Corporate McSocial Responsibility

Corporate McSocial Responsibility

Post Op-Ed at Townhall.com
May 06, 2006

Fast-food gadfly Eric Schlosser has a new book out. Chew On This: Everything You Don't Want to Know About Fast Food is Fast Food Nation for middle school students.

 

An excerpt has Schlosser arguing that Big Fast Food seeks to control human behavior by advertising to children, that it ruthlessly replicates its business practices across all restaurants, and that McDonald’s—owing to its size—is the major culprit.

 

Steve Easterbrook, the new President and CEO of McDonald’s UK, responded in an op-ed by pointing out that “salt levels are down 30% in Chicken McNuggets and 24% in fries, compared with 2004”.

 

A few years ago, another anti-McDonald’s writer, Paul Hawken, condemned McDonald’s Corporate Social Responsibility report because it “was about how a corporation that's been severely stung by bad publicity, poor service and declining earnings now wants to plead its case to its critics…but it ignores what its critics care about.” Namely, that “the food it serves harms people, promotes obesity, heart disease and has detrimental effects on land and water.”

 

How pitiful, then, that last month, the McDonald’s CSR blog praised a business school on whose faculty sits a frequent co-author of Hawken’s. Will McDonald’s ever learn?

 

Hawken and Schlosser fault McDonald’s for producing, selling and marketing fast food. Period. McDonald’s belief that such a deep-rooted assault on its legitimacy can be appeased through a new age-sounding CSR campaign in which “everything is connected to everything else” is harmful not only to itself and the fast food industry, but to the free market system as a whole. Unfortunately, many other businesses have embraced CSR with the same passion as McDonald’s.

 

This is not to say that a company should ignore challenges to its legitimacy. It is just that CSR, as it is generally understood, offers a poor framework for doing so.

 

In the traditional view of the market, all transactions are voluntary. That is, well-informed individuals freely buy and sell goods and services. Individuals are motivated to buy and sell based on their own rational self-interest such that a market transaction will only occur if both the buyer and the seller believe they will each benefit from the transaction. Because each transaction occurs without coercion and each party to the transaction improves his welfare, market actors—be they individual consumers, small businesses or large corporations—are thought to possess “legitimacy”.

 

The doctrine of CSR, however, is premised on the idea that the ‘free market’ is not actually free. Instead of making voluntary transactions, Eric Schlosser, for example, would argue that corporate advertising tricks or manipulates people into wanting products they shouldn’t want or don’t need. On a broader level, CSR proponents argue that globalization has disrupted the traditional boundaries between state, society and economy so as to call into question the strict separation between the political realm and the economic realm—a separation that the traditional view of the market takes for granted. Furthermore, this blurring of boundaries has resulted in an increase in corporate power and a decrease in the political power of national governments. Market actors can no longer point toward an ‘assumed’ legitimacy or ‘practical’ legitimacy due to the separation of state and economy. Instead, all actors (or stakeholders) in society must justify their own boundaries with reference to their ‘moral’ legitimacy. CSR is then seen as a political tool to validate the moral legitimacy of the corporation.

 

But what happened to the role of the individual? In the traditional view of the free market, all action begins with the rational (purposeful) behavior of the individual. A corporation, for example, is seen as a nexus of contracts between individuals who are legally and morally responsible for their actions. But in the CSR world, the main ‘actors’ are not actual people but abstractions: the state, society, the corporation. The problem is that these abstract constructions—metaphors like “corporate citizen”—obscure and ignore real human behavior.

 

Traditional economic theory takes into account the selfish nature of Man. The modern corporation, defined as a nexus of contracts, acknowledges this fact as well and attempts to construct the contracts in such a way as to align the interests of the individuals in the corporation (especially upper management) with the interests of the corporation. But to do this, there needs to be a simple, coherent purpose to the corporation: to maximize long-term shareholder wealth. Profits then act as signals for other companies to enter a market and compete. Such a market actor, said Adam Smith “by pursuing his own interest, frequently promotes that of the society more effectually than when he really intends to promote it.”

 

Nothing so elegant takes place in the world of CSR, where the legal fiction of corporate ‘personhood’ is elevated to the realm of fact. The corporation is not only a citizen but is also a powerful political participant who must justify his legitimacy with reference to another abstraction, a ‘social responsibility’. Who determines what this responsibility is and who defines the extent to which it is adhered? In the case of McDonald’s, the answer seems to be Eric Schlosser and Paul Hawken.