Corporate Social Responsibility
A recent Reason magazine article featured a debate between Milton Friedman, Whole Foods founder John Mackey, and Cypress Semiconductors' T. J. Rodgers. The basic arguments came down to Mackey's defense of a socially conscious and responsible corporation, Friedman's argument that all of Mackey's arguments collapsed to his original claim that the only social responsibility a corporation had was to make a profit, and T. J. Rodgers hodgepodge of ad hominem rhetoric.
When Mackey argues that his community involvement is good for his company, his vision collapses to marketing. When he argues that it is good for his employees, he is arguing for better productivity and therefore profitability. When it is good for customers, he is supporting his value proposition that keeps him in an upscale, high margin end of the market. It is only when he is directly making the point that his profitability allows him to not only sustain his vision, but to enhance and expand it to new markets, that he explicitly recognizes that he and Friedman are making the same points.
There was a block diagram illustrating Mackey's theory about the interaction between customers, investors, employees, and the local community which I found to be intriguing (not found in the online version, dammit). I have been thinking that a corporation can be more than just an investment vehicle: it can also be a vehicle to serve other interests, such as introducing a new type of thinking (e.g. open source manufacture), where profit may be incidental or even non-existent. However, I think that in one sense, Friedman is right: without the profit, you can't grow or perhaps even sustain such a vision. When Mackey says, "I believe the entrepreneurs, not the current investors in a company's stock, have the right and responsibility to define the purpose of the company," I think he is absolutely right. They should define the purpose, but if their vision requires outside investment, they are subject to the same customer-imposed constraints as anyone else (including gasoline sellers). If nobody wants to buy, they may have to revise their defined purpose.
I have written about this under my sweatshop series. Specifically, when trying to identify a solution, I noted that many of the examples of sweatshop-free businesses have been failures to one degree or another. The reason, in my opinion, was that they were focusing on how the garment manufacturing processes and their labor practices impacted the workers, with little or no regard to how they impacted customers. Paying people not to work, as Aaron Feuerstein did, ended up being so costly that he was bought and then forced out. SweatX closed their doors. Those two businesses and their entrepreneurial leaders, despite all of their best intentions, are no longer able to follow their vision because they didn't realize a profit.
My answer to Tyler's conjecture is that Friedman believes that most of the counterarguments collapse to profitability, and that profitability allows the other noble purposes to be fulfilled. If you want to rely on 501c(3) or other charitable means, someone first has to make and save profits to make those happen.
Technorati tags: sweatshop, corporate social responsibility
When Mackey argues that his community involvement is good for his company, his vision collapses to marketing. When he argues that it is good for his employees, he is arguing for better productivity and therefore profitability. When it is good for customers, he is supporting his value proposition that keeps him in an upscale, high margin end of the market. It is only when he is directly making the point that his profitability allows him to not only sustain his vision, but to enhance and expand it to new markets, that he explicitly recognizes that he and Friedman are making the same points.
There was a block diagram illustrating Mackey's theory about the interaction between customers, investors, employees, and the local community which I found to be intriguing (not found in the online version, dammit). I have been thinking that a corporation can be more than just an investment vehicle: it can also be a vehicle to serve other interests, such as introducing a new type of thinking (e.g. open source manufacture), where profit may be incidental or even non-existent. However, I think that in one sense, Friedman is right: without the profit, you can't grow or perhaps even sustain such a vision. When Mackey says, "I believe the entrepreneurs, not the current investors in a company's stock, have the right and responsibility to define the purpose of the company," I think he is absolutely right. They should define the purpose, but if their vision requires outside investment, they are subject to the same customer-imposed constraints as anyone else (including gasoline sellers). If nobody wants to buy, they may have to revise their defined purpose.
I have written about this under my sweatshop series. Specifically, when trying to identify a solution, I noted that many of the examples of sweatshop-free businesses have been failures to one degree or another. The reason, in my opinion, was that they were focusing on how the garment manufacturing processes and their labor practices impacted the workers, with little or no regard to how they impacted customers. Paying people not to work, as Aaron Feuerstein did, ended up being so costly that he was bought and then forced out. SweatX closed their doors. Those two businesses and their entrepreneurial leaders, despite all of their best intentions, are no longer able to follow their vision because they didn't realize a profit.
My answer to Tyler's conjecture is that Friedman believes that most of the counterarguments collapse to profitability, and that profitability allows the other noble purposes to be fulfilled. If you want to rely on 501c(3) or other charitable means, someone first has to make and save profits to make those happen.
Technorati tags: sweatshop, corporate social responsibility
Labels: philosophy
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