revolutions unfolding in Eastern Europe, the Soviet Union, and Asia. Though not universally shared, Gluck’s call to action struck a chord with many firm leaders. … They were being challenged to help change the world.
The McKinsey Global Institute was founded in this era, looking to generate fresh insights through serious research that integrated the disciplines of economics and management. And although work continued to prize financial impact for clients, the thinking around future impact continued to expand.
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This article was conceptualized, illustrated, and edited by McKinsey Global Publishing colleagues Mike Borruso, Torea Frey, Gwyn Herbein, Philip Mathew, Janet Michaud, and Nathan Wilson, with Paul Lasewicz, our archivist, guiding us on this walk through history.