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A Better Account of Corporate Social Responsibility

It was Milton Friedman who said: “a corporation’s responsibility is to make as much money for the stockholders as possible.” Despite his Nobel Prize, Friedman definitely hasn’t persuaded our business schools of that. In fact much of the literature on the social responsibilities of business was produced as a retort to that 1962 assertion of his. Business ethics courses today are dominated by Corporate Social Responsibility Theory (CSR). And out in the real world, major companies, and many small ones, too, advertise their CSR efforts on their websites.

CSR typically boils down to the claim that beyond what a company is legally obliged to pay to the state in taxes, there exists a moral obligation that a company use its private property to address society’s ills. This idea of a social justice mortgage on the holding of large private property enjoys weighty support from leading liberal theorists such as Peter Singer and John Rawls.

It is the egalitarian doctrines of Singer and Rawls that are regularly cited in business ethics textbooks as the deep logic of CSR. Rawls speaks of property as a “common asset” meant to serve the least advantaged. Singer believes his formulation of the guiding principle of utilitarianism—the greatest happiness for the greatest number—proves there is a moral obligation to radically curb luxury business and reallocate that money to the poor.

But what a canard it is that people on the Right—whether libertarians or conservatives—don’t care about the poor. Of course they do. They care about other things, besides. After 9/11, the executives of FedEx, which was founded by an ex-Marine and Vietnam veteran, believed their company had a public duty to aggressively ramp up the scrutiny of packages, and far more than other American carriers absorbed the costs of security training for staff at the expense of higher shareholder profits.

If conservatives and libertarians are likely to think this should qualify as CSR, egalitarians are sure to see it as quite beside the point, for it hasn’t any bearing on steering management to pursue social equality goals.

Interestingly, two Italian fashion houses are pushing back against the simplistic CSR that is trotted out in our business schools. Late last year, Prada released a new CSR statement in the form of a charming film. With no mention of the poor, the piece declares that Prada’s CSR consists in the preservation of craft, land, and high culture. This is all the more startling once it is known that Miuccia Prada, a designer and highly successful businesswoman with a net worth of some $11 billion, is also a PhD in political science and a one-time member of the Italian Communist Party.

From his 14th century castle vantage, Brunello Cucinelli can look over the Umbrian hills that surround Solomeo, the formerly dilapidated Italian village restored to life through his eponymous fashion label. Fields that had gone to ruin are now home to sheep tended for his trademark cashmere; abandoned houses are now the workspaces and homes of seamstresses; and forlorn streets now bustle with young students leaving classes at the school for artes mechanicae recently established by Cucinelli.

Cucinelli’s inspiration is political: he wants to revive the Italian “age of communes,” a conscious affirmation of the Italian social and physical landscape shaped in the Middle Ages by self-sufficient trading communes distant from the authority of Pope and Emperor.

Theoretical support for the CSR of these Italian fashion houses comes from a philosopher I’ve mentioned before in this space, Max Scheler (1874-1928). A highly influential German philosopher, especially in European conservative and Catholic circles, he is the author of “Christian Love in the Twentieth Century,” a 1917 essay that develops a model of business organization: the estate.

The first thing one might think of in this regard is a country estate, a manor with surrounding lands, cultivated for food or sport. Scheler’s idea does not exclude such estates—or, say, monasteries that brew beer or produce other crafts or wares—but he defines an estate as any business organized around place, history, and self-sufficiency for itself and its workers. The estate—a place where knowledge is gained, innovation exercised, and a space that is also a web of sympathies—cements the dignity of the people who inhabit it. It is a place of work, a property that fosters a standing in the community. It provides a role for self-regulating human effort. Linked to a community, it is a concern of families in a locality.

Here is how Scheler puts it:

An estate is something stable, a standing or status, something wherein a man is self-sufficient, but which he nevertheless does not freely choose like a profession, since he merely finds himself “placed” there. But to know one’s estate is to be truly at home in the State, at home in the consciousness of firmly defined and assured lawful rights on which no one may trespass.

This is not a vision of work that we moderns share. We think of anonymous office blocks, mega-factories in China, or contract workers toiling in vast warrens of cubicles. Such images convey the idea of a worker having a function but no role: a mere body able to be slotted into changing conditions of work and replaced rapidly if necessary. By contrast, an estate is the seat of work that shapes a person’s identity.

In the fashion world, design houses always depend on the liberal arts. The “grammar” of fashion is history, narrative, art, and geometry, but Cucinelli has supplemented these with a “School of Craftsmanship,” with the cost of attending borne by his company. The crafts of mending and linking, cutting and assembly, tailoring, masonry, and gardening, along with philosophy and ethics, are taught. These mechanical arts are about history and place. They express and reinforce the long life of the village of Solomeo: they build upon the physical memory of the thousands of villagers who built and rebuilt their homes there.

These arts also assert the independence of the village, its competency to shape full lives for its young and old. They make a place “dense,” alerting other citizens, and the government, that deference is due to lands and lives organized around traditional skill and innovative work. The estate is an identity, a confidence.

A five-minute video, “A Man and His Dream,” offers Cucinelli’s ambitious philosophy, and mentions one of his motivations: his father, a villager who went to the city to work in a factory and there endured ridicule from his coworkers for his village ways. Cucinelli, dubbed by the Wall Street Journal as the “King of Cashmere,” swore he would seek a business model that would guarantee the dignity of his staff—of employer and employee alike. His video shows seamstresses at work in a well-lit and nicely appointed room, and shows him discussing his intellectual role models. From his reading, he says, he gathered what was necessary: From Immanuel Kant, he learnt both the importance of physical and moral beauty; from Jean-Jacques Rousseau, the worth of village life; and from St. Benedict, the role of the abbot father who manages others but always with an eye to the confirmation of their dignity.

“Humanist enterprise” is Cucinelli’s term for his brand of capitalism. His business, with no debt and more than $300 million in net revenues, clarifies that CSR can profitably be built around tradition, land, and nobility. In light of the examples of Prada and Cucinelli, and the theoretical principles of Scheler, it would be possible for companies like Chanel, Cartier, Hermès, Jaguar, and Ferrari, to name a few, to take heritage—the idea of craft and place—seriously. If they did, they could affirm that their core trade meets the obligations of CSR rightly understood.

Reader Discussion

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on March 23, 2016 at 08:57:52 am

This is a thought provoking and useful essay. Thank you.

Virtue is easy to practice in good times. I would guess that is true of corporate persons as well as those of the flesh and blood type. In bad times, competing motivations will be clearer. Do you think that, when push comes to shove, and when circumstances force corporate persons (or more properly, persons of the fleshy type, who respond to the incentives established by the institutions within which they live) to choose among competing values, that Friedman's understanding of corporate motivation prevails? Perhaps virtue in business is a kind of luxury good? If that is the case, we should all wish corporate entities all success? I would also guess that in very flush times, when profits are abnormally high, incentives, and the dominate ethos guiding corporate behavior, will also shift in Friedman's direction.

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Image of Kevin R. Hardwick
Kevin R. Hardwick
on March 23, 2016 at 12:06:35 pm

Individuals have motivations.
Individuals form organizations and associations.
The organizations and associations do not have motivations.

Among the motivations of individuals are obligations.
The performance of some obligations may be implemented through organizations and associations.
We observe individual motivations to transfer obligations to organizations and associations, often for reduction of individual obligations of responsibilities.
We observe individual motivations for transfer of obligations to organizations and associations for more effective implementation of their performance.

Organizations and associations have no motivations or obligations other than those derived from the individuals comprising them.

It has been widely accepted (though possibly fading) that social orders are more "successful" when their members recognize, acknowledge and accept that they all have obligations and that some of those obligations are to one another. That may be seen as "social responsibility."

It is in that aspect of the source and nature of obligations and the motivations for their performance that we should recognize that what may be so glibly labeled "corporate social responsibility," can never be anything other than the use of organizations and associations for the expressions of motivations and the performance of obligations of individuals.

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Image of R Richard Schweitzer
R Richard Schweitzer
on March 23, 2016 at 15:03:47 pm

In my experience in the workplace, the CSR nonsense is just a way to push political correctness via the workplace. It is an instrument of politically motivated social engineers as much as it is anything.

It is also my experience that when company management goes all-in for the CSR PC nonsense, either bad times are ahead for the company, or the company gets a nice fat government contract (figure that one out).

There are exceptions to this as noted in the article, but the positive tendency to care about the little people has always been a part of the culture of wealth.

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Image of Scott Amorian
Scott Amorian
on March 23, 2016 at 19:50:13 pm

It has also become a mechanism for the corporate managerial class to invade the monopoly (and power) of the political class.

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Image of R Richard Schweitzer
R Richard Schweitzer
on March 23, 2016 at 20:14:45 pm

I believe, Richard, that you are implying fascism.

I tend to believe that in a more perfect form of government there would be as much of a wall between business and state as there is between church and state. There is a value in having strong inputs into government from church and business, but not to the point of collusion to create controls that feed the cupidity of those seeking greater power (always sought with the best of intentions of course).

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Image of Scott Amorian
Scott Amorian
on March 24, 2016 at 10:07:39 am

No, Scott. Fascism is based on violence (thuggery, military) to control the public power (blackshirts, brownshirts, falangist-with moorish troops).

Nor does this imply "corporatism" by which the political managerial class (See,
Burnham, "Revolt of the Managers") co-opts the managers of production and manufacturing.

In fact it is somewhat the reverse, for entirely different objectives. In the case of corporatism, the political (usually totalitarian) class usurps the province of business and industry for political or military objectives; in the invasion of the political sphere for business or industrial purposes, it is usually "rent seek."

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Image of R Richard Schweitzer
R Richard Schweitzer
on March 24, 2016 at 15:27:11 pm

Hmmm.. That's interesting.

I believe there are technical politics, and political politics. Like with communism. Technical communism is a sharesey kind of thing with weak centralization of government. Political communism it totalitarian. Same with fascism.

I think this conversation is interesting because it is bringing out some of the mechanics of technical fascism. Politicians need money and popular support for their good intentions. Big business has money and it can organize and direct people. Big business wants rents and other favorable market advantages to improve their financial positions while less politically connected businesses go into Chapter 11 because they can't compete with the connected businesses. Politicians can give rents and advantages. One hand washes the other.

So bring in the social engineers ...

Now we have every other TV commercial being as much a political marketing ploy as it is an ad for the company.

Now we have small businesses being forced by government to do business with large businesses both to support the financial goals of the big business and to support the good intentioned causes of the politicians behind the big business (ala healthcare laws and numerous administrative regulations).

Now we have the big businesses working with the staff of the small businesses directing the staff to conform to political correctness. (Yes, that is actually happening. I've been through it.)

I'm not sure any more where business is separate from government. In the case of healthcare, insurance is now another part of government. Insurance, under the direction of government, can make its own administrative law and enforce it with rate increases.

I was reading the other day where the Dept of Labor was proposing rules to regulate personal finance advisers and control the advice they give to clients. Not federal financial regulatory agencies, but the DOL. WTF?! Are the advisers in bed with the feds now too? (Since it's the DOL, I'm guessing it's unions behind this, trying to create their own rents and advantages.)

It's all pretty vile stuff if you ask me.

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Image of Scott Amorian
Scott Amorian
on November 14, 2016 at 21:31:53 pm

[…] The two things Plank identifies as moral are indeed good but it is hardly CSR. Rather are they the straightforward consequences of Under Armour being a big company and a brand. CSR is the claim that for a company to be moral more is required than core business and paying taxes (please see my post at Law & Liberty: http://www.libertylawsite.org/2016/03/23/a-better-account-of-corporate-social-responsibility/). […]

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Image of Is Under Armour a morally responsible company? - Veneration & Refinement: The Ethics of Fashion
Is Under Armour a morally responsible company? - Veneration & Refinement: The Ethics of Fashion
on February 12, 2017 at 16:05:11 pm

[…] proposes Scheler’s estate as the norm of business ethics.  I put forward Brunello Cucinelli (http://www.libertylawsite.org/2016/03/23/a-better-account-of-corporate-social-responsibility/) as an ideal of the estate with Patagonia as a modified runner-up (and then downgraded on learning […]

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Image of Scheler Modified: Levi's - Veneration & Refinement: The Ethics of Fashion
Scheler Modified: Levi's - Veneration & Refinement: The Ethics of Fashion

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.