December 1, 2006
Corportions and Social Responsibility
It was predictable. Milton Friedman died and his death was an opportunity to rehash tired arguments on corporate social responsibility. Henry G. Manne writes an editorial in the WSJ cited Friedman's "the social responsibility of business is to increase its profits" and a flood of responses in the letters to the editor appear. The moves are familiar. One dutifully writes that Friedman is never quoted properly because he hedges with "while conforming to the basic rules of society, both those embodied in law and those embodied in ethical custom." Another writes that incorporation is a social privilege and comes with social duties; yet another writes that corporations are large and powerful and can hurt folks and that insiders do not bear the costs they inflict. It is like watching a well-known and well-rehearsed Greek tragedy. Friedman, with the qualifier, is, of course, correct. At issue is who decides what "ethical" custom is, particularly if compliance may hurts the bottom line. Managers? Shareholders? Government? Academics? I go with shareholders (whose views are implemented by managers).
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