Friedman on the fad of "corporate social responsibility"

When the college kid collecting money for Ralph Nader's latest effort starts carping about the "social responsibility of corporations," reach for your intellectual ammunition. Milton Friedman debunked the notion that a corporate has any "social responsibility" long ago on the grounds that the entity had an obligation first to its shareholders, the private property owners who lend capital and other resources and thus make the corporation viable. Straying away from that sole, primary obligation is an invitation to trouble and muddled thinking.

Corporations exist to make profits which indirectly benefit the public interest by providing goods and services and yes, good jobs at good wages. It's not the job of corporations (even though CEOs spout pithy commitments to CS) to do anything except to secure the faith of its owners, which incidently may be a number of obnoxious non-governmental organizations (NGOs).

The esteemed Henry Manne says it better.

Now I realize (I should have known) he was absolutely correct about the significance of proposals for socially responsible corporate behavior, whether they emanated from within or outside the corporation. These proposals reflect, as well as anything else happening today, the inability of many commentators to distinguish between private and public property--in other words, between a free enterprise system and socialism. Somehow large-scale business success, usually resulting in a publicly held company, seems mysteriously to transform the nature of numerous individuals' private investments into assets affected with a public interest. And once these corporate behemoths are "affected with a public interest," they must either be regulated by the state or they must act as though they are owned by the public, and are therefore inferentially a part of the state. This attitude is reflected not merely by corporate activists, but by many "modern" corporate managers.

An integral part of the older notion of public utility regulation required that the enterprise be, or act like, a monopoly (whether "natural" or not), in order to be affected with a public interest. But in today's confusion, there is no such equirement. No arguments, weak as they are, about natural monopoly, market failure, government creation of corporations or the alleged government gifts of limited liability and perpetual existence, are required to justify the demands now regularly placed on business entities.

Any large enterprise, no matter how competitive its industry and no matter how
successfully it is fulfilling the public's desires, has a social responsibility--a term that makes mockery of the idea of individual responsibility--to use part of its resources for "public" endeavors. Today's favorite causes are environmental protection, employee health, sales of goods at below-market prices, weather modification, community development, private enforcement of (not merely abiding by) government regulations and support of cultural, educational and medical facilities.
How did this transposition from private to public responsibility come about? After all, even the largest corporation started simply as an idea in someone's head. At first this person hires employees, borrows capital or sells equity, produces goods or service and markets a product. Nothing about any of these purely private and benign arrangements suggests a public interest in the outcome. But then the business begins to grow, family stock holdings become more diffused, additional capital is required and, voilà, another publicly held corporation. In other words,
another American success story.

"Corporate social responsibility" is another excuse for letting the camel's nose in the tent. It is nothing more than a power grab by advocates of big government.