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Wednesday, November 5, 2014

Strategic CSR - Corporations

The article in the url below is an interesting survey of the state of CSR today – where we have been and, possibly, where we are going. In the process, it poses the following question:
“Is it na├»ve to expect corporations to assist in addressing the social, economic and environmental challenges of the day?”
There are two points the author makes, in particular, that I want to highlight. First, is the idea that the executives who lead the corporations of the past:
“… served not just stockholders, but also workers, customers and the community.”
The implication reinforced throughout the article is that executives today serve only stockholders. It is frustrating continually to see such complex ideas presented so simplistically. I understand the constraints of space that newspaper journalists face, but that does not seem to be the main driver behind the problem. In general, we like to see the world as a series of dichotomies, rather than the continua that are all around us. Businesses today operate within a series of stakeholder relationships. They do not choose this; it is simply the way that it is. Now, they can certainly prioritize the interests of one group over another, but it is not true to say that executives only care about stockholders. It is impossible to run a business that way. An overly simplistic representation of this when discussing CSR prevents the more important discussion around stakeholder prioritization, which is the true challenge that executives face. In fact, you could argue that the main job of executives today is to manage among competing stakeholder interests to allocate scarce resources in the best interests of the firm.
Second, the author concludes that, due to the narrow, distorted perspective of businesses today:
“Elected governments are certainly imperfect. But to address our most intractable ills, they are the better tool.”
As someone who has been thinking about CSR for many years (so is well aware of the many ways in which for-profit firms both create and destroy value, broadly defined), I think this statement is ludicrous. A strong and active government is clearly a vital component of a functioning democratic system. But, anyone who pins their hope for social progress primarily on government agencies and, heaven forbid, elected politicians, has just not been paying attention over the past few decades. No-one makes this point more effectively than Milton Friedman, in an interview on The Donahue Show in 1979 (, which I show in my class and should be, I think, compulsory viewing for all business students:
“The great achievements of civilization have not come from government bureaus. Einstein didn’t construct his theory under order from a bureaucrat. Henry Ford didn’t revolutionize the automobile industry that way. In the only cases in which the masses have escaped from [grinding poverty], the only cases in recorded history, is where they have had capitalism and largely free trade. If you want to know where the masses are worst off, it is exactly in the kinds the societies that depart from that. So the record of history is absolutely crystal clear, that there is no alternative way so far discovered of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system.”
Take care
David Chandler & Bill Werther
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Motivating Corporations to do Good
By Eduardo Porter
July 15, 2014
The New York Times
Late Edition – Final