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.
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.