The bitter clash between fac­tions of the DeMoulas family, the major share­holders in the Market Basket super­market chain, once again raises the issue of cor­po­rate respon­si­bility. Is the sole respon­si­bility of exec­u­tives and boards of direc­tors to max­i­mize the value of stock­holders or are they respon­sible to a broader array of stake­holders that include cus­tomers, employees, sup­pliers and host communities?

In recent decades, a grand total of two options have evolved for dealing with the issue of cor­po­rate respon­si­bility. If you believe busi­nesses should exist unmo­lested, solely to serve the inter­ests of stock­holders, then the late econ­o­mist Milton Friedman is your man. He was the most out­spoken advo­cate of that view and argued that cor­po­rate social pro­grams add to the cost of doing busi­ness. Spending money to reduce pol­lu­tion, for example, makes a busi­ness less profitable.

Many man­age­ment gurus counter that there is danger in focusing solely on prof­itability. An overzealous pur­suit of stock­holder returns can encourage max­i­mizing short-​​term rather than long-​​term returns. Such an ori­en­ta­tion leads to actions like cut­ting expen­di­tures judged to be nonessen­tial in the short term such as research and devel­op­ment. The resulting under­in­vest­ment jeop­ar­dizes long-​​term returns.

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