A Brief Review of Corporate Purpose Theory

1: Shareholder Theory

“There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

In 1970, Milton Friedman declared that a corporation’s purpose is to maximize profits for its shareholders. This essay was also widely interpreted to justify the rise of neoliberalism, where the values of American democracy are driven by the interests of capitalism.

2: Stakeholder Theory

Countering the Friedman doctrine, the stakeholder theory model promotes corporate social responsibility. However, corporations often mask profit motives with progressive messaging, undermining citizens’ efforts to address systemic issues.

Examples include:

Subverting the meaning of purpose

Nearly one in five deaths in the United States are caused by the effects of smoking (U.S. Centers for Disease Control and Prevention). Yet the leading manufacturer and marketer of cigarettes champions itself as a purpose-driven company that is committed to “moving beyond smoking.”

Nearly every shareholder corporation markets itself as a purpose-driven or socially-responsible company even though it is structurally and legally obligated to prioritize the profit motive.

Eroding the social contract

Shareholder corporations benefit from tax cuts in prosperous times (e.g., 2018) and bailouts during crises (2008, 2020) while inequality and public debt rises.

Undermining democracy

Corporate Super PACs and lobbying sway elections and stall reforms benefiting workers, communities, and the environment. Mainstream media, driven by corporate ownership, often frames issues through partisan divides rather than addressing root causes.

3: ‘We the People’

The Constitution gives citizens—not corporations—the authority to determine America’s future. Corporations are granted its privileges by society, and the authority to shape economic and social values rests with citizens through democratic processes.

Steps Toward Empowered Economic Democracy

• Removing Corporate Money from Politics: Eliminating Super PACs and corporate-funded elections to prioritize citizen voices.

• Raising Corporate Standards: Holding companies to higher accountability to reduce societal harm and ensure transparency.

• Educational Reform: Rethinking the predominant academic models that perpetuate unsustainable and neoliberal paradigms.