“Corporate governance is to conduct the business in accordance with the owner’s (shareholders’) desires” is conceptualized by:

Correct option is B

Milton Friedman, a Nobel Prize-winning economist, is closely associated with the shareholder theory of corporate governance, which asserts that a company’s primary responsibility is to maximize shareholder wealth. According to Friedman, corporate governance should ensure that managers and executives conduct business in line with the desires of the owners (shareholders), which fundamentally means increasing profits, as long as it stays within the rules of law and ethical customs.

In his influential 1970 article in The New York Times, titled "The Social Responsibility of Business is to Increase Its Profits", Friedman argued that:

"There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game…”

This view underpins much of the traditional corporate governance framework, where managers are agents of shareholders (the principals), and mechanisms must be in place to align managerial behavior with shareholder interests.

Information Booster:

• Advocate of Classical Economic Theory and Monetarism.

• Believed shareholder wealth maximization is the sole social responsibility of business.

• His theory shaped agency theory and principal-agent relationships in corporate governance.

• Influenced governance systems with emphasis on transparency, accountability, and profit orientation.

• Supported minimal government interference and market-driven corporate behavior.

• His ideas laid the foundation for contractarian models of governance in Anglo-American systems.

Additional Knowledge :

(a) Henry Fayol –  He was a management theorist known for formulating the 14 principles of management and functions of management (Planning, Organizing, Commanding, Coordinating, Controlling). He did not conceptualize corporate governance from a shareholder perspective.

(c) Peter Drucker – A management guru, Drucker focused on management by objectives, leadership, and corporate responsibility. He supported a more stakeholder-inclusive approach rather than Friedman’s shareholder-exclusive model.

(d) Lord Cadbury – He is known for chairing the Cadbury Committee in the UK, which produced the Cadbury Report (1992), a landmark in modern corporate governance, focusing on board structure, auditing, and internal controls. However, his work came later and emphasized stakeholder accountability, not just shareholder profit maximization.