CEOs Should Mind Their Own Business

CEOs Should Mind Their Own Business

Miller and Nichols Op-Ed in Investors Business Daily
December 27, 2005

President Coolidge once said the business of America is business. He might have added that the business of business is to pursue profits, for lately some corporate leaders seem to have lost sight of that basic precept.

 

Instead, they have embraced corporate social responsibility (CSR), the political doctrine du jour of the leftist ninnies who seek to further socials goals that they have decided are virtuous. The activist-inspired CSR movement represents the convergence of two seemingly discordant political doctrines ­ corporate socialization and the privatization of regulation.

Gary Johns, a one-time Australian Labor Party MP turned NGO watchdog, has described the phenomenon as “a left-wing conspiracy dressed up as a right-wing conspiracy.” Perhaps this accounts for the schizophrenic response to CSR by some in the business community who seem not to realize that it is socialism via the back door.

Daniel Vasella, the chairman and CEO of Novartis, the world’s fifth largest pharmaceutical company, has written that multinational companies “have a duty to adhere to fundamental values and to support and promote them.” If he were referring to corporate values such as honesty, innovation, voluntary transactions and the wisdom of the marketplace, he’d be right. But what he meant was “collaborat(ing) constructively with the U.N. and civil society to define the best way to improve human rights.”

Do-Gooders   

The expansion and consolidation of human rights are worthy goals, to be sure, but Vasella’s saccharine altruism brings to mind economist Milton Friedman’s reproachful observation:

“Businessmen believe that they are defending free enterprise when they declaim that business is not concerned ‘merely’ with profit but also with promoting desirable ‘social’ ends; that business has a ‘social conscience’ and takes seriously its responsibilities for providing employment, eliminating discrimination . . . and whatever else may be the catchwords of the contemporary crop of reformers.”

Regrettably, there are many in the media, business and public office who cite the convictions of these corporate leaders as justification for corporate socialization.

Vasella’s catchwords are “human rights” and “corporate citizenship,” but we have recently seen other examples of businesses trying to “do good” (or perhaps trying to look good) while straying from their primary purpose. These include McDonald’s ending its popular supersized portions in the name of discouraging obesity, and businesses adopting less efficient but supposedly “environmentally sustainable” practices.

Inside The Gates   

Some businessmen see the CSR as a public relations opportunity to get the leftists off their backs, or naively think that the Holy Grail of successful business management is good PR. Why else would one of the world’s largest biopharmaceutical companies spend a small fortune to bring National Public Radio’s “Prairie Home Companion” program to the San Francisco Bay Area?

Other executives support the CSR movement because their companies can afford to, and they believe the competition cannot or will not pay the price of admission to the CSR cult. At every chance, they preen for the press on issues such as the Kyoto treaty, sustainable development, rain-forest protection, the so-called living wage and Vasella’s human rights. BP incessantly reminds us that it is looking “Beyond Petroleum.”

One would think that these corporate chieftains aspire to sainthood, but their real motive is to use CSR as a tool to achieve a nonproductivity-based advantage over the competition. They are neither puppets of the left nor appeasers. They are just good old-fashioned opportunists.

CSR is pernicious, a 21st century Trojan horse designed to destroy free enterprise from within. Fortunately, some corporate warriors still understand that businesses don’t have social responsibilities; only people do. And inasmuch as corporate leaders work for business owners, their legal and moral responsibility is to pursue the best interests of their employers ­ interests that relate primarily to making as much money as possible while conforming to the laws, regulations and ethical norms of society.

By spending company funds on activities that he decides arbitrarily are “socially responsible,” a corporate executive, in effect, reduces returns to shareholders ­ and is, therefore, spending someone else’s money.

It is easy to spend other people’s money. It is far more difficult, but more meaningful, to spend your own on the causes in which you believe. If executives wish to support nonbusiness-related goals of their own choosing, they should make charitable contributions from their private fortunes.

But billions of corporate dollars are diverted from investors and distributed elsewhere, often according to the whims of unaccountable activist groups. These are often the same groups that attack relentlessly the very technologies and products that are developed by their benefactors.

The result of this undemocratic process is that, in effect, leftist activists are able to dictate business policies and expenditures, based on their dubious vision of what is sustainable, equitable and fair for the rest of us.

Neither free enterprise nor the human condition worldwide is likely to benefit from companies pursuing CSR. Such actions do, however, raise the cost of doing business and lower corporate productivity. By diverting resources away from productive capital, businessmen will hurt many of the very people they claim to want to help.

Equitable Misery   

The solution to the CSR threat is for individuals and organizations to inform the 100 million or so Americans who have money in stocks that their investments are being shanghaied by the CSR movement, their influence is being diminished, and their money (including their tax dollars) is being used by activist groups, corporate appeasers and do-gooders to undermine free enterprise and promote corporate socialism.

“Socialism is a philosophy of failure, the creed of ignorance and the gospel of envy, (and) its inherent virtue is the equal sharing of misery,” Winston Churchill once said.

Do business leaders really want to move our society in that direction?