Managing Leadership^®

The spurious concept of corporate social responsibility continues to be pushed assiduously by its tireless and ardent adherents. Emotionally charged rhetoric is used to depict corporate earned income as largely ill-gained, and corporate activity as unconscionably unmindful of, if not downright responsible for, a long litany of presumed social and environmental ills.

As a result of this relentless full-court press, this hollow ideology has attained firm footing as a mainstream component of ordinary business activity, today. Ethics courses and programs run by traditional business schools include detailed treatment of this spurious concept in their curricula. Consultants, of course, abound.

Corporations are told that they must work to alleviate the wrongs they cause, or that they have the means to help address. The modern corporate element of capitalism is thus demonised or, at the very least, their profits are depicted as, somehow, ill-gotten gains, some of which must be given back to the community.

Complementing this coercive atmosphere is an insidiously seductive trend wherein CEOs who give away corporate assets are lionized by the supporters of this movement. Pictures of executives writing large checks appear prominently in the social pages, or even the front pages, of local and industry papers. These bosses accept prestigious directorships on the boards of fashionable charities, which afford them additional personal exposure to the press at appropriate events highlighting their enlightened social consciousness.

But, of course, there is nothing moral about any of this. These CEOs are giving away money that doesn’t belong to them to promote or support activities that are not within the charter of their firms. The whole scheme points to yet another glaring shortcoming of the tendency to view CEOs as the owners of their companies, free to do with their assets as they will.

The only people who have the ultimate right to determine what is to be done with corporate assets are their owners. In public companies these are represented by directors (presumably – there is much work to be done in this area). Managers, not to put too fine a point on it, should do only what they’re told. They have only that discretion given to them by owners or their representatives (obviously, many of the problems we experience daily originate here).

There is room to argue what constitutes a business decision or a personal decision to support, in one way or another, such causes. In many cases, lending one’s name to a charity function, such as a fund-raising walk, can serve a purpose that is every bit as legitimate as lending it to a sporting event; it highlights the corporation’s name, and it does so in a positive way that associates the firm in people’s minds with community norms and values.

But the fact remains that managers have no moral right to give away corporate assets to charities in any fashion whatever that cannot be clearly justified in a business context, such as an overt part of a marketing campaign. Doing such things because of a bogus requirement to conform to the hollow and artificial construct of corporate social responsibility is an abandonment of managerial responsibility.

Many of these causes are indeed worthwhile, or sincerely believed to be so by one or another group of people. If you are among them, donate out of your own assets, not your bosses’.

The late Milton Friedman also argued against the idea of corporate social responsibility, suggesting that it represented a socialistic tendency for “elites” to make determinations about how to allocate social assets to address social issues; that is, it represented a form of central planning. See here for commentary on this published in today’s Wall Street Journal.

In the meanwhile, enjoy your holiday weekend. I look forward to being back with you on Monday.