http://online.wsj.com/article/SB10001424052748703338004575230112664504890.html
The article opens with: “the idea that companies have a responsibility to act in the public interest and will profit from doing so is fundamentally flawed.”
It continues by supporting Mr. Hancock’s in-class assertion: ”Irrelevant or ineffective, take your pick. But it’s worse than that. The danger is that a focus on social responsibility will delay or discourage more-effective measures to enhance social welfare in those cases where profits and the public good are at odds. As society looks to companies to address these problems, the real solutions may be ignored.”
The article’s concludes that the issue of corporate “ethics” is best understood as a financial calculation –
In the end, social responsibility is a financial calculation for executives, just like any other aspect of their business. The only sure way to influence corporate decision making is to impose an unacceptable cost—regulatory mandates, taxes, punitive fines, public embarrassment—on socially unacceptable behavior.
Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.”
For those that are curious, here’s the list of “The Top 100 Corporate Criminals of the 1990s”
Note Mokhiber’s caveat #2 – Corporations define the laws under which they live. (a reasonable assertion given our lobby-ridden legislative process)
Do these perspectives add up to suggest that the ultimate responsibility lies with individual citizen-consumers?
The author writes, “In the end, social responsibility is a financial calculation for executives, just like any other aspect of their business.” I agree with this idea.
I don’t believe that companies do anything selflessly. In class, I argued that the potential downside of further depletion of the Yangtze River would cost Coke and Pepsi much more than $24m. Furthermore, the issue would cease to be in their control. This seems very selfish to me.
Let’s take a hypothetical example. Let’s say that Company X sets up a daycare for the children of its employees. Did this take money out of shareholder’s pockets? Perhaps, but is it possible that Company X is trying to secure its employees and reduce employee turnover? Having amenities such as daycare reduces turnover and turnover is expensive. So, perhaps Company X sees that it is more expensive to train new employees than to set up a daycare.
So, when making a corporate decision, make it a financial decision (i.e., consider all of the potential impact). If your decision happens to be good for people, the earth, etc., shout it from the mountains!
I personally think CSR is antiquated. Look instead at, “Creating Shared Value”, by Michael Porter (http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1). His article is an attempt to resolve the CSR vs Friedman argument.