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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Wednesday, March 9, 2016

Strategic CSR - Capitalism

The article in the url below argues a point that is central to understanding what is meant by strategic CSR. It does so by reacting to an announcement by the Ford Foundation made last year:
"On June 11, the $11 billion Ford Foundation announced that it will pour its resources—about $500 million in giving a year—into fighting inequality. 'We are talking about inequality in all its forms—in influence, access, agency, resources, and respect,' Darren Walker, the charity's president, wrote in a letter."
The irony the article highlights is that the money that underwrites the Ford Foundation's ability to operate comes from the economic success of the Ford motor company:
"The bulk of the Ford Foundation's assets came when it received 88% of the nonvoting shares in the Ford Motor Company, most after Henry Ford died in 1947. Ford hated inheritance taxes, then a punitive 70%. In 1956 Ford Motor went public at $3.2 billion. Most of the shares sold were from the Ford Foundation, about a quarter of its holdings."
As such, the author criticizes the Foundation for "getting exactly backward what its namesake, Henry Ford, understood. Society benefits from making, not giving." Instead of focusing on social problems and giving money away, the author makes the case that the Foundation should be investing in for-profit companies that are capable of delivering much greater social progress:
"Ford Motor was profitable because Henry Ford created scalable assembly lines, reduced the cost of the Model T to under $300, and sold 15 million of them. Model Ts made millions of businesses and workers more productive and created that 'public welfare' that the Ford Foundation struggles to achieve. Ford Motor created wealth for society, as well as for Henry Ford, and you can't do the latter without the former. … In other words, the Ford Motor company increased living standards, and as a result its owner became fabulously wealthy. This may have increased the perception of inequality, yet everyone was better off."
You get the sense that, if the author had his way, he would get rid of Foundations altogether:
"If the Ford or Clinton foundations really wanted to help society, they'd work on lowering barriers to business formation and cutting the regulatory chains that inhibit productive hiring in the U.S. and globally."
Take care
David Chandler & Bill Werther
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The Capitalist as the Ultimate Philanthropist
By Andy Kessler
June 24, 2015
The Wall Street Journal