The case against corporate social responsibility?
The Wall Street Journal published an astonishing piece yesterday on corporate social responsibility. The author, Aneel Karnani, is a business professor at the University of Michigan.
Why astonishing? Try this summary from the print edition titled “Finding the Balance:”
The Illusion: Because companies sometimes can profit from acting in the public interest, it fuels the belief that executives have a responsibility to serve not only their shareholders but also some larger social purpose.
The Reality: When companies do well by doing good, the driving force is the pursuit of profit, not a commitment to social welfare. More often, profits and social welfare are at odds, and executives can’t be expected to heed the call for social responsibility at the expense of shareholders.
The Danger: Appeals to corporate social responsibility are not an effective way to strike a balance between profits and the public good, and they may be a distraction from more effective initiatives, such as government regulation.
OK, so the author uses healthier options at fast-food restaurants and in packaged foods as “situations where profits and social welfare are in synch.” I would argue that these instances actually support his case, but never mind.
If the business community recognizes that corporate social responsibility is just another marketing tool, we need to listen hard.
Why is the Wall Street Journal giving professor Karnani almost a full page to discuss such things? The editor explains:
It takes a lot of nerve to speak out against corporate social responsibility. How can you not be in favor of the idea that companies have a duty to address some of the many social ills that plague the world? But put conventional wisdom under a microscope, and you sometimes see things you never knew existed.
Some of us had a pretty good idea these things existed, but I am delighted to see the business community publicly acknowledging what we have known for a long time.
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Comments
I think the fallacy of CSR is pretty apparent to everyone by now. I’m sure messaging the notion in the WSJ will make their smug reader constituency immediately have a change of heart, change their ways, and climb out of their towers to hold hands with the people…
[...] here to read the full [...]
@Subvert
I think I love you!
In Food Inc one of the Walmart reps says (re: buying organic yogurt products) “We think it’s the right thing to do. It’s what our customers want.” It’s not right because it’s right, it’s right because it drives sales.
Can’t remember the name of the documentary that pointed out that corporations can be sued if they don’t act in the best (ie. financial) interests of their shareholders. Any budget item must be justified by the financial bottom line, and with a short period of return. Social responsibility budget items will either be justified/written off marketing, image making (or remaking!), or somehow tax deductible.
Even in Public Health we are now being told to not speak about programs that have a 5 year return or a 10 year return, which is pretty darn good in public health terms. We’re being told to talk about immediate returns to our “health” decision makers.
@ Cathy
I think you might be speaking of the movie, ‘The Corporation’.
It is this fool’s quest for ever-increasing, immediate returns and insanely expansive growth that is bringing our imminent destruction. In the end, when we sit with all of our worthless stocks, paper money, and meaningless material wealth, we will all ask ourselves: “Was it worth it?”
No, as one who will be around around longer than most stockholders, it will not be worth it. I’m glad my grandparents were able to finance a comfortable retirement via the stock market in the ’90s that has lasted through today and hopefully through the rest of their lives, but a similar option will almost certainly not be available for me.
Corporate Social Responsibility is a marketing ploy, but the idea behind the original concept is essential. How do we make everyone remember that some of us will be around in 70 years (probably)? Preserving our health and environment is vital. Currently, neither regulation nor CSR is really successful. What can be done to improve the impact of large companies?
One of my first instincts it to say go less global– if your butcher sells bad meat, his customers will flee– but that is neither practical nor likely to work for many products and services. It’s not quite that simple though.
Ah, what evil lurks in the hearts of men… who work for corporations.
[...] Food Politics [...]
I went to a private, Catholic, Liberal Arts college, and one of their educational “pillars” is SOCIAL RESPONSIBILITY. It was drummed into you the minute you stepped on campus. As a business major, my first classes were on social responsibility in the business environment and ethics! Corporate Social Responsibility is a REAL practice, but not in the hands of corporate pundits who have no idea what SR and ethics even mean and simply use it as a marketing label.
I agree with Marion that it’s quite significant to have the WSJ publish this piece. I am afraid I can’t agree with the first commenter that “the fallacy of CSR is pretty apparent to everyone by now.” Quite the contrary, CSR has become an entrenched part of almost every major corporation’s MO, is commonly discussed in the business literature and is likely taught at B-schools everywhere as a feel-good way to indoctrinate newcomers to the world of business so that they can sleep at night.
As for this piece, I suggest reading Aron Cramer’s retort on HuffPo, which I think sums it up for those who tout CSR as already having great impact, as well as being the wave of the future:
http://www.huffingtonpost.com/aron-cramer/wsj-takes-aim-atcorporate_b_692003.html
In the food world, PepsiCo has positioned itself as the nation’s leader in CSR, with its “Performance with Purpose” tag line. The company’s real “purpose” is to to stave off more effective government intervention, just as the WSJ article suggests. Judging by the lack of federal government action, for example, on marketing to kids, the strategy is working pretty well.
Roxanne – Did you ever see “Back to School”? In school they build fictional companies that sell widgets in fantasy land. In the real world zoning problems can only be fixed with a little political greasing. The bottom line will always come first unless you have a truly independent leader of a privately held company championing a cause.
Michele – Ya think Pespi’s Refresh Everything is working? They’ve even figured out a way to get their logo in schools by having kids actually make the signs! evil genius!
I wonder when the public will begin to see through the marketing masks of social responsibility put in play by corporate execs.
@Michelle Simon
Ah, Ms. Simon, this is why you went to Yale and I went to state college! You are right, of course, and give fine examples to support your point. I must defend Subvert, though! (S)he perhaps should have qualified the “everyone” as “everyone who is aware and intelligent of what really goes on in the world”. I still agree with the spirit of the comment by Subvert, as it appeals to my sense of outrage that the future of my grandchildren and the planet are being devastated for the benefit of very short term gain for a relatively small part of the population.
I do not own any food, ag, oil, etc. stocks–just some alt. energy. I try to live up to what I preach. It’s the only way I see to not be part of the problem. Corporations make profits FOR shareholders, who have become incredibly greedy. Of course, now that corporations are “persons”, the distinction is not as clear.
Since Michelle won’t plug her book, I will.
Reading Appetite For Profit is one way to examine CSR and its effects on more substantial reforms. Good examples, easy to read.
What I don’t understand is why we don’t turn the microscope on ourselves? After all, we buy the products that these companies make, don’t we? After all, companies are predictable in what they do: they try to make money for their investors. If we as consumers step up and tilt our purchases towards responsible products, then this issue would become a lot easier to solve.
Dan
Casual Kitchen