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Does "corporate responsibility" make corporations more responsible?
It's Martin Luther King Day, so it seems particularly appropriate to talk about the role of social activism. Does it have a place in our investment portfolios?

A couple of interesting recent articles say "no." From the right comes Henry Manne, and from the left there's this from the journal Democracy.

Manne's take is fairly simple: Public corporations are for maximizing profits to shareholders. Period. The Democracy writers argue that whatever activists think corporations should be for, maximizing profits is certainly what they are always going to seek to do. So activists trying to get them to change their ways are just engaging in an expensive, probably fruitless battle. Better, they say, to focus on changing the laws corporations have to abide by.
Posted by Pat Regnier 7:10 PM 2 Comments comment | Add a Comment

You can change corporate behavior by two methods - legislation and consumer demand. If consumers refuse to purchase this affects corporation's goal of maximizing profits. Unfortunately, in our society consumers normally will forego moral companies for lower prices. I cringe when I have to agree that legislation is the most effective manner to enact moral/ethical behavior.
Posted By Mark Cericola, Dallas Texas : 1:37 PM  

A privately held company doesn't have to serve only to make the proprietor a profit -- the proprietor is perfectly free to use it to further environmental or other social goals. It is rarely the case that human beings, entrepreneurial or otherwise, are interested only in money; for some amount of social good per dollar in lost profit, most people will choose the social good over the profit, just as they forego their own consumption to give money to charity.

The purpose of a public corporation should be to serve the interests of its shareholders. It will be the case that profit will be a common interest, while other interests will tend to be more diverse, but few shareholders would choose a nickel profit over hundreds of acres of ecological destruction, and it is fiduciary misconduct for a company to pretend otherwise. It is certainly in the spirit of respecting shareholders as the owners of the corporation to do social good that is popular with the shareholders, particularly when it is part of a pattern of social good that the corporation has sought in the past (so that dissenters have "come to the nuisance").

(I work for a company that went public less than ten years ago, and continues to act as it did when it was a partnership -- which involves making a lot of money, but not as our only goal.)
Posted By Dean Jens, Brooklyn, NY : 8:45 PM  

Or feel free to send a letter to the editor about this story. Top of page

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