NEW YORK – Increasingly, corporations are under pressure, often from activist non-governmental organizations, to take on specific “corporate social responsibility” (CSR) obligations. But the fact that CSR is being demanded, and occasionally conceded, does not ensure clarity about either its rationale or the ways in which it should be undertaken.
CSR can be divided into two categories: what corporations should do (say, contribute to a women’s rights NGO or build a village school) and what they should not do (say, dump mercury into rivers or bury hazardous materials in landfills). The latter is wholly conventional and subject to regulation (and recently to questions about how corporations should behave when there are no host-country regulations).
But are CSR obligations really good practice? Milton Friedman and other critics often asked if it was the business of businesses to practice corporate altruism. Prior to the rise of the corporation, there were mainly family firms, such as the Rothschilds. When they made money, it accrued principally to the family itself. Altruism, where it existed, also was undertaken by the family, which decided how and on what to spend its money. Whether the firm or its shareholders and other stakeholders spent the money was beside the point.
With the rise of the business corporation, large family firms have generally disappeared. But that does not mean that a corporation is the right entity to engage in altruism – though its various stakeholders obviously can spend any portion of the income they earn from the corporation and other sources in altruistic ways. Instead of CSR, we should have PSR (personal social responsibility).