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For argument sake, let us say that a company is trying to dump hazardous waste in the heart of Amazon. As per Friedman, as long as the share value (without violating the laws) is increased by such an action, the company justified. However, if the shareholders were asked about their opinion, they might have shot down the idea.
Hence, the argument that "shareholder value maximization" is the only goal may be false if the value is interpreted only as profit. As in utility theory, the utility may be a function of not just profit but a multitude of variables.

Andrew Carnegie's proposal for paternalistic and philanthropic behavior of corporations, although laudable, may not really work. These are for two particular reasons. Andrew Carnegie practiced his philosophy in corporations, essentially his private property. Hence, from a purely owner's right standpoint, he had the right to do whatever he wanted with his wealth. However, modern organizations are held by a multitude of shareholders who may not agree in principle with Carnegie. Institutionalizing any corporate norms regarding the role of the business would be very difficult, and in worse case scenarios, we may see fraudulent / wasteful activities of the managers go unaccounted. This would be a violation of the agent-principle contract that exists between the shareholders and the operating managers.

Our contention is to view businesses as playing a middle role between these two extremes. The role of business is primarily to create value for its shareholders; however this narrow parochial view may blind the corporations from taking strategic decisions that will benefit the organization in the long run. Since organizations are going concerns, long-term profits are more important than short-term. Even from a strict shareholder perspective, most stock market value "typically, more than 80 percent in US and Western European public markets" depends on expectations of corporate cash flows beyond the next three years. Hence, businesses have the role of creating sustainable profits for its shareholders. If viewed from this angle, a lot of irresponsible corporate behavior may be unacceptable.

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* Contributed by: -
Saurabh Goswami & Malini Pande,
II Year Students,
IIM Kozhikode.