Analysis of Milton Friedman
Analysis of Milton Friedman-Article
Milton Friedman’s article on how the entire value of the organisation belongs to the shareholders and the organisation is nothing but a ‘mere legal fiction’ was a revolutionary idea. If it wasn’t for Milton’s stature and reputation it would have been bombarded as an insane idea and would have been forgotten on the day itself. But, instead it went on to become one of the guiding principles for owners of the private firms, other stock holders and even the executives. Was the article instrumental in changing the Ethical rules of the entire world’s organisational perception? Well, the evidence in inclined towards it.
Milton’s theory affected existing policies for a short while in the following ways:
Private sector started focusing totally on making money, and forgetting about any concerns for employees, customers or society.
Executives started to expect share holdings relative to their performances.
Money took over and everyone who had a part in this theory started to maximise the value of their concern. One example is Jack Welch who maximised shareholder value from $14b to $484b.
People were so focused on the targets, they completely ignored for a while, the ethical and fundamental complications of their doings.
The Result ?
Everyone was so involved in creating Value, they lost the customer. Losing the customer, in the long run hit their sales and eventually companies toppled and the value that they built over the ears collapsed destroying shareholders.
The Insane theory that made people run around money ignoring the fundamental ethical concepts of customers ultimately proved disastrous to them.
Milton Friedman’s article on how the entire value of the organisation belongs to the shareholders and the organisation is nothing but a ‘mere legal fiction’ was a revolutionary idea. If it wasn’t for Milton’s stature and reputation it would have been bombarded as an insane idea and would have been forgotten on the day itself. But, instead it went on to become one of the guiding principles for owners of the private firms, other stock holders and even the executives. Was the article instrumental in changing the Ethical rules of the entire world’s organisational perception? Well, the evidence in inclined towards it.
Milton’s theory affected existing policies for a short while in the following ways:
Private sector started focusing totally on making money, and forgetting about any concerns for employees, customers or society.
Executives started to expect share holdings relative to their performances.
Money took over and everyone who had a part in this theory started to maximise the value of their concern. One example is Jack Welch who maximised shareholder value from $14b to $484b.
People were so focused on the targets, they completely ignored for a while, the ethical and fundamental complications of their doings.
The Result ?
Everyone was so involved in creating Value, they lost the customer. Losing the customer, in the long run hit their sales and eventually companies toppled and the value that they built over the ears collapsed destroying shareholders.
The Insane theory that made people run around money ignoring the fundamental ethical concepts of customers ultimately proved disastrous to them.