Is Corporate Social Responsibility optional?

Leon Gettler of The Age has just started his own blog.
In this entry he discusses the efforts that several corporations are putting into Corporate Social Responsibility. He singles out the born again approach of GE:

GE chief Jeffrey Immelt unveiled GE’s eco-imagination blueprint
that will see GE more than double its research and development into clean technology for its customers, double its sales of new technologies and products that conserve water, and reduce its own greenhouse gas emissions by 1 per cent over the next seven years. It’s a big shift for GE, you wouldn’t have seen it when Jack Welch was running the show.

On the down side, Gettler refers to some new research from the Australian Graduate School of Management that suggests that consumers don’t particularly care about corporate ethics when making buying decisions. So is CSR really worth the effort?


Well firstly, it’s easy to take some research and grab a headline out of it. I’m not sure the work behind the AGSM piece fully supports the headline. I think there’s more to it than that. However, what if we were to accept the conclusion that ethical approaches don’t make a difference to buying outcomes. Does that mean we should give up on CSR?
In short, No!
There is something we forget in all the debate about how corporations should behave and the oft stated little challenged assertion that the purpose of corporations is to provide the greatest possible return to shareholders. (For an anlysis of the untruth of the last statement I point you to Art Kleiner’s book Who Really Matters)
The thing we forget is that corporations exist only to the extent that we allow them to. In effect, the require a licence to operate. A licence for the people who operate the corporation to be granted indemnity against certain forms of prosecution. It is this indemnity which is a corporation’s greatest strength and greatest weakness.
It is it’s greatest strength in that it enables it to raise far greater amounts of capital than it would otherwise be able. It’s greatest weakness in that it lures the operators of the business into believing and acting as though they are beyond the law.
Nevertheless, it is our governments that grant these licences (ie allow the business to become incorporated). Our governments may, on our behalf, impose any such condittions on the granting of a licence as they see fit for the protection of both the corporation and the society in which it operates.
There is very little argument that governments have the right to impose taxes on corporations – although all self-respecting corporations use every reasonable endeavour to minimise the amount of tax they pay. (And some seek to operate in tax havens an pay no tax at all.) Why then should not governments not require corporations to pay a ‘social tax’ and contribute to the development of the society in which they belong.
In large part governments and societies have expected this type of tax to be paid but have left it largely unregulated. Some companies provide very little back to the environment in which they operate whilst others contribute a great deal. Overall, we have be prepared to accept that the balance has been OK. Not perfect but OK.
With the corporate excesses of recent years, we have realised that we have, as a society, been lazy in imposing social taxes on corporations. It has seemed too hard and the more powerful of us stand to gain considerably from minimising this type of obligation. In the process corporate leaders have largely been able to hold the argument that they have no social responsibility – their only obligation being to shareholders. Try telling the Enron shareholders that their executives had only their (the shareholders’) best interests in mind.
No, as much as self interested executives and large shareholders try, we must not allow them to move the goal posts in terms of their wider responsibility. To the extent that we have been lazy and self interested to allow them to win this argument in the public mind, we must take a stand and move the goal posts back.
So, I don’t care about whether consumers care or not. I care only that we, as a society cares. We have the ability to set the rules. Let us set them. Let us demand corporations exercise responsibility in return for the protections and opportunities for profit that we offer them.

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