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Corporate Social Responsibility (CSR)

Corporate Social Responsibility (CSR) has been under intensified attack in the past several months. Some if not most of the underlying rationale against CSR is old, leaning on Milton Friedman’s piece published in The New York Times Magazine in 1970 or on even older works by Adam Smith. I spent some time reading a recent issue of The Economist devoted to the attack, publications from various conservative think tanks, and anything else that seemed relevant.
Adam Smith is still used as a kind of guru. Actually, reading Adam Smith yields pithy tidbits like “Disagreeableness and disgrace affect the profits of stock in the same manner as the wages of labour. The keeper of an inn or tavern, who is never master of his own house, and who is exposed to the brutality of every drunkard, exercises neither a very agreeable nor a very creditable business. But there is scarce any common trade in which a small stock yields so great a profit.” Adam was clearly introspective about his time – he wrote over 7,500 words on the issue of labour alone. But this was the late 1700’s. Lots happened since then.
Detractors of CSR are prone to overstatement and oversimplification. Writers sneer that corporate responsibility denigrates and discourages investment or works against capitalist enterprise or threatens the “liberty” of the free-market system. Detractors also idealize the capitalist system and assume checks and balances, ignoring the forces of consolidated power.
CSR is, fundamentally, all about long-term prosperity. Responsible corporate management should enhance, not detract from, the ability of a firm to yield a return to its shareholders. See the Winter, 2004, issue of Business Ethics for a summary of long-term studies and the most recent issue for “CSR in the Cross-Hairs”. As Philip Rudolph, Partner in Foley Hoag LLP (Trillium Asset Management Corporation’s law firm) said in a recent letter to the editor of The Wall Street Journal, “—conclusions are premised entirely upon the establishment of a false dichotomy between profit and responsible business conduct. Social responsibility is simply not such a zero-sum game.”
Cinergy President and Chair James Rogers writes eloquently in the company’s stunning annual report entitled“Global Warming: Can We Find Common Ground?”. This is the best language I’ve seen to describe CSR from the perspective of a corporate manager:
“What makes a good company? Certainly the products it makes and services it provides must be of high quality and affordable to consumers. It treats its employees fairly and, in turn, they are productive and engaged. It is profitable and innovative. What makes a great company? A great company thinks and plans for the future. It recognizes the need to use its resources wisely, to protect the environment and contribute to the quality of life in its communities. At Cinergy, sustainability is about providing for our customers today while protecting the ability of future generations to inherit a better, more productive society. Sustainability encourages us to look at our business through a kind of time machine and it proves what we’ve always known: That responsible actions lead to long-term success.”