Corporate Social Responsibility

By Glassman, James K. | The American Enterprise, January-February 2006 | Go to article overview
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Corporate Social Responsibility

Glassman, James K., The American Enterprise

"Few trends could so thoroughly undermine the very foundations of our free society" wrote Milton Friedman 43 years ago, "as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible," Wow! Now there's a refreshing opinion in a world where CEOs pander to the aging radicals who run the increasingly powerful anti-capitalist entities called non-governmental organizations (NGOs).

In recent years, many CEOs have flocked to support something called "corporate social responsibility" or CSR. (And who could be against that?) In November, for example, Business for Social Responsibility--an organization that includes some of the world's biggest companies, from ABB to Walt Disney--attracted more than 1,000 people to its annual meeting in D.C. World Bank president Paul Wolfowitz gave the keynote address.

While CSR seems unexceptional, it actually "assigns to businesses a new role and purpose" notes economist David Henderson in his 2001 book, Misguided Virtue. Under a CSR regime, businesses are supposed to embrace "corporate citizenship" and "run their affairs in close conjunction with an array of different 'stakeholders" so as to promote the goal of 'sustainable development.'" Economics, social life, and environmental desires are all part of a "triple bottom line" to which businesses must adhere.

"CSR advocates maintain that businesses should assume the major role in making the world a better place" writes Randall Frost. Friedman disagrees. "This is a fundamentally subversive doctrine" he says in Capitalism and Freedom. "If businessmen do have a social responsibility other than making maximum profits for stockholders, how are they to know what it is?"

That's a job for the political process. It's clear that one reason those on the left have embraced CSR is that they are having such a hard time achieving their aims through representative democracy. Environmental and social radicals have built NGOs that acquire power by working closely with kindred spirits in the media to intimidate businesses.

It often works. Henderson quotes Sir Mark Moody-Stuart of Shell Oil: "Because we, too, are concerned at the requirement to address those in poverty who are excluded from the benefits that many of us share in the global economy, we share the objective of the recent demonstrators in Seattle, Davos, and Prague.

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