Good Intentions

Bubble On Green
Photo by Limbo Poet

The Wall Street Journal seems to take great delight in the idea that the corporate social responsibility “fad” might be passing. Hmm. An 8% reduction in corporate donations in 2008? By what percentage did sales fall in that year? More importantly, it’s been quite awhile since anyone advanced the idea that a company’s commitment to corporate social responsibility should measured simply by its donations. Read the article here.

When the going gets tough, costly good intentions can go out the window. Company spending has been squeezed by the global recession and budgets for corporate social responsibility have suffered disproportionately.

A survey of U.K. businesses by KPMG and Business In The Community found a third of companies cut their corporate social responsibility budgets in 2009. Corporate philanthropy has also been hit, with a study by the Giving USA Foundation revealing that charitable donations by U.S. companies fell by 8% in inflation-adjusted terms in 2008.

Perhaps this is not so great a loss. There is a growing feeling among company executives that marginal initiatives, which can so easily be dispensed, are not enough to alter corporate behavior. In a speech last year, Stephen Green, chairman of U.K. bank HSBC, said: “There has been a tendency to compartmentalize so-called corporate social responsibility activities as an adjunct to the mainstream business activities.” Mr. Green believes in replacing corporate social responsibility with a new focus on “corporate sustainability,” which, rather than being an add-on to a business. “is about the raison d’être of the company itself.”

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Apple Again Resists Shareholder Pleas for Emissions Reporting

Rotten Apple
Fortune magazine named Apple the most admired company in the United States in 2008 and in the world in 2009. This certainly doesn’t sound admirable. Read the article here.

In a repeat scenario from last January, Apple Inc. is contesting two petitions from shareholder groups to increase the company’s environmental efforts, according to Apple’s proxy statement, reports EE Times. Two of the proposals call on Apple to establish a board-level sustainability committee, and to report how the consumer electronics company will reduce greenhouse gas emissions and address other environmental and social issues such as toxics, recycling and employee and product safety, according to the article.

In January last year, Apple opposed a shareholder resolution that would require the company to publish a corporate social responsibility (CSR) report, despite unveiling a number of new green products.

Apple’s board is rejecting both petitions this year, stating the company has taken appropriate steps to protect the environment including posting information at its Web site since August about its carbon footprint and recently released products, reports EE Times.

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Agribusiness Chief Slams Organics

Michael Mack, the chief executive of Syngenta, doesn’t think organic food is such a good idea. I’m sure it has nothing to do with the fact that Syngenta is in the business of making pesticides and developing “crop protection” technologies. Read the article here.

“Organic food is not only not better for the planet,” he said, in an interview at The New York Times building on Tuesday. “It is categorically worse.”

The problem, Mr. Mack said, is that organic farming takes up about 30 percent more land, on average, than nonorganic farming for the same yield (though this varies by crop, of course). If the world wants to feed its fast-growing population on existing cropland — and Mr. Mack is clear that he does not want forests chopped down to clear more land for biofuel production, let alone food — then productivity becomes a key factor, he said.

“If the whole planet were to suddenly switch to organic farming tomorrow, it would be an ecological disaster,” he said.

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Do Market Libertarians Believe Their Own Hype?

Read the article here.

But in summary, Becker’s view of corporate morality is that the only ethical responsibilities of business executives are to obey the law, adhere to contracts (really just a subset of the first rule), and, most critically, to maximize the price of their companies’ shares. The first coherent statement of this moral view came from the economist Milton Friedman in a full-throated defense of capitalism with the brilliantly blunt title, “The Social Responsibility of Business Is To Increase Its Profits.” Now the bogeyman of creeping socialism that Milton worried about 40 years ago is long gone, as is Friedman himself, who died in 2006, but his contentious and now ossified principles live on in the writings of Becker, his most faithful student.

The Friedman-Becker moral theory has three virtues. The first is its simplicity; it reduces the whole tangle of moral issues to a simple bright-line test. The second is that it is able to justify most miserable behavior and even turn the tables on anyone who suggests, for instance, that companies should worry about the treatment of workers in Chinese factories or the fairness of offering subprime mortgages with usurious terms. To care about things like this is not only unnecessary, the theory suggests, but actually wrong because it betrays the interests of the shareholders who are the executive’s ultimate employers.

The third virtue is that it combines supremely well with the idea that senior executives should have pay packages that rely mainly on stock options and reward them for a single-minded devotion to the share price. The combination of the “shareholder value” theory and stock- and options-based compensation creates a beautifully virtuous circle. The profits of the shareholders are the CEO’s own interests, too, so if acting in the best interests of the shareholders (that is, raising the share price) is the CEOs main moral responsibility … well, gee, acting ethically means acting in his own best interest is always the right thing to do.

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