Last week I mentioned the Harvard Business Review debate on Corporate Social Responsibility (CSR), called What Does Business Owe the World? This week, Harvard Business Review published my take on the issue, “In Defense of the Unabashedly Profitable.”
I intended my argument as a via media between Milton Friedman’s famous argument that the only responsibility a corporation had was to make a profit, and the view of what we might call the “CSR Left.” That’s the view that corporations have all sorts of “social” responsibilities that are contrary to their economic interests and so ought to be imposed upon them by the state, and these responsibilities just happen to correspond to the various political preferences of the Left.
So here’s how I start:
A business is not a family or a charity or a government. It has a specific social function with a specific purpose, which implies specific duties. One of its responsibilities — its duties — is to make a profit. I know that Milton Friedman argued famously in 1970 that profit-maximizing was the only responsibility of executives, and that’s an overstatement.
Still, think about it.
The opposite of profit is loss. Unprofitable companies disappear, along with whatever goods, services, and jobs that they provided. If executives act willfully against their responsibility to seek and make a profit, they will have failed in one of their primary duties.
We all have other moral responsibilities, and that applies to corporate executives too. Their moral responsibilities, by extension, apply to their corporations (which are not themselves agents with responsibilities).
But, perhaps the title was distracting, because one respondent, Michael Palmer, misunderstood me at several crucial points. He seemed to think I was agreeing with Friedman and denying that corporations have responsibilities. My appeal to “duties” rather than “responsibilities” also seemed to be confusing, although I use the words more or less as synonyms.
In any case, my basic point is that a primary duty/responsibility of corporations—indeed, one of their unique functions—is to create economic value and so derivatively to be profitable. But I don’t claim that that is a corporation’s only responsibility.
Some critics of CSR have objected that only individuals and not corporations can have responsibilities. I noted that they, too, have a point. Corporations are not strictly speaking agents with responsibilities. They’re not conscious, they don’t pursue purposes or have intentions. Nevertheless, we still rightly apply responsibilities to corporations by extending the responsibilities of the relevant agents involved—such as corporate executives.
And for that reason, we ought to understand the other responsibilities that corporations have in terms of the good, old-fashioned moral responsibilities that apply to all of us as individual moral agents:
The solution . . . will lie . . . in carefully defining real duties, including the duty of businesses to seek profit; and then making sure these duties are aligned properly with corporate leaders’ other basic duties to their fellow human beings.
What we should esteem, in other words, are businesses that avoid lying, cheating, stealing, or otherwise abusing the public trust, and at the same time are robustly and unabashedly profitable.
Perhaps there’s something wrong with my argument; but I hope it’s clear that I do think corporations have moral responsibilities. I just think a lot of the debate about “corporate social responsibility” has gotten muddled by bad politics and bad moral reasoning.