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The not so obvious corporate task Samuel Brittan: Financial Times: 27/08/04 Corporate Social Responsibility (CSR) has now become a major industry supporting a whole complex of speech writers, public relations specialists and networkers at large whom business leaders find it more expedient to appease than to take on. There are few willing to echo Milton Friedman's remarks of 40 years ago that the social responsibility of corporate officials was "to make as much money for their stockholders as possible". Examples abound. Marks and Spencer was named "Company of the Year" by Business in the Community (BITC) about the time that Philip Green was considering a takeover bid for the group; and Julia Cleverdon, BICT chief executive, was reported to have said: "These aren't the values by which Philip Green runs a business. I think these values will go if he takes over and takes it private." Although Mr Green has a forthright no-nonsense approach to business, he did not respond by a defence of profit maximisation. On the contrary he denounced Ms. Cleverdon's remarks and threatened legal action. In the end the chief executive of BICC apologised for possibly giving the impression that the values of Mr Green would be a threat to sustaining the social activities of M&S. This August the London Stock Exchange took an initiative to reduce the burden on corporations imposed by numerous organisations sending out questionnaires about governance and ethical matters. The LSE working party, which included executives of social responsibility rating agencies, has devised a single questionnaire which it hopes, none too convincingly, will wrap up all the other inquiries. Its motto seems to be "If you can't beat them join them." Amid all this political correctness it is refreshing to read a paperback by the economist David Henderson firmly defending the Friedman doctrine and rebutting the whole CSR notion (The Role of Business in the Modern World, Institute of Economic Affairs). His main point is that the best social results are achieved not by corporations consciously trying to do good but by their competitive attempts to make profits against the background of appropriate laws and conventions. Recent corporate scandals have played into the hands of the CSR movement by blurring the distinction between criminal behaviour and breach of trust, on the one hand, and failure to follow more controversial so-called ethical objectives on the other. There is however more to say. Marks and Spencers has committed itself to running "an extensive work experience scheme for the disadvantaged", covering homeless people, disadvantaged school children, lone parents, and first generation students from non-academic backgrounds. Maybe these are mistaken goals and that less favoured citizens should be left to work out their own salvation, perhaps with the aid of cash transfers from the tax and social security system. If one is not prepared to go that far then the alternative to business participating in these efforts is to leave it entirely to the government. This might be desirable under some extremely unlikely benevolent and efficient dictatorship. But real world democracies, as Henderson is well aware, suffer from every kind of distortion, short-termism and interest group influence. Moreover businesses do have the advantage of local knowledge and of using it in numerous different ways, which is prima facie more attractive than relying on centralised directives, regulations, restrictions and subsidies, whether emanating from national capitals or from Brussels. A middle of the road response response might be to say that social activities such as Marks and Spencer's are works of supererogation, which are only possible once a business organisation has made at least a competitive return on capital and if possible exceeded it. The appeal of CSR goes, however, beyond these analytical points. Some economists have been too wrapped up in their own subject to notice that an emphasis on self-interest conflicts with the teachings of most religions and ethical systems over millennia. Many businessmen and women want to believe that they are directly improving the lot of their fellow human beings and do not find it personally satisfying just to concentrate on the bottom line in the hope that they are thereby indirectly contributing to a better world. Even Professor George Kailis, the Australian management dean who writes the forward to Henderson's book, warns that a critique of CSR that "failed to clarify a positive role for business" would leave his supporters "uncertain and dissatisfied". I have suggested several times that the self-interest maxim takes its place as one of the more surprising prima facie subordinate maxims of conduct in a broadly utilitarian system of public morality. Its essence is that in some areas and under certain conditions, the use of markets avowedly based themselves on self interest will prove more beneficial than an overt attempt to achieve the public good directly. The pursuit of self-interest as recommended by sensible market economists, so far from being a crude prescription for personal enrichment, is in fact a subtle doctrine, perhaps too subtle for this world. Nor should it extend to political opportunism, that is, attempts to use government to extract benefits from others or to protect a particular firm or group along the lines of the Russian mafia. The pursuit should not extend to activities such as cheating, lying, misrepresentation and corruption, which have been all too evident in recent business scandals. My main reservation about the Henderson volume is that even if an excessive devotion to CSR leads to lower growth in western nations, it is no big deal. For on the excellent classical principle of diminishing returns, they have reached the stage where marginal additions to real take-home pay have a diminishing impact on welfare. The real losers are in the poorer countries of the world, where crude economic growth is still of vital importance and with whose welfare CSR campaigners claim to be so concerned. There are disadvantages in the developed world as well but these arise not mainly from the threat to prosperity, but from the myriad petty interventions which impair personal freedom to no good purpose and add to the irritating bureaucracy and restrictionism which are encouraging some of the most promising souls to opt into internal exile along the lines suggested by the best-selling French author Corinne Maeir in Bonjour Paresse: "Never accept a position of responsibility for any reason.... Make a beeline for the most useless positions where it is impossible to assess your contribution to the wealth of the firm. Once you've found one of these plum jobs, never move."
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