A biographer of Milton Friedman called Jennifer Burns was in the FT yesterday saying:
Corporate social responsibility is back – and that's bad news for anyone who cares about corporate behaviour. August's US Business Roundtable statement embracing stakeholder capitalism is only the latest iteration of a mantra gaining currency around the world. On the surface, the brief statement offered bromides about pleasing customers, investing in employees and supporting communities. But its real significance comes in how shareholders drop to last in its list of stakeholders.
That's an extraordinary claim, not least because the Business Roundtable most certainly did not say it.
What Burns said to support her argument was this:
The idea of benevolent corporations serving the public good has also muddled a distinction that was clear to earlier generations. Young professionals used to recognise the need for a choice. Some careers were lucrative, but largely devoid of meaning – hence the inflated salaries and fancy recruiting dinners of investment banks and consulting firms. But now that trade-off has faded away. Working for a tech company is not only lucrative, it is supposedly a way to save the world. There's no need to live in penury, to spend time studying foreign languages, to get to know people different than you. Now you can make a difference from the comfort of your keyboard.
Bring back the Friedman doctrine, and maybe we'd have a more honest conversation. Do I want to dedicate myself to maximising shareholder value? Or do I want to consider one of the other institutions – from universities, to non-profits, to public service – which truly are mission-driven? But if we freed corporations from the need to do more, then the rest of us would have to act.
Let me presume Burns is honest and that she really believes such linear distinctions are possible. That is, she thinks we are capable of deciding once and for all, and completely, that we are either good or greedy, which in summary is what she is saying. It sounds crass, because it is crass, but let's assume she really does think humans can behave in this way.
What she then argues is that those who want to do good will be and should be indifferent to the fact that the vast majority of the world's resources will be entrusted to a bunch of self acknowledged psychopaths, devoid of any conscience, who will without any remorse use those resources to advance their self interest, including by ensuring that all the efforts of those who want to do collective good are comprehensively undermined at every possible opportunity.
That this fairly describes the corporate response on issues like development, tax and the environment, let alone gender, social and economic inequality, is beside the point. That only proves that this outcome is possible despite CSR to date. It does not suggest it is desirable. What it does say is CSR is not enough: soft tinges to hard capitalism remain hard capitalism in other words.
But Burns ignores completely the asymmetries of power in the real world, which to date have always rewarded the psychopath. Instead she wants those with psychopathic tendencies to be given unalloyed power.
If evidence was needed that good people still need to speak out this is it.
In fairness to the FT, there is evidence that they do not agree with Burns and may have been using her as the absurd counter-argument to their own view. But it's still pretty staggering that such opinion can be passed off as reasonable, let alone publishable.
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“The disposition to the affections, which tend to unite men in society, to humanity, kindness, natural affection, friendship, esteem, may sometimes be excessive… The defect of this disposition, on the contrary, what is called hardness of heart, while it renders a man insensible to the feelings and distresses of other people, renders other people equally insensible to his; and, by excluding him from the friendship of all the world, excludes him from the best and most comfortable of all social enjoyments.” (Adam Smith (1723 — 1790), Scottish Moral philosopher, The Theory of Moral Sentiments (1759)
In Adam Smith’s earlier book, The Theory of Moral Sentiments, and my opening quotation, that seems to imply, at least to me, that man is a social animal who, by and large, believes in qualities such as humanity, kindness and friendship and that we tend to look for social and economic policies, politicians and political parties who make an effort to balance entrepreneurship, success and self-gratification with individual and corporate social responsibility. It may be that I am not my brother’s keeper, in the widest possible sense, but surely in any developed and civilized society there are social responsibilities? Besides, it is oft suggested you can tell how civilized a nation is by the way it treats its’ old and young.
The culture of any company sits and starts at the top with the Chairman, Chief executive and board of directors and maybe even major shareholders. If you accept shareholders have a stake in companies, not just buildings, plant, equipment, products, services but also culture and reputation, then corporate social responsibility must be a dirty phrase. Indeed, I suspect that one way that companies manage to expand in developing nations, by outsourcing jobs to areas of much lower costs and overheads, is by cutting any corners there may be in relation to social, cultural, ethical and may be even environmental and moral standards as a means of getting ahead in the game of business. But is that right and should it be allowed to happen or is all fair when it boils down to making more bucks?
Some organizations may have established internal training programmes on governance, company ethics, behaviour and corporate social responsibility and the data protection act but few appear to have spelled out precisely what is meant by ethics and how any ethical dilemmas might be addressed by a company when sourcing products. Others have introduced an internal system of ‘whistle-blowing’ such that if an established code of corporate ethics has been issued and someone is seen to violate that guide then they encouraged to report it and in some cases to a third party, but how effective is that system and are whistleblowers protected, and if not then why not? But yet others still choose to ignore corporate social and environmental responsibilities.
Occasional reports in the media seem to suggest business in general has become more corrupt in that businessmen appear more concerned with making money and maybe even avoiding forms of taxation by whatever means and turning the positions of director and manager into a gambling process rather than a profession with integrity and social, ethical and moral values and more than a degree of concern for environmental issues; that is why there is a need for regulation not only to ensure that there is real competition in every areas of business and commerce but also to ensure that boundaries are not crossed too often. It is not just regulation with respect to human rights but regulation concerned with health and safety issues, with standards of workplace conditions, machinery, operating systems and hours worked.
And on the matter of the need to regulate commerce Adam Smith suggested, “To widen the market and to narrow the competition is always the interest of the dealers … The proposal of any new law or regulation of commerce which comes from this order, ought always to be listened to with great precaution, and ought never to be adopted, till after having been long and carefully examined, not only with the most scrupulous, but with the most suspicious attention. It comes from an order of men, whose interest is never exactly the same with that of the public, who have generally an interest to deceive and even to oppress the public, and who accordingly have, upon many occasions, both deceived and oppressed it.”
The creation of wealth should not be diametrically opposite to the implementation of corporate social responsibility, indeed providing goods and services of a good quality that people need and at a reasonable price should be the norm and not the exception; allowing the community to invest in a company is sensible; and, putting something back into the community makes corporate sense because that way the community flourishes and individuals have income to spend. That is why corporate responsibility should be part of any company’s core strategy as part of the process of ensuring that business activity, policy, procedures and internal workings are transparent, can be compared to other companies and organizations in the same business sector and with other major businesses so that customers are clearly aware of their business dealings.
Thank you
Good to see Adam Smith being properly quoted. The likes of the Adam Smith Institute clearly have not read much Adam Smith – just the one sentence taken out of context. They’ve certainly not read Moral Sentiments.
In his way Smith’s insights into the negative aspects of capitalism are every bit as profound as Marx’s – and of course Marx oddly enough was capable of recognising the positive aspects of capitalism. I rather think they would have got on better than people might expect
Im also wary of organisations that have separate CSR functions – too often it reflects a tokenistic approach, perhaps with a bit of corporate philanthropy. For the serious organisations its just an integral part of how they operate – everyone’s responsibility. Unless you are a dyed in the wool anti-capitalist, the generalisation ‘all big corporations’ is not very helpful. There are large corporations who are deadly serious about this, trying to implement sustainable, ethical business models and resentful of pressures from the City to only maximise profit, and from competitors who free -ride. They need supporting as they are potentially strong allies in for instance bringing in regulations that they would have no problem complying with but which would force others to change their behaviour.
Worth noting also that bad behaviour is not limited to large corporations – there’s plenty of tax avoidance or bad treatment of employees in small and medium companies too. Try the hospitality, building or agricultural sectors for a start.
I agree re your last para
And politicians turn a blind eye
The big corporations are not changing their spots, they are just trying to paint them greenish against a pink rinse background coat.
There’s great danger in this, not only that we allow them to continue business as usual as wolves in sheeps’ clothing (to shift the animal metaphor slightly) but that the socially responsible ‘social greenwash’ will undermine genuine (albeit sometimes ineffective, or misdirected) attempts to tackle the real problems we face as societies and species, because it will be cynical PR and transparently so.
Sustainable cost accounting is designed to challenge this greenwash
“Sustainable cost accounting is designed to challenge this greenwash”
Then we are going to need to make some headway with getting the idea accepted and implemented as policy.
(I know….I know, ….that’s what you are doing…:-) )
Just commissioned to write about it in Denmark…
Her bio on the Hoover Institution website says she’s the ‘ leading independent expert on Ayn Rand ‘ . Ayn Rand was a fantasist and third rate novelist . Who’d want to waste one’s life being ‘ the leading independent expert ‘ on her.
That explains a lot…..
Anyone who subscribes to Rand’s view of the world has to be regarded with deep suspicion – that includes the likes of Patel and Javid. Was it Javid who said he re-read Rand every year? That really is a cult.
Indeed
@ John Hope and others
It’s worth commenting that the last Speaker of the House of Representatives of the US Congress, Paul Ryan, was/is an admirer or Ayn Rand, and expected his staff to be conversant with her “ideas” (aka “obsessions not tethered to evidence”).
Given that Ryan was probably the most ineffectual House Speaker this century, possibly in US history – a “trifecta” of White House, Senate and House of Representatives, and he STILL couldn’t manage to repeal Obamacare, just one example of his ineffectiveness (where, incidentally, he showed he’s completely misread the “pooling” idea behind insurance, in which non-claimants effectively pay for claimants, but that’s the risk you accept in an insurance agreement. Ryan called that “unfair”) – his predilection for Rand may be indicative of a failure of both the empathy and comprehension needed for the role of Speaker.
Even more astonishingly, one of his “selling points” as a politician was that he was a devout Catholic – not something easy to square with support for Randian “ideas”.
In the “..Moral Sentiments” (referenced by Kenneth) Smith draws a distinction between actions which elicit “Praise” and actions which are “Praiseworthy” and suggests that virtue resides in the latter.
Many of the means by which some businesses fulfil Friedman’s view of corporate social responsibility – to maximise profits – would never qualify as “praiseworthy”. That they may receive praise from those who think like Ms Burns merely shows how inverted the concept of “virtue” has become in some quarters.
Graham Hewitt says:
“[…] Ms Burns merely shows how inverted the concept of “virtue” has become in some quarters.”
The American dream declares virtue to be defined by how successful you are. And the measure of success is wealth. (To be fair the Americans didn’t invent the idea)
This certainly turns on it’s head the old saw that ‘Virtue is its own reward’.