Acton Commentary

The Irresponsibility of Corporate Social Responsibility


Business is a very complicated process. It takes a lot of concentration to figure out what you are going to do to ensure that your company is sustainable, continually profitable. To spend a lot of time on peripheral issues — human rights in Burma, fair-trade coffee or unfair-trade coffee or whatever kind of coffee you are drinking this week — is a very complicated process.

When businessmen go to Washington it is not pleasant. Businessmen in their own world are giants. They are empire builders. They are wealth creators. They are respected. When they go to the political process, they are nobody. They are targets of opportunity. They have bulls' eyes painted on their chests and it is amazing to see how they are treated before a Congressional committee. You see CEOs of major corporations quivering in their midst because it is not their world. They do not know the language of politics and they often find themselves treated badly. So they sort of say to their vice presidents of government affairs or lobbying, “Make it go away. Create a deal. Do what you have to do but I want this off the table. I do not want to worry about picket lines outside my plant or editorials in the paper talking about how horrible this corporation is.” And, indeed, if you look at the array of policies that the modern corporation addresses, none of them work.

They may adopt a policy which is, obviously, appeasement-oriented. But as we know from history, appeasement policies rarely work. It is what I call the “Crocodile or Captain Hook” strategy. The idea is, essentially, that if you feed the crocodile your leg it is much more likely to become a vegetarian. The evidence is not very clear on that but it does not suggest that is a valid concept. When Chamberlain went to Munich and came back, he waved his paper in his hands and said, “Peace in our times.” A lot of the business community sometime comes back and waves a piece of paper and says, “Greenpeace in our times.” And the response is pretty much the same — encouraging people to think that, “Look we are vulnerable. If you push us hard enough we will give way to you.” In a world where they do not see any value in what you are doing, you are just encouraging them to take another bite out of your corporation, another bite out of shareholder profits.

There is what I call the Pharisee strategy. The Pharisee strategy, of course, is the strategy talked about in the Bible where the businessman gets up in front of the audience and he says, “Thank God that I'm not as bad as my fellow businessmen.” Well, in the first place it is not altogether credible. And secondly, does that do anything for the stability of the market, the legitimacy of the marketplace? No.

Let's not forget what I call the Mafioso approach. The Mafioso approach is, “You got us. We are slimy, greasy businessmen. But hey, who funded the last three novenas at the cathedral? We use our money to fund good things.” Well, the obvious response is, “Well, keep funding the good things, stop doing the bad things.” This has not explained what the corporation is doing. So, it is not likely to get credit for it.

Finally, there is the quasi-rational strategy: “Look, we cannot control politics. We are buffeted by political pressures. What we need is regulatory certainty. We want the government to set rules. We prefer good rules but we do not care. Set the rules up - 55 miles an hour, 12 miles an hour, 200 miles an hour. It does not really matter but put the rules there and then we will live with them. We can then get back to business and ignore politics.”

But, of course, regulatory certainty is one of the fool's games of all time. Once, I gave a lecture called, “Lucy and the regulatory football.” The businessmen are convinced that this time the government agency will hold the ball firmly and the businessmen will run and kick it over the field goals and of course, mostly they fall back on their assets.

These strategies do not work. They are failing, and business needs to think more carefully about corporate social responsibility. In a competitive marketplace, in a world where doing anything is complicated, what does it mean to commit your company to advance environmental equality? You know, environment is a very, very big topic. Does that mean the next million dollars you have is going to reduce liquid emissions, wastes to the stream or air emissions or reduce the number of materials in your products, increase recycling, allow your plant facilities to become wildlife habitats? There are an infinite number of ways you can improve the environment. What metric do you have to decide what to do? And that is just the environment. Suppose human rights are added to your agenda?

The genius of capitalism, the genius of the market is that it creates specialized institutions which provide specialized purposes. They work within their roles in the culture of their society, but they are not trying to do everything. They are trying to do something that is extremely important: Create wealth and knowledge, which is then distributed to customers, to workers, to suppliers, to shareholders who then use that additional wealth to pursue the values that you and I have, that individuals have.

Individuals can decide that they would like to spend their money on some environmental project or some issue or problems in Romania or Burma, and so forth. But in a society as heterogeneous as the United States is, there are a very large number of things we might want to do. And rather than the corporation acting as our big daddy, making those decisions for us, spending the money that would otherwise be dispersed to the population, maybe some others have different goals and different ideas. And should we not be able to pick up our choices, our values and advance them?

The whole idea of the corporate social responsibility movement is to take away the choices we have and to give them to the elites, the politically preferred rulers of our society - the NGO, nongovernmental organization. NGO, bad title. Anyone who knows the NGO movement in practice knows it is not a non-governmental organization. It is a PGO - pro-government organization. They have never seen a government program they did not want to expand.

The Acton Institute has done a wonderful job of trying to re-instill in the business world the understanding of its moral legitimacy. There is a gospel song. I forget who sang it but it was, “If you do not respect yourself, nobody else will respect you either.” If business stops arguing for its own legitimacy that it is an important — not the only, but a very important — actor in a world that is still desperately poor, desperately ignorant, then who else is going to respect it? Who is going to defend the corporation? Acton or the Competitive Enterprise Institute? But the resources that corporations have are much bigger than ours and, if correctly deployed, would, in fact, have a role of making this possible.

This article was adapted from his February 15, 2007, talk at the Acton Lecture Series in Grand Rapids. Listen to his entire presentation here mp3.