A+| A| A-
Revisiting Friedman’s Construct of Corporations
The ideological and juridical idea of what a corporation as a form is all about and what happens in the case of wrongs committed by such corporations is sought to be unpacked. The accepted notion in business and economics, which has seeped deeply in popular imagination too, that corporations exist primarily for benefiting their shareholders and hence their “accountability” is restricted to their shareholders only, is critically examined. For this, Milton Friedman’s influential conceptualisation of a corporation with the juridical construct of the corporate veil is interrogated and its far-reaching consequences through three recent important corporate cases in India are investigated.
Helpful suggestions and comments of Manali Chakrabarti and the anonymous reviewers of EPW are gratefully acknowledged.
The top 500 corporations presently account for a third of world income as a whole. In terms of revenues earned in 2017, 69 of the top 100 economic entities were corporations, not the governments; corporations like Walmart, Apple and Shell earned more annual revenues than most countries. Ten of the largest corporations earned more annual revenue than even a large economy and state like India (Global Justice Now 2018). A powerful institution like a corporation, given its size and reach, is not only a vehicle to generate revenues and make profits but, through its actions, makes decisive and long-lasting impact on humanity. Yet, the corporation as an entity seems to be taken for granted by the mainstream and the crux of the debate around it is restricted to whether they should part with any of their not inconsiderable accumulated profits for “stakeholders,” like employees or the public at large in the name of corporate social responsibility. Only in rare cases, some of them may get subjected to a critical analysis for their “isolated” (mis)conduct and influence, especially if it is too flagrant to ignore.
This paper attempts to unpack the ideological and juridical idea of what a corporation is all about and what happens in case of wrongs committed by such corporations. We will critically examine the accepted notion in business and economics, which has seeped deeply in popular imagination too, that corporations exist primarily for benefiting their shareholders and hence their “accountability” as well is restricted to their shareholders only. For this, we interrogate Milton Friedman’s influential conceptualisation of a corporation with the juridical construct of corporate veil and attempt to investigate its practical implications through three recent important corporate cases in India. We substantiate our arguments through two international cases too. In the first part, we summarise Freidman’s construct, in the second, we take up the three cases along with the idea of the corporate veil and interrogate Friedman, and finally we discuss the far-reaching implications for the lack of corporate accountability when Friedman is read together with corporate veil.
Dear Reader,
Or
To gain instant access to this article (download).
(Readers in India)
(Readers outside India)
