Calvin Coolidge once said that the business of America is business. He might have added that the business of business everywhere is to pursue profits. Lately, some corporate leaders seem to have lost sight of that elementary precept.
Daniel Vasella, the chairman and CEO of Switzerland-based Novartis, the world’s fifth-largest pharmaceutical company, recently wrote 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 exchange and the wisdom of the marketplace, he would 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.”
The extension of human rights is a worthy goal, to be sure, but Vasella’s saccharine altruism brings to mind economist Milton Friedman’s reproachful observation that ‘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.”
Friedman accused such executives of being “unwitting puppets of the intellectual forces that have been undermining the basis of a free society.”
The current catchwords are ”human rights” and ”corporate citizenship,” which prompts businesses trying to ”do good” (or perhaps just trying to look good) to deviate from their primary purpose. Take, for example, McDonald’s ending its popular ”supersized” portions in the name of discouraging obesity and businesses adopting less efficient, more ”sustainable” practices.
Businesses do not have social responsibilities; only people do. Inasmuch as corporate leaders work for the owners of the business, their 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 legal rules and ethical norms of society. By taking actions on behalf of the company that he arbitrarily decides are ”socially responsible,” a corporate executive is, in effect, spending someone else’s money by reducing returns to shareholders.
One of the easiest things to do is to spend other people’s money on causes in which you believe; one of the most difficult, but most meaningful, is to spend your own money. If these executives donated even 5 percent of their salaries to such causes, they would be worthy of admiration, even if the causes were repugnant to some of us.
Neither free enterprise nor the human condition is likely to benefit if companies decide to follow Vasella’s model. Their actions would, however, raise the cost of doing business, lower corporate productivity and feed the United Nations’ predilections for meddling. By diverting resources away from productive uses, businesses would end up hurting many of the very people they claim to want to help.