As part of a Marketing Strategy class, I was assigned a reading by Aneel Karnani titled ‘The Case Against Corporate Social Responsibility’. The following (rant) details why this kind of stale thinking needs to be replaced with a fresh perspective on corporate citizenship.
While I laud the author’s brave attempt, the article fails to establish any new ground against CSR apart from the customary justifications. In fact, a large part of it essentially regurgitates Milton Friedman’s view on the responsibility of Corporations to society.
Mr. Karnani starts off with a weak premise when he states:
Companies that simply do everything they can to boost profits will end up increasing social welfare. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests
Basically following the conventional logic that individuals acting in their own self interest end up maximising social welfare. Not having a socially responsible and ethical framework to guide behaviour is exactly the kind of narrow-mindedness led to numerous disasters and tragedies, from the Union Carbide Bhopal disaster to the recent Gulf Oil Spill. Moreover, corporations are members of society (and certainly very powerful ones) why should they be immune from taking any responsibility for their actions?
I’m certainly not advocating philanthropic action (which should be optional) but merely suggesting a focus beyond shareholder value maximisation. Not only does a more holistic approach encourage long-term and sustainable solutions, it also keeps corporate interests aligned with the rest of society. Additionally, a growing number of sophisticated shareholders today are even concerned about the societal impact of corporations and their actions. Case in point, the establishment of the TSX Clean Tech Fund to help this emerging breed of ethical investors.
Mr. Karnani seems to be a staunch believer in the profit objective of corporations, although I would argue that this is an antiquated outlook on things. Profit is usually the end result so it does not necessarily have to be the objective as well. Let me illustrate by pointing out that most luxury brands would not make money if their were solely profit driven. Why spend more when you can cut costs? Focusing on profits alone does not insure innovation and creativity.
There is a need to focus on something beyondprofits, something intangible and meaningful - almost transcendent. Apple wants to ‘make a dent in the universe’ and sell beautiful products that enrich its user’s lives - profit comes naturally.
In some sense I do agree with the author though, we need to move beyond CSR and integrate responsible thinking into strategy, it can no longer just be a side note. Self-regulation is the way forward if we want to build long lasting relationships not only with shareholders, but with our customers and employees as well.
Overall I thought that a ‘carrots or sticks’ approach to regulating businesses as suggested by Mr. Karnani inherently assumes petulant corporate behaviour driven by a reckless profit motive. Not only is this simplistic, it overlooks the fact that sometimes it is not profit but a passionate hope for a better world that drives us.
As always, I welcome your thoughts on the above.
SK
