In September 1970, the late Milton Friedman published a bold manifesto entitled “The Social Responsibility of Business is to Increase its Profits” in the New York Times Magazine, where he argued that businesses do not need to engage in various charitable or public-spirited activities, even those that generally meet with approval from shareholders. The best defense of the Friedman thesis is that any discrete corporate effort to advance collateral ends will not enjoy the unanimous consent of all corporate shareholders, so that the contribution operates like an implicit tax on dissenting shareholders. The better track is for the corporation to make the shareholders rich, so that they in turn can embark on their own charitable operations, without having to bind their fellow shareholders...Someone who thinks "you didn't build that" probably disagrees.
Unfortunately, government efforts to impose socially responsible regulation in a top-down manner can easily go awry, by limiting the ability of a firm to develop efficient supply chain practices, which might for a whole host of reasons require rapid shift from one supplier to another, perhaps in response to unanticipated regulation from the host state. Diversification of supplies is often the best response to sovereign risk.
The point here is not that corporations should cease socially-responsible activities, but rather that they should organize them independently of their production efforts. Thus if a corporation wants to show good will to a developing country, either by voluntary choices to improve worker conditions or to make charitable gifts entirely apart from the core business operations, it should be allowed to do just that. It may well be better, for example, to send aid to local schools than to enter into inefficient agricultural contracts. link
Tuesday, September 23, 2014
I'm still of the belief that a corporation's only goal should be to make money for its shareholders. Let the shareholders do what they want with their own money: