Column of the Day, Plus Timeless Essay of the Day, on ‘Corporate Social Responsibility’
Tom Borelli at Townhall (HT Amy Ridenour) has a great column on how company CEOs are using “corporate social responsibility” (CSR) as a form of public-relations insurance:
CEOs of some of the largest companies have become the biggest advocates for expanding the responsibility of business beyond financial performance to include social and environmental goals. With the public outraged over executive compensation, and high profile cases of corporate fraud, CSR is an insurance policy for image-sensitive CEOs.
By paying an ideological and financial cover charge to social and environmental causes, CEOs gain admittance to Club CSR and enjoy a host of membership privileges. One major club benefit is protection from advocacy actions such as protests and boycotts wielded by anti-business activists.
Membership requires the creation of a public relations campaign or business strategy that serves the CSR agenda. By feeding into politically correct themes, these campaigns frequently distract the media and shareholders from failed business practices and poor stock performance. Being viewed as socially responsible buys great latitude for struggling CEOs. No longer considered selfish capitalists, these CEOs can finally gain access to elite social circles.
Global warming, the Holy Grail of CSR topics, provides the greatest cover for a distressed CEO. For example, under the leadership of John Browne, the giant energy company BP has enjoyed a free ride from activist attacks because of the company’s aggressive advertising campaign promoting global warming concerns, carbon footprints and alternative energy.
Meanwhile, BP’s record includes a deadly explosion at one of its refineries and a major oil pipeline leak in Alaska. Because of these incidents, the company is under investigation by an alphabet soup of federal and state agencies – EPA, OSHA, and DOJ – for possible law violations.
Borelli also points to GE as another company using CSR to cover up mediocre financial performance.
Three points on what Borelli wrote:
- BP may be getting a pass as much because it’s British as because of it green advocacy. Similar efforts by ExxonMobil accompanied by a refinery explosion and a pipeline leak would certainly not earn that company a pass.
- GE’s green strategy could actually make cynical business sense. There is a lot of business opportunity in controlling and cleaning up pollution, especially in rapidly industrializing countries like China. In GE’s case, associating itself with the “climate change” movement and showing off a few demo plants shuts the enviros up, allowing the serious business of building cleaner-than-ever coal and nuclear plants to continue.
- For many American companies, no amount of make-nice will buy a company peace over the long-term. Exhibit A: Wal-Mart, which has spent nearly a year trying to placate critics with its public go-green promises, lightening up on shoplifters, revising its pay structure, and putting social activists on the payroll. And what does it have to show for its efforts? A health-care tax in Maryland that affects only the retailer (first item at link; may be overturned by the courts); a “living wage” ordinance in Chicago that as of this writing is close to becoming law (may be vetoed by the city’s mayor); and racially embarrassing comments from one of its (now former) community-outreachers. Some payoff.
All of this giving in to “social responsibility” is not without potential cost. Nobel laureate (1976 - Economics) and legendary economist Milton Friedman famously wrote in one of the greatest economic essays of all time that “The social responsibility of Business is to Increase Its Profits,” and that “Businessmen who talk (of “social responsibility”) are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.” Further:
What does it mean to say that the corporate executive has a “social responsibility” in his capacity as businessman? If this statement is not pure rhetoric, it must mean that he is to act in some way that is not in the interest of his employers. For example, that he is to refrain from increasing the price of the product in order to contribute to the social objective of preventing inflation, even though a price increase would be in the best interests of the corporation. Or that he is to make expenditures on reducing pollution beyond the amount that is in the best interests of the corporation or that is required by law in order to contribute to the social objective of improving the environment. Or that, at the expense of corporate profits, he is to hire “hardcore” unÂemployed instead of better qualified available workmen to contribute to the social objective of reducing poverty.
In each of these cases, the corporate executive would be spending someone else’s money for a general social interest. Insofar as his actions in accord with his “social responsibility” reduce returns to stockholders, he is spending their money. Insofar as his actions raise the price to customers, he is spending the customers’ money. Insofar as his actions lower the wages of some employees, he is spending their money.
To the extent that “social responsibility” doesn’t get in the way of what stockholders, customers, and employees receive, it can be excused as harmless grandstanding. To the extent that it does get in the way, and I believe that would be most of the time, it hurts all of us by slowing down economic growth, and preventing the resources needed to accomplish valid social goals from ever appearing.
