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Milton Friedman said that the "One and only one social responsibility of business [is] to increase profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."
In recent times, some people have come up with new ideas of corporate social responsibility. Sections of annual corporate reports are dedicated to social responsibility, universities have endowed chairs of corporate responsibility and mutual funds containing only "socially responsible" companies have been created, even though they consistently underperform S&P 500 stocks.
What is required to be a good corporate citizen? Social responsibility means many things to many people. There are responsibilities to shareholders, employees, the public and the environment. There are as many opinions on the subject as there are stars in the sky, and each one has at least one special interest group working towards it.
Milton Friedman, of course, was right. Profits drive growth -- for individual corporations and for the whole community. For example, the San Jose Mercury News recently published an article about how continued expansion of large Silicon Valley companies has filtered down to small companies that they contract with and that their employees purchase goods and services from.
Cypress Semiconductor of San Jose is an excellent example, and advocate, of real corporate responsibility. Founder, CEO and president Dr. T.J. Rodgers was featured on the front page of the Wall Street Journal last summer after he wrote a scathing response to a nun who every year sends the same letter asking for more representation of women and minorities on the board of directors. (Rodgers and the nun also squared off at a debate at Stanford University this spring.)
The basis of Dr. Rodgers' argument is that even though Cypress has no women on its board, the choices were based on qualifications, not gender. There are not many women, at this time, who have spent decades as senior executives in the semiconductor industry, which is the main qualification to be a member of the board. Rodgers goes on to discuss the many things that Cypress does for its employees, the local economy, and local charities. These things need to be done to keep employees in a highly competitive job market, and other profit-driven reasons. See the special section on Dr. Rodgers below.
On the other side of the issue, Congressmen Bingaman and Daschle have proposed the creation of a new type of corporation to reward those companies that fall into the guidelines of what they feel a responsible corporation should be. Their proposal calls for a lower tax rate on socially responsible corporations. It would also require that the CEO make no more than 50 times the lowest paid employee of the company. That would require Andy Grove of Intel -- a company whose after-tax profit was $5.1 billion dollars in 1996 -- to not be paid more than $750,000 (50 x $15,000). Corporations would also be subject to an additional 10% tax if they re-import more than 10% of a foreign subsidiary's output.
Unfortunately, free-market advocates have not been as vocal as our opponents pushing for a social agenda. Much of the attention to the issue has come as a result of T.J. Rodgers' letter. Those and other articles and essays are linked below. We've also done some research on the opposition groups.
return to contents The Solutions Partner Organizations
Competitive Enterprise Institute
The outspoken Fred W. Smith, president of CEI, lets his opinion be known in this piece titled Do Good, Be Profitable.
Steve Buckstein, Cascade president, argues that what some claim to be exploitation of cheap Third World labor by corporations like Nike, actually helps to raise living standards around the world in this op-ed piece entitled Nike helps develop poor countries.
The Mackinac Center for Public Policy
In Corporate America Feeds the Hand That Bites It, Lawrence Reed examines the pattern of corporations donating money to causes that are generally left-of-center and sometimes are directly oposed to the actions of that corporation.
Reed also discusses the questionable economics of mandated social responsibility in Mandatory Benefits Aren't Free.
Thomas W. Hazlitt takes issue with people complaining about the corporate world and its lack of values in this article entitled Corporate Rakeovers.
The proposal for a new type of legal form of incorporation for socially responsible corporations, and comments made by Robert Reich, former Secretary of Labor, are the subject of Reich and Responsibility.
How Green is the Valley discusses the fact that Silicon Valley entrepreneurs have a very low rate of charitable giving.
Several other free-market oriented groups have also spoken out on this topic. Below are some highlights:
John Hood examines how companies that may not be deemed socially responsible actually do more good for society than those who are, in this article from the July 1996 issue of Policy Review entitled How Business Delivers the Good.
In a May 1996 Business Bulletin, evidence shows that corporations have always been more responsible than is generally publicized.
Mark Wilson, a labor policy analyst, shows that increased profits do not necessarily come at the expense of the worker and tend to benefit the worker in the end, in this FYI titled Wages, Profits, and Income: Politics vs. Reality.
Phyllis Schlafly challenges the Self-Appointed Monitors of Corporate Responsibility in this column from July 1996.
A review of the book "Business as a Calling: Work and the Examined Life" discusses the responsibilty of business based on religious concepts of morality.
Nike Town Shantytowns? discusses the use of lower wage labor in foreign countries by large U.S. manufacturers and the pressure labor and the government puts on them to stop.
Center for the Study of American Business
The following papers from the "CEO Series" has industry leaders discussing corporate responsibility to shareholders and employees:
National Center for Policy Analysis
Wages vs. Profits shows that wages and profits tend to go hand-in-hand for workers in this article from Investors Business Daily.
T.J. Rodgers, Corporate Crusader
Dr. T.J. Rodgers, president and CEO of Cypress Semiconductor has been an outspoken voice on many issues affecting corporations. He has denounced corporate welfare, joined with Senator Abraham in supporting legal immigration, and rejected many PC ideas about what a socially responsible corporation should be.
Here is a complete copy of the famous letter to Sister Doris Gormley, pointing out the flaws in her demand for Cypress to have more diversity on its board of directors. This letter was also republished in Reason under the title Profits vs. PC.
Holding Up the Shareholder is an op-ed Dr. Rodgers wrote for the New York Times that discusses last spring's volunteer summit in Philadelphia featuring Colin Powell, among others, criticizing corporations for being too centered on profit.
The New Mr. Chips is an interview with Dr. Rodgers by Virginia I. Postrel & Steven R. Postrel of Reason Magazine. They discuss a wide range of topics from corporate welfare to global competitiveness. He was also profiled in Fast Company magazine in an article entitled Rage Against the Machine.
Dr. Rodgers testified before Congress in June 1997, showing his opposition to corporate welfare. His complete testimony and press release are available at the Cypress Web site. In July, Cypress hosted a press conference with Senator Brownback (R-KS) announcing major policy initiatives to end corporate welfare.
As if all this weren't enough, Dr. Rodgers has also expressed his opinion on the latest posturing against immigration and frivoulous shareholder suits.
return to contents Links to Other Information
The U.S. Department of Labor has created a Corporate Citizenship Resource Center and also made a speech by former Labor Secretary Robert Reich available.
This Canadian poll shows the public perception of corporate responsibility.
The following are links to some of the groups that monitor corporate responsibility. They demonstrate the level of organization of this movement.
The Business Enterprise Trust honors people who blend sound management with social responsibility.
The mission of the Hispanic Association on Corporate Responsibility is "Market Reciprocity," i.e., the inclusion of Hispanics in Corporate America at a level commensurate with their consumer purchasing power.
The Rainforest Action Network keeps track of its campaigns for Corporate Responsibility.
The Council on Economic Priorities monitors the social accountability of corporations.
Corporate Watch is committed to exposing corporate greed by documenting the social, political, economic and environmental impacts of these transnational corporations.
The Corporate Responsibility Register is a clearinghouse of information published by corporations on social responsibility.
The Social Investing Forum and Good Money are two Web sites that help investors make choices about socially responsible companies.
In December 2004 this page was modified significantly from its original form for archiving purposes.
Free-Market.Net, founded in 1995, is now a part of ISIL.
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