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Let’s not forget that the flow of corporate wealth to CEOs and shareholders has helped drive the middle class into income stagnation and debt, impoverishing corporate America’s customer base.So much of the debate today about corporate social responsibility misses the point.American corporations plainly are smarting from the accusation that they’ve abandoned their sense of social responsibility in pursuit of higher profits.
But the danger is that if it’s seen chiefly as a PR device, then corporate giving — currently a minuscule one-tenth of 1% of revenue among major corporations, according to the committee’s latest survey — will be first on the chopping block in economic downturns.
Moreover, the giving-for-giving’s-sake model always runs up against the notion that the only constituency that counts in corporate management is the shareholder.
Corporations today influence their communities and society at large in ways Friedman could not have conceived, and of which he might not have approved.
It’s not only the multibillion-dollar lobbying war chests of major industries.
Only people can have responsibilities.” Friedman argued that business leaders should keep their eyes on business and their hands off socially responsible programs because they were more likely to be “clear-headed” in the former and “muddle-headed” in the latter.
Yet his vision of the perfect market doesn’t have much to do with our recent experience, in which the clear-headed pursuit of short-term profits trashed the world economy.The modern dean of this school was the late eminent economist Milton Friedman, who in a 1970 article belittled talk of corporate social responsibility as “pure and unadulterated socialism.” Friedman called corporate social responsibility a “fundamentally subversive doctrine.” He conceded that some putatively socially beneficial actions such as improving local schools might have indirect benefits for a corporation — make it easier to recruit employees, for instance — but for the most part he scorned that rationale as “hypocritical window dressing.” Friedman maintained that society would benefit as a whole only if managements focused on increasing profits “within the rules of the game,” which meant without deception or fraud.That would provide customers with the best products and prices, workers with sustainable employment, and shareholders with plenty of money to spend on their own choice of good works, if they so wished.But the former can be achieved only by serving, not merely exploiting, your customer base.Friedman wasn’t wrong, but his definition of “social responsibility” was surely too narrow and his faith in the market too naive.Corporations are integrating philanthropy into their business strategies, say, by supporting charitable programs serving their suppliers, customers or markets — Pepsi Co paying to train the Mexican farmers who provide it with its corn syrup or Novartis delivering health education in rural India to residents who might end up buying its drugs.The question always is whether companies undertake these ventures because they’re the right thing to do or because they want to look altruistic for marketing purposes.There are many reasons why corporate social responsibility is on the table these days.One is that the sharp rise in business profits since the 2008 crash hasn’t produced a commensurately sharp rise in hiring.In other words, are improved profits a collateral benefit or the main point?Some might say that it doesn’t matter, as long as you end up with less penurious farmers or healthier peasants.