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OpEd: The Case for Corporate Social Responsibility

3p Contributor | Tuesday August 24th, 2010 | 5 Comments

By Nathan Shedroff In response to Prof. Aneel Karnani’s recent Wall Street Journal article “The Case Against Corporate Social Responsibility

It’s a sad day when the Wall Street Journal, usually known for accurate reporting and thoughtful opinions, not only publishes something so illogical and devoid of common sense, but does it with such prominence. I understand it wants to remain relevant in a world that is quickly changing from past ideals but sensationalism without critical thinking serves no one and damages its brand.

It’s even more sad when a professor at a renowned business school espouses “business as usual” fictions, poor understanding of the industries he refers to, and a profound misunderstanding of history. Professor Karnani confidently says: “”Very simply, in cases where private profits and public interests are aligned, the idea of corporate social responsibility is irrelevant: Companies that simply do everything they can to boost profits will end up increasing social welfare.”

Really? How good was Enron, Worldcom, or Blackwater for society? How good were they for the market and economy as a whole? How about Fannie Mae and Freddie Mac and any bank and investment firm who created or traded in toxic assets and bad loans? Were the short-term market gains for a few worth the meltdown that has affected everyone – including people who have no desire to “play the market” but simply have a good job that can help them provide for their families?

As professor Karnani states, businesses are required to focus on profit and neither be benevolent nor provide value for society. However, instead of pretending this is how it has to be, this is precisely what needs to change, as Leon Kaye pointed out earlier today on 3p.

Mr. Kamani goes on to describe, laughably, how fast food restaurants have “successfully” introduced healthier food, at a profit and to the value of society. This is another convenient fiction that is clearly wrong on both counts. Salads and “healthy” food at fast-food restaurants are loss-leaders that exist for brand enhancement and to avoid continued legal hassles (which, given the cost of lawyers may indeed save them money). In fact, almost none of the food in these restaurants makes a profit–their sale barely covers costs. The bulk is made only on the drinks. In addition, the food is often higher in calories, salt, and sometimes even fat than the burgers and fries they’re supposed to replace. In theory, to someone only interested in the surface appearance, the company and society look to be doing better, but the reality is much different–and worse for society, at least, if not for the companies, too.

All of this is what needs to change. In the Design MBA program at California College of the Arts, where I work, we make sure our students understand our fictitious business past (often referred to as “business as usual”). But, it’s no longer enough to repeat a past that won’t work—and never really did. If businesses don’t serve society well (and many haven’t), they will either be regulated out of existence or their competition will do the same. We need to teach students new solutions and processes for being successful and providing ecological social, cultural, and financial value to society is imperative–and what businesses were ALWAYS supposed to be doing. Training our future leaders to continue to ignore both the past and the world around us in the present (not to mention the imminent future) is a recipe for exactly what’s happened much of the industry and business climate in the state of Michigan. The rest of the world, especially in Europe and Asia doesn’t buy this and we shouldn’t either.

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Nathan Shedroff is the program chair of the ground-breaking MBA in Design Strategy at the California College of the Arts. He has an MBA in Sustainable Management from Presidio Graduate School and has authored several books on sustainability and design.


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  • http://www.terrainfirma.co.uk Gareth Kane

    I think the Prof is creating a false ‘or’ to create a pseudo-controversy.

    We all know that CSR is good for business, so business should do CSR whether it is for moral or business reasons. What I think he misunderstands is the difference between investments which give a direct Return on Investment and those where the ROI is more subtle – ie reputational.

  • http://www.pinkinspiration.blogspot.com LiLi

    I totally agree with you Mr Shedroff. What I think Professor Karnani keeps forgetting is that companies mission is to make profits yes, but not necessarily doing well in the economic field they will do good to society.

    Doing goodto society it’s not having your cake and eating it too as he says… companies duty should be to make profits WITHOUT damaging the environment society and even try to go further and do some good.

    He says CSR is either irrelevant or ineffective… what a simplistic and wrong appreciation…

    He also says “these companies (fast food or fuel-efficient vehicles) are benefiting society while acting in their own interests”… If fast food companies wanted to really do good to society, they would change their businesses or really get involve in campaigns to change people habits or promote public debates about healthy lifestyles.

    “…In most cases, doing what’s best for society means sacrificing profits…” false. I think all these misunderstandings are because Professor Karnani must be confusing CSR with philanthropy, he even call it charity. He forgot a long time ago CSR has replaced charity by making social management part of the Business Plan.

    If managers don’t want to jeopardize their compensation they should worry about stakeholders satisfaction… that doesn’t mean they forget the shareholders as Mr Karnani thinks…

    I don’t think NGO’s as watchdogs are enough, especially in developing countries as mine, even government regulation is insufficient. CSR is supposed to go further regulation, that’s the point!!!

    It would be useful for Professor Karnani to visit or study countries like mine, where have very strong laws and controls for paying taxes for example. But our culture (with a long history) is not to pay taxes, we have very high tax evasion rates. How does he think “self-control” would work here? we would have to start to change a 200 year behaviour!!! So when governments and civil society are not enough, CSR is extremely useful and maybe the only way.

    It is a shame that Professor Karnani is teaching these mistaken concepts to new generations of businessmen.

  • http://www.pinkinspiration.blogspot.com LiLi

    I would recommend this article to Mr Karnani:
    “A Responsible BP Must Go Beyond Petroleum” – Written By Aman Singh Das on SustainabilityForum.com

    LINK: http://www.sustainabilityforum.com/blog/responsible-bp-must-go-beyond-petroleum)

  • http://www.halslater.com Hal Slater

    Why would anyone expect an Australian to want to see US Industry succeed? The WSJ is a shill for a few economic interests to raid the American society for vast gains then recede to their island enclaves to live in isolation and luxury. Otherwise, it spews false logic to foment dissent between the rich and poor. It, along with FOX are a Trojan Horse in American society.

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