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Down With CSR! Up With Business Ethics!

Some people use the term “corporate social responsibility” when they want to talk about “business ethics.”

That’s a mistake.

CSR is a particular thesis, or perhaps more properly a movement, within the larger topic of business ethics. Business ethics asks, quite generally, how businesses ought to behave. CSR is — roughly — the thesis that business ought to take into consideration the interests of society at large in their decision making.

Another way of putting the CSR idea is that, from a CSR point of view, it makes perfect sense to admit that a business:

  • makes a useful product or provides a useful service;
  • provides employment;
  • provides an investment opportunity for investors;
  • follows scrupulously all laws and regulations to which it is subject; and
  • pays its taxes….

…and then to ask of that business, “Yes, but what do you contribute to society? How does society as a whole figure in your daily decision-making?”

Three quick criticisms of CSR:

1) Misunderstands capitalism: The central tenet of CSR — namely that the best way for business to contribute socially is through good works — is faulty, and implies a misunderstanding of the basic wealth-and-welfare generating function of markets. Businesses contribute by producing things we want; they facilitate voluntary exchanges of goods and services that, when conducted honestly, leave all concerned better off. (Ask yourself: when did Bill Gates start contributing to society? Was it in 1994, when he founded the Bill & Melinda Gates Foundation? Or was it in, say, 1975, when Gates founded the firm — Microsoft — that would help put the power of computers in of millions of offices and homes? I’m no fan of Microsoft or its products, but to think that Gates’ contribution began with the founding of his admittedly wonderful foundation is just silly.)

2) Smokescreen: when companies are cooking the books, or flaunting environmental laws, who cares what CSR activities they’re engaging in? OK, I’m exaggerating. Of course good works are good works. But it’s not at all clear that they make up for other transgressions. We should stay focused. When business leaders start bragging about their CSR activities, we should smile politely, and then enquire how their companies are doing in terms of honest advertising, corporate governance and regulatory compliance.

3) Waste of Public / Activist / Media Attention. In the face of corporate scandals and economic instability, what we ought to be asking of business executives is that they focus on doing their job honestly and diligently. In any given week, millions of dollars are being spent on academic and industry conferences, round-tables, and dinners to talk about the importance of CSR. In any given week, newspaper stories are being drafted about which companies are doing well, or badly, in their CSR efforts. And in any given week, activists are staging protests, writing letters, and educating the public about the failures of companies to be “socially responsible.” What would happen, I wonder, if all of that money and effort were redirected to the simple idea of getting more people, in more businesses, to behave more consistently according to basic rules of honesty and integrity?