The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Friday, February 8, 2008

Strategic CSR - Bill Gates

The article in the first url below reports on Bill Gates’ (Special Cases of CSR: Microsoft (Bill Gates), p285) recent speech in Davos in which he called for more “creative capitalism.” While appealing at first glance, however, I am unconvinced by Gates’ argument. Ultimately, I am unsure what he actually means by “creative capitalism” and how it is to be realized in practice. For example, it is easy to say that:

“… private companies should be encouraged to tweak their structure slightly to free up their innovative thinkers to work on solutions to problems in the developing world. It's gung-ho, rather than hairshirt, philanthropy.”

But, in reality, what does “encouraged” mean? How are firms to determine exactly what is an ‘appropriate’ project and what is not? Do firms need to calculate a certain level of potential ‘social goodness’ in advance? And, if firms need to be encouraged, who is going to do the “encouraging”? Governments? If so, how are they going to “encourage” them? None of these questions are addressed sufficiently and, at the moment, Gates argument rests on an appeal to the altruistic side of firms and their shareholders:

“While companies or individuals may ultimately profit from this work in developing nations, the reward primarily comes in the form recognition and enjoyment.”

On an individual/micro level, such arguments are appealing, romantic even; but at a macro level, they quickly fall apart. I suggest the market, while imperfect, remains the best means society has for allocating scarce resources. This skepticism of the details behind Gates’ vision is evident in the article in the second url below, which balances the first article’s claim that Gates “gets it” with the assertion that he “misses the point”:

“If [Gates’ idea] sounds familiar, it should. It's an attractively repackaged call for activism that's been kicking around for more than four decades under labels like "corporate social responsibility" and "caring capitalism." Gates' well-intentioned suggestions would shift these efforts from domestic charity to international charity aimed at poorer nations.”

Although the author’s argument is a bit crude in places, he is on firm ground in stating that:

“… there is a stronger argument to be made against "creative capitalism," and it is that profits come from serving society. The larger the profits, the better job the company tends to have done. Profit maximization is a worthy goal by itself.”

I also agree with his implication that Milton Friedman’s ideas (expressed in his 1970 article, “The Social Responsibility of Business is to Increase Profits” demonstrate the social value of business. I would add that Friedman’s argument (inflammatory sound bites notwithstanding) is perfectly compatible with a business argument for strategic CSR—that CSR, implemented throughout an organization that adopts a stakeholder perspective and a focus on long term value creation, maximizes social value. A number of these thoughts are included in the article in the third url below:

“Sure, let those who have become rich under capitalism try to do good things for those who are still poor, as Mr. Gates has admirably chosen to do. But a New-Age blend of market incentives and feel-good recognition will not end poverty. History has shown that profit-motivated capitalism is still the best hope for the poor.”

Have a good weekend.

Bill Werther & David Chandler
Strategic Corporate Social Responsibility
© Sage Publications, 2006

On 'creative capitalism,' Gates gets it
By Michael Kanellos
January 25, 2008

Gates misses the point on 'creative capitalism'
By Declan McCullagh
January 25, 2008

Why Bill Gates Hates My Book
By William R. Easterly
850 words
7 February 2008
The Wall Street Journal