Arun Sudhaman

Working the angles around media, comms and marketing.

PR and the Milton Friedman question

with 2 comments

The theories of late economist Milton Friedman do not often make an appearance within the PR world. So it was interesting to hear them discussed at today’s presentation of Edelman’s latest Trust Barometer findings.

The study, now in its 11th year, looked at whether businesses exist solely to make profits – Friedman’s view – or whether companies should be willing to sacrifice profit in favour of investment in broader stakeholder interests.

It is a question that goes to the very heart of corporate reputation in the 21st century. And some of the findings, quite frankly, are astonishing.

If we rank countries in terms of which expressed most agreement with Friedman’s point of view, the UAE comes out top with 84 percent agreeing. No surprises there, you might suggest, given its high-profile embrace of laissez-faire capitalism.

In second place, with 72 percent agreement, is Japan. This will raise eyebrows, given Japan Inc’s reputation for aligning shareholder value with broader stakeholder interests. Perhaps Japan is responding to 15 years of crippling economic stagnation by putting profit ahead of all other interests.

The scores of some other countries are also perplexing. In the US, just 56 percent agree with the Friedmanite view, behind socially responsible Sweden (60 percent).

Meanwhile, there is overwhelming agreement with the second question Edelman posed – around whether companies should sacrifice profit in order to safeguard the interests of society.

Almost half of the countries surveyed scored above 80 percent, led by Germany (91 percent), the UK, Ireland and China. In the US, agreement was 85 percent.

Not a single country scored below 50 percent, with the UAE (55 percent), Japan (62 percent) and Brazil (63 percent) demonstrating the lowest levels of agreement.

So what are we to make of all this? The Economist finds the results as surprising as we do, and suggests that they offer plenty of food for thought for business leaders gathering in Davos. After writing a lengthy thesis explaining why the PR industry should drop its reliance on stakeholder theory, Paul Seaman is less convinced.

Not only do people want businesses to spend nicely, it also appears that – broadly – they want governments to oversee this. There was plenty of agreement with a question asking whether government needs to regulate corporate activities to ensure they are behaving in a responsible manner, led by the UK (82 percent), Ireland and Canada. Even in the US, where Government oversight of business is a topic of fierce debate, 61 percent agreed with this view.

Some of this must be down to the financial crisis. “People are saying that we need some checks and balances to ensure that the economy ticks over and that companies are using some of those profits to address the interests of a range of stakeholders,” says Edelman global corporate head Alan VanderMolen, who oversees the firm’s intellectual capital.

Meanwhile, the influence of NGOs cannot be underestimated. Their ability to influence the terms of debate has been nothing short of revelatory.

But has it actually influenced the behaviour of business? There is certainly plenty of evidence to indicate that companies are working closer than ever with NGOs to ensure that their activities align with other societal issues – whether they concern the environment, labour practices, health or education.

Perhaps the strongest argument for business to take these concerns seriously though, is that it is – simply – good for business.

“If doing better business includes ensuring we have a sustainable labour force in future, then it stands to reason that better business includes having an eye towards issues in society,” points out VanderMolen. “I could make the argument that it is in the best interests of shareholders to address societal needs.”

So maybe self-interest does trump all else. Although not, perhaps, in the manner that Milton Friedman intended.

Full findings from the 2011 Edelman Trust Barometer are available here


Written by Arun Sudhaman

January 25, 2011 at 5:33 pm

2 Responses

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  1. Good post, thanks for the mention. The question that’s worth exploring, one that rarely gets asked, is whether there really is a crisis of trust in the West. I have my doubts. Just as I have my doubts that China’s government, business, media and NGOs are the most trustworthy on earth, as Edelman says they are. I think we need to redefine the debate or we risk losing the plot.

    Paul Seaman

    January 25, 2011 at 5:53 pm

  2. I think the China numbers say more about the respondents than those particular institutions. But I take your point – particularly when the survey throws up the random anomaly that – somehow – CEOs trust levels have surged.

    Arun Sudhaman

    January 26, 2011 at 9:46 pm

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