///The Only Corporate Social Responsibility///
My degree is from Trent, a school with a business program predicated on the presumed organizational benefits and moral validity of the “triple bottom line” (profit, environmental sustainability, and social responsibility). As much as I enjoyed my university education and never had a bad prof, I still politely disagree with the business school’s primary discourse. I think that ‘corporate social responsibility’ is a misnomer.
You’ve probably heard lots of whining about Chick-fil-A’s regressive stance on gay marriage over the last few weeks. In turn, hundreds of thousands of portly Chick-fil-A lovers deluged its stores with patronage to clog their arteries. Oh, and to support the company’s stance. Some portion of these folks didn’t attend to support the traditional definition of marriage, but to show support for a really inarticulate notion of ‘free speech’ (of course people have free speech, just as people have used their free speech to rip on the company). Then a few LGBTTTQ (no, that is not me mocking anybody — that is the latest acronym I could find) folks decided to hold a kiss-in (although, apparently, not many got the memo).
Then Amazon’s PR group used the situation to articulate its support for gay marriage. Amazon’s stance proves that, in America, a company can bully the government, avoid paying taxes, and still claim to be ‘progressive’. Thank goodness we can look to an online book retailer for moral guidance.
What do Amazon and Chick-fil-A have in common? Not much. I wouldn’t buy Amazon stock because of its stellar 0% dividend. I wouldn’t buy Chick-fil-A because, even if I wanted to, it’s a privately-held company (not traded on a stock exchange) — if I could choose to buy a privately-held fast food chain it’d be Five Guys. Another thing these companies hold in common is that they’re both throwing a lot of money at their pet causes.
The shameful part is that Amazon and Chick-fil-A can deduct from their taxes the shareholder money that they waste on charitable contributions. Companies don’t have any social responsibilities beyond adhering to the law and maximizing profit. These companies should, from these maximized profits, pay larger dividends (heck, Amazon should pay A dividend). Shareholders, in turn, could donate their extra income to whatever causes they wanted.
Let’s look at a quick primer on social responsibilities:
- Companies make profit.
- Governments exist to enact solutions to collective action problems (e.g. prisoner’s dilemmas, tragedies of the commons, etc.), based on the tyranny of the plurality.
- Charities resolve social problems as defined by their benefactors.
I recall an interview in an extremely socialist movie (the kind of nonacademic, subjective junk you’d get from a Naomi Klein propaganda piece) called “The Corporation“. Somebody (I forget who) says that a corporation is a profit-making machine in the same manner as a shark is a killing machine. That’s obviously a pretty biased simile but it’s true.
I like companies. Limited liability corporations have made fractional ownership possible, they’ve helped accomplish incredible things, and they’ve generated a lot of wealth. By myopically following their ‘evil’ pursuit of profit, they’ve helped far more people than charities ever will.
Even still, it’s OK to be uneasy about the notion of entrusting ‘social responsibilities’ to companies – they’re not designed to enact them. Would you trust BP to decide which wetlands to protect as Crown Land? I’m horrified by the notion and I’m not an “Occupy Wall Street” tool. Corporate social responsibility – followed to its logical conclusion – would turn CEOs into policy-makers. Collective interests and shareholder value are the victims. And pity the company that gets a social planner for a CEO.
From the perspectives of virtue ethics and this petite bourgeois blogger, that’s why for-profit corporations shouldn’t be asked to, nor applauded for, enacting social responsibility. Don’t let your government off the hook. Don’t accept that charities like the Canadian Cancer Society waste most of their money on marketing, fundraising, and administration. Don’t feel smug and believe that your social responsibility (which actually does exist) is fulfilled because you bought a coffee on Tim Horton’s Camp Day.
Wendy’s is the company that got the ‘gay marriage’ question right (although I beg to differ on their $1.89 “value menu” price point). Their statement on the issue of gay marriage is that they don’t have one. Wendy’s is “proud to serve customers of varied races, backgrounds, cultures and sexual orientation, with different beliefs and values.” I like Junior Bacon Cheeseburgers. I don’t care about the opinions of Dave Thomas any more than he cares about mine (and he’s dead).
Over 40 years ago, the brilliant Milton Friedman (RIP) wrote a short article called “The Social Responsibility of Business is to Increase its Profits“. Some business execs really need to read it.
///The Movie Project///
My Team Fortress 2 performance improved again. As a sniper in one round (without dying), I had 10 headshots and exactly 20 total kills.
lol wut? You wanted to hear about movies? *pocket sand*
///Catherine a.k.a. Cat in the Hat///
She tried to wear her toy as a hat. And here’s a video of Cat and I:
///Mentions///
- Sir BCM kindly called himself the King of Procrastinators in referencing my monthly goals. But I doubt his procrastination could beat my continuous failure to fix the Malibu. I should challenge him to a procrastination duel.
- Dave from 6400 Personal Finance mentioned my guest post on Boomer and Echo. He should seriously trademark the slogan “Because being frugal is no excuse for being fat”. And I should seriously consider following it.
///Amendments and Addenda///
All good.
///Tweet(s) of the Week///
I started reading this book I found called 50 Shades of Grey and now my boy parts feel funny. What should I do guys?
— Nelson Smith (@financialuproar) August 3, 2012
@financialuproar ever since I saw Magic Mike, my taste in literature has inexplicably changed.— TimelessFinance (@TimelessFinance) August 3, 2012
For the record, no, I did not see Magic Mike. If I had, it definitely wouldn’t count as a “Movie Project” film.
///Keyword Fun///
Money-Smart Keyword Award goes to:
ing direct automatic savings plan $50 2012
and
asp with ing direct get bonus
Smart! Although, to my knowledge, the bonus is $25 not $50.
Money-Stupid Keyword Award goes to:
why do people always rip me off
Because you clearly have no locus of control. The real question is: why do you always let people rip you off? You’ve got to stand up for yourself.
lol wut? Keyword Award goes to:
what do gen y drink when out
Sunny D, it’s the goodness kids go for!
Notably missing keyword to SEO-optimize this post by increasing the keyword density
social responsibility
///YouTube///
An excellent movie from the US Department of Homeland security about surviving an active shooter situation. Fighting back would be, by far, the most effective option. But because of Canada’s regressive hatred for handguns, it’s not possible.
///Links///
1. Control Your Cash did a cool blog post last week about Knight Capital’s half-billion dollar tech error. Personally, I’m interested in financial economics. Even if you’re not, read this post for an excellent explanation what a “market maker” is. Greg mentions the hilarious “Illuminati” blame game that unintelligent people play to disguise their ignorance about how competitive markets works (“If we all don’t buy any gas on a specific date next month, the evil oil companies will drop their prices!!”).
2. An op-ed column by David Brooks yielded the best quote I read this week: “what God hath woven together, even multiple regression analysis cannot tear asunder,” as well as the second best quote of the week, “In your 20s, for example, you should regard yourself as an Ayn Randian Superman who is the architect of the wonder that is you.”
3. ”I Won’t Hire People Who Use Poor Grammar“. As the last paragraph says, “That’s why I grammar test people who walk in the door looking for a job. Grammar is my litmus test. All applicants say they’re detail-oriented; I just make my employees prove it.” My grammar isn’t excellent, let alone perfect. But lazy, consistent errors show a lack of respect for one’s clients. Note this article’s slug (blog URL): “i_wont_hire_people_who_use_poo.html”. Duly noted.
///lol-worthy///
Great post, Joe!
I don’t disagree with the principle that a business’ social responsibility is to increase profit, even though it’s a tough pill to swallow sometimes as an employee. It can be a bit of a blow to the old ego to realize that, fundamentally, you’re only as valuable to your employer as your profit-generating ability. Which means, for 99% of us, that no matter how brilliant or hard-working we are, we are replaceable – being a little harder to replace than the norm is the best we can hope for (and the most leverage us wage-slaves can get). But once you get over the idea that your employer somehow owes it to you to appreciate you as an individual, it makes the whole working relationship a lot easier to navigate. People invest too many emotions (loyalty chief among them) in what is essentially a very simple transaction. It helps to think like a corporation too, when it comes to your side of the equation.
Exactly. I think you’re speaking of a different logical fallacy, but excellent point nonetheless. Employees assume that they’re loyal to their employer, and that their employer should be loyal in return. For starters, the tattered remnants of this Post-World War II social contract between labour and capital got taken off life support by NAFTA. Secondly, as you note, corporations are not the sort of thing that can have loyalty. You and I can be loyal friends. My dog was loyal to me. Coca Cola can set up a telephone line to solicit my views, they can send me free things, and they can market to my demographic — they could even start an employment relationship with me — but in the end, Coca Cola can never be loyal to me. Realizing this is fundamentally liberating. Also, a lot of consumers pledge loyalty to a particular company. It’s ludicrous, emotional, and extremely irrational. Oh yeah, and it costs money. I am loyal to fellow humans and purchase products promiscuously.
It logically makes sense that corporations have no responsibility to society other than the direct benefits of the transactions they perform. Unfortunately they tend to be staffed by those un-logical humans
High motivation and job satisfaction, which provide some of the highest rewards possible for shareholders and employees, often don’t come from doing one isolated thing without caring about the broader effects.
This applies to individuals just as well as it applies to whole corporations. If your business is run and staffed by robots they will do the same thing with the same efficiency whether they’re making land mines or medication for third-world orphans. If it happens to have a few of those humans in it they will have a very different performance and view of themselves at the same task depending on the story you tell them, from “beatings will stop if you sweep 50 rooms every day” to “sweeping the floors here is making this country the best place in the world”.
Of course every story has people who reject it. I think chick-fil-a has made it clear that they are willing to drive away a lot of people and decrease their profits. And some highly productive people are drawn to anti-social stories, which makes certain corporations profitable and slightly-to-very evil.
That said, I think Tim Horton’s Camp Day or a similar Dairy Queen promotion I heard about here last month are just ridiculous. I’ve got a feel-good deal for you – for every $10 bill you send me I will donate $0.25 to charity! Keep ‘em rolling in folks. It’s for a good cause.
Another HUGE pet peeve of mine is getting asked for donations at the till. I was at Wal-Mart last week, and I got asked for a donation to the Red Cross. It’s bizarre that people would make donations to charities and not stretch their money further by getting a tax receipt. I’ve donated to the Red Cross, and here’s Wal-Mart making me feel guilty for not making a donation so their store manager can make whatever “social responsibility” target to look better to his corporate. Wal-Mart’s stupid “Save money, live better” strategy of selling higher margin stuff in their stores already costs me enough money. It already drives me to shop at Dollarama more than I ever did before. Here’s a thought Wal-Mart: regain your focus on saving me money and I’ll donate money however I want. Their company spends millions to skull break unions and keep a steady flow of scabs, and they want me to think they’re socially responsible. I still haven’t let a greeter look at my receipt ever; if they want to act like a warehouse club, quit ripping me off with high prices.
Another one that’s nutty is charity lotteries. First off, because of the prizes only half of your money goes to the charity (and the recipient charities tend to be those huge, bureaucratic charities that do very little with the money other than pay administrators). So realistically about $0.25 on the dollar will serve the target beneficiaries. Because it’s a lotto ticket, you won’t get a tax receipt. So instead of donating $100 directly (meaning say $50 will get to the targets) and getting $40 back (and thus paying $60 to donate $50), I’m buying a $100 lotto ticket to give about $25 in benefit. I lose $40 and the charity loses $25. Money-stupid indeed.
I hear you on that – let the companies keep their cash flow and either generate more returns for, or give it back to, shareholders.
However, I still think there is a role for corporate social responsibility internally instead of externally, exactly because as human beings we are not robots. I’m not particularly vague, feel-good, reports and photo ops. Instead, I care more about how a company runs itself and manages its employees simply because we aren’t robots. The emotional/human facet to employees will affect productivity and this cannot be lost in the pursuit of profit. A company whose pursuit of profits that result in the poor treatment of employees, or the environment, or whatever, just because the law says they can, doesn’t mean they should e.g. Nike (child labour in the 90s), Apple (contracted employees at Foxconn), or various natural resource companies. It’s not a self-aware company entity making a decion (though maybe in the 22nd-Century companies will be run by AI), it’s a human making a decision.
I’ll invest in a company with a management team that will generate profits for me without unecessarily risking my investment, generating reputational risk, etc. because of some absurd need just to hit analysts’ quarterly targets.
I realise I’m probably in the minority in this regard, but I felt it worthwhile to mention that CSR and profitability aren’t mutually exclusive, depending on how it is implemented.
You’re right that shareholder value (cost control) drove Nike to establish sweatshops. Of course, most of the sweatshops were actually desirable employers relative to local employers but that’s a different discussion. Nevertheless, Nike’s handling of the child labour issue — which they foolishly protracted over many years — was decidedly NOT a good example of generating shareholder value. Marketing matters.
I didn’t really get into it, but my fuller opinion is this: corporations should not be able to write-off donations to charities or charitable foundations. If they want to donate, they should make their donations out of profit. Then the company will be really careful (and always keep shareholder value top-of-mind) when making charitable donations. It’d better have a really good marketing return, or they won’t bother. You’d probably see some companies continue to support their charitable foundations. But all of that obnoxious point-of-sale donation harassment would disappear. People (including non-institutional shareholders), who can actually have social responsibilities, could make personal decisions about who to support. Most importantly, companies like Nike, rather than just writing cheques to charity, would need to look for things in their actual operations to brag about. I think you’d see a lot more intelligent, efficient corporate decision-making.
And then of course there’s the requirement that companies comply with laws. For example, it’s illegal for Canadian companies to bribe foreign officials. But nobody really cares about enforcing this law, even though it’s devastatingly problematic in a lot of poorer countries. People need to focus on the real responsibilities of companies. We really don’t hold companies to account. This kind of obligation is enforceable, and we should demand that our government holds them to account. Facebook should be charged for millions in privacy-related violations. Ford should have gotten nailed for huge fines under consumer protection laws when they ignored the Pinto’s fatal flaw. But people really don’t care. They see the CSR Report that BP puts out every year, and couldn’t care less that the company is fighting the US government to avoid paying its fair share for the devastation in the Gulf.
On a side note, Apple has stolen every single product idea that it’s ever had (including the idea for a GUI, which Steve Jobs was famous for lamenting was in turn stolen from him).