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June 15, 2005

Socially Responsible?

Michael Blowhard writes:

Dear Blowhards --

To what extent should businesses be "socially responsible"? And what's meant by "socially responsible" anyway? Should a company be loyal to its employees? To the locale where it's located and where it operates? Or only to its shareholders and bottom line?

ChicagoBoyz' Lexington Green -- who's generally very libertarian -- surprises in this posting about a recent Microsoft deal with China.



posted by Michael at June 15, 2005


There are consequences to any course of action. Personally, I believe that companies need to balance the needs of all stakeholders.

Consider what might happen otherwise:

Don't develop your staff, and they quit at inopportune times (and the best quit first).

Don't invest in your community, and you may have trouble hiring, and you may have trouble getting zoning variances, or tax breaks, or...

Being considerate of all stakeholders is good business.

Posted by: Eric Sohn on June 15, 2005 10:43 PM

Should businesses be socially responsible? Hmm. Well, the way I think of it is this: Would it be OK for a business--in fulfillment of its sacred duty to its investors--to machine gun its competition--if it were not against the law? If you answer no, then, you're on a slippery slope to--yes, to the obligation of behaving in what you (a business, a person) understand to be a socially responsible, regardless of what the law requires. If you say no, then, by what right do we make it against the law? Isn't this--the prohibition against machine gunnign the competition--a regulation? Are we not against regulation of business in its sacred pursuit of profits, which trickles down to create prosperity for us all? And if this is a justifiable regulation, how is it justified except in the name of social responsibility? And are we not then on yet another, very similar slippery slope?

And, yes, I know the social implications of many business practices are nowhere near as clear as that of gunning down the opposition. There is ample opportunity to screw things up: hurt business AND society both. It happens all the time. But we're talking principles here. In my mind, either come out and endorse the law of the jungle or concede that each proposed regulation of business (or other social activity), no matter how picayune, must be debated on its peculiar merits and not on the basis of some absolute principle.

But if you're going to be a fundamentalist libertarian, show the courage of your convictions. The only truly libertarian institution in America is the Mafia--and even that may just be a myth.

Posted by: John Hinchey on June 15, 2005 11:00 PM

I'm a pretty strong free marketer myself, but I must say I find myself agreeing with Lexington Green.

Posted by: Rachel on June 16, 2005 1:51 PM

This depends entirely on your definition of 'socially responsible'. I agree that it's good for business to treat employees well, with the expectation that this will result in some meaningful benefit for the company in return. I also agree that adherence to certain social conventions is something we ought to expect from one another.

However, with respect to that subset of social responsibility which involves extending money for a charitable cause, it is very important to remember (at least if you are a publicly-traded corporation) that it is *not your money*. Keeping a failing factory open for the benefit of the workers is a good example of this.

Taking it upon yourself to spend other people's money for things that make you feel good is neither moral nor honest, even if those things are meant to help other people. If you want to extend charity to someone, use your own cash. Don't take it out of my retirement fund without asking.

Posted by: Mike on June 16, 2005 3:13 PM

Mike is right; the definition is the important thing, and it's mutable.

Is it socially responsible to try to increase the share value of a company to help the assets of fixed income retirees who have invested in the company? Is it socially responsible to use only ingredients that have been obtained from swamp and jungle plants in an attempt to reduce the habitat for the mosquitos that are a primary disease vector in poor, tropical countries? How about not using ingredients from swamp and jungle plants in an attempt to save the habitat of threatened species? (You might notice some conflict in the above.)

Now, of the above, which have you explicitly promised to do? (It might help to understand the concept of "fiduciary duty".) It's possible, of course, that your promise has been to balance these or some other responsibility.

As I see it, your primary social responsibility is to not lie about what you are trying to do.

ps. As to "machine gun[ning your] competition", it seems to me that we do have some pretty explicit laws that might be understood to create a requirement of some sort; perhaps I'm wrong. Shall I take your argument as meaning that any time anyone invokes the sacred mantra of "social responsibility", this implies an equivalence with a social obligation not to murder? Since that strikes me as silly, I can only assume that your screed about social responsibility refers only to that concept in the sense that there are some generally agreed upon responsibilities. Since it doesn't seem likely to me that Michael intended to suggest that there is any debate about whether companies have no responsibilities whatsoever, your comment seems unresponsive.

If, on the other hand, you intend to seriously invoke a slippery slope argument, you'll need to adduce a mechanism. I might suggest that you take a look at Eugene Volokh's "The Mechanisms of the Slippery Slope" for a fuller discussion. (That link is to a draft version.) Absent such a mechanism, your argument is more hyperbolic than substantive.

pps. Your invocation of the Mafia strikes me as as an attempt to damn by association. (The Mafia holds that position, libertarians hold a similar position, the Mafia is bad, therefore, libertarians are bad.) The best that can be said of that argument is that it is fallacious, and I'm afraid that I (at least) am unwilling to be that charitable.

Posted by: Doug Sundseth on June 16, 2005 4:19 PM

In China, there will be a search engine that won't capitulate. It will win. Hands down.

Posted by: heron543 on June 16, 2005 8:25 PM

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