49 Can stakeholder theory and profit maximization be reconciled?

Stakeholder theory and Milton Friedman’s views may be reconciled, as we have attempted to establish in this text. Long-term profit maximization flows straightforwardly from stakeholder theory, which says that businesses should consider the interests of many parties in their decision making. At the margins, this should be uncontroversial. For instance, a company that ignores the needs and wants of its employees may find itself without any. Or, a company that ignores its consumers may quickly find they have found other companies willing to satisfy those needs.

Yet, at the same time, proponents of stakeholder theory may balk at attempts to unify these contrasting approaches to business governance. From this perspective, society should hold companies to a higher ethical standard than mere profit maximization.^[1] For example, offering companies the privilege of limited liability and legal personhood means that, like early corporations, society may be able to hold them to a higher standard than just acting as profit-making machines.