Responding to CSR (2006 Jun)

by Barry A. Liebling

Advocates of Corporate Social Responsibility (CSR) are increasing in number and in influence. They are succeeding in establishing CSR as the vogue in many corporations, among large numbers of investors, among “progressive” writers and commentators, and within schools of business.

Generally, the ascendency of CSR is a victory for those who yearn for a socialist economy directed by “experts who interpret the will of society.” It is a menace to proponents of free market capitalism.

CSR is a doctrine that has two layers.

First, CSR advocates assert that having a business focus on the interests of the owners, or shareholders, is old-fashioned and obsolete. Instead, a business should balance the “needs” of all stakeholders – which besides shareholders includes employees, customers, communities, and local neighborhoods. Furthermore, a business is to be judged according to how well it meets a “triple bottom line” – its economic performance, its social performance, and its impact on the environment. While economic performance is easy to measure, gauging social and environmental performance requires the assistance of committed socialist “experts” who are not shy about giving companies advice. The net effect of accepting CSR is to take ownership rights away from shareholders and to give them to well-connected outsiders who are not owners – mostly people with a leftist agenda who seek to seize and direct the company to further their collectivist goals.

Companies that are active in CSR give money to organizations that lobby the government for “social justice” causes such as requiring “living wages,” ratifying the Kyoto Protocol, legislating for animal rights, blocking banks from doing business with organizations that are not “progressive,” and increasing protected classes and entitlements.

Second, CSR advocates assert that their approach is the unique path to business ethics. To reject CSR, according to its supporters, is to eschew business ethics as such. Advocates of CSR proclaim that they offer the only way to “do well and do good.”

How do the top managers in the largest corporations respond? A substantial number of senior executives are going along with CSR. Some are caving in because they are intimidated by leftist activists who threaten to make trouble if companies do not comply. Common threats are public denunciations, organized boycotts, and confrontations at shareholder meetings. Cowed executives do not appreciate that placating a bully encourages future aggression.

Alternatively, some members of top management are partisans of the CSR vision and deliberately work for a world where private business is abolished and is replaced by “democratically-directed, socially-conscious” institutions.

Of course, many business leaders – to their credit – are resisting CSR. Their most common rejoinder is defiant but is not a telling blow. Executives typically assert that it is not appropriate for businesses to get into political conflicts. They say that a company should be focused exclusively on maximizing profits, and taking sides on controversial issues is a diversion. But attempting to be neutral is naive. The reluctant businessman wants to be excluded from the fight but also wants to refuse the CSR demands. Take note that a businessman who defies CSR is acting politically. Unfortunately, by attempting to avoid judgements and remain neutral the businessman lends credence to the fallacy that CSR has the answers to what is ethical in business.

The best strategy for confronting CSR is to identify the essence of its flawed view and to explain how capitalism is the right path to “doing well and doing good.” Specifically, CSR is based on the cynical collectivist notion that you belong to society, and society – through its representatives – may use your life just as a hive uses a worker bee. By contrast, capitalism is based on individualism – the doctrine that you have a natural right to live your life as an end in itself, according to your own plans with productive achievement and personal happiness as appropriate, moral goals.

How does this translate to what corporations should advocate and how does this clash with CSR? Consider three examples of the capitalist principle that business should always be by voluntary mutual consent. Corporations should speak out against eminent domain, because governments do not have the right to confiscate private property – even if CSR advocates say it is for the “greater good.” Corporations should argue for the abolition of tariffs because buyers and sellers should be free to get the best bargains they can – even if CSR advocates want to protect their favored industry. Corporations should be opposed to local governments blocking the entry of new big box stores because success or failure should be decided in the marketplace – even if CSR advocates complain that a new store will change the local community.

Articulating the virtues of capitalism is the best way both to promote it and to reveal the brutal nature of CSR.

*** See other entries at in “Monthly Columns.” ***

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