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Corporate Responsibility and the Man in the Mirror

August 29, 2010 6 comments

Last week, Dr. Aneel Karnani, a University of Michigan business school professor, presented “The Case Against Corporate Responsibility” in the pages of the Wall Street Journal. The core of Karnani’s argument, that “the idea that companies have a responsibility to act in the public interest and will profit from doing so is fundamentally flawed,” comes in two early paragraphs:

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. In circumstances in which profits and social welfare are in direct opposition, an appeal to corporate social responsibility will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.

Irrelevant or ineffective, take your pick. But it’s worse than that. The danger is that a focus on social responsibility will delay or discourage more-effective measures to enhance social welfare in those cases where profits and the public good are at odds. As society looks to companies to address these problems, the real solutions may be ignored.

Karnani’s thesis strikes me as unremarkable. What are interesting, however, are two related topics, one of which he does not explore, and the other of which he underexplores. The first is the relationship between a corporation and an individual in the responsibility context, and the second is Karnani’s concern that “the real solutions” may be lost with a focus on corporate responsibility.

A corporation is an organization of humans engaged in a business enterprise. People incorporate as a way to order their affairs and be treated under the law in a way that is tied to the nature of their activity. While the law commands that corporate governors act to maximize profits, the incentives for individual actors are not so different. For people, as for corporations, there often is a cost to acting in a socially responsible manner, and individuals who commit themselves to environmentally friendly behavior, for example, may find themselves in a difficult financial position. Substituting “people” for “corporations” in Karnani’s article would have challenged us to look more critically at our own life choices.

Additionally, those who pursue environmental, health, and other responsibility goals should consider the fact that the behavior they aim to encourage usually is more expensive for people than their current behavior. Healthier food and hybrid cars are more expensive than the less responsible alternatives. Leaders need to decide whether to try to align incentives– through government regulation or mobilization of collective action, for example– to achieve health and environmental goals or, more radically, to break out of a cost-benefit analysis altogether.

The second point, that a focus on corporate responsibility will distract from “the real solutions” to social problems, is an important contribution that could come out of a discussion like the one Karnani initiated, but Karnani doesn’t do much with it. Expecting corporations to act responsibly with respect to social problems “will delay or discourage more-effective measures to enhance social welfare in those cases where profits and the public good are at odds,” he writes. This is the obvious conclusion that flows from the premise that corporations only act to maximize profits. More interesting is whether, when profits and the public good are not at odds, the corporate-provided solution is suboptimal or incomplete, for example. This might happen because a corporate solution arises in response to consumer demand, but because the mass of consumers are not experts and may manifest their demand imprecisely, the “solution” will not respond to the actual underlying problem, but rather the consumers’ reaction to their understanding of that problem. It might also happen because corporations, ever profit-maximizers, choose cheap solutions to problems that require more thorough treatment or choose to make a big deal out of resolving a relatively minor issue while distracting consumers from more serious– and more expensive– issues that go untreated. See also here (discussing the danger of distorting discourse through a disproportionate focus on relatively minor issues). On the other hand, perhaps it’s the case that consumers can gain a sufficient understanding of problematic issues like health and environmental degradation and can communicate their desires for more responsible corporate behavior in a way that forces an appropriate response. Karnani did not pursue this avenue in his article, so the thoughts in this post are merely speculation.

Karnani’s article, as interpreted and expanded upon here, is a helpful reminder that people, not disembodied concepts like “corporations” and “the government,” must be the ones to act in response to social problems.

Categories: Action, Corporations

In Pursuit

August 14, 2010 Leave a comment

In writing the Declaration of Independence, Thomas Jefferson borrowed much from English philosopher John Locke. Although it appears without citation, Locke’s influence shows in both the overall approach and specific wording of the Declaration. See also John Locke, The Second Treatise of Civil Government, 1690. The core of Locke’s Natural Rights philosophy was the natural right of each individual to life, liberty, and property. Early in the Declaration, Jefferson stated that “Life, Liberty and the pursuit of Happiness” are among the “certain unalienable Rights” with which the “Creator” endowed people. Reading the Declaration today, with the Lockean influence well-recognized, it is easy to assume that Jefferson merely was covering his tracks a bit, adding a touch of rhetorical flair and whimsy, or at least avoiding direct and obvious plagiarism by swapping “property” for “the pursuit of Happiness.” (Perhaps my own Hamiltonian sensibilities also served to make it easier for me to arrive that this baser conclusion, but I don’t think so.) Looking at the two writings together and applying ordinary tools of textual interpretation suggests a different result, however. The alternative view is that “the pursuit of Happiness” is not at best a tuft of throwaway fluff, but rather a conscious and meaningful modification of Locke’s original triplet. Looking backwards through time– my first, longstanding approach– we might conclude that “the pursuit of Happiness” means “property” and thus it is through property (and a natural or unalienable right to it) that we might and should pursue happiness. Looking forward through time– the new view I’m suggesting here– we might conclude that “the pursuit of Happiness” means something different or more than “property.” Property could still be a part of it, and one’s home and land could be a great place to develop one’s good life, but it is more than the enforcement of property rights. In some instances, “the pursuit of Happiness” may even be contrary to certain property rights regimes.

Ken Burns at the Chautauqua Amphitheater, Wednesday, August 11, 2010

Furthermore, Jefferson did not substitute “Happiness” in place of “property,”  but rather “the pursuit of Happiness,” which places the focus not on the capitalized word (“Happiness”) but on the central action of the phrase: “the pursuit.” On this view, what Jefferson wanted to emphasize was something ongoing and never completed. It is the journey, the climb, the quest, the striving that must continue, rather than something static like property. In two lectures this week at the Chautauqua Institution, documentary filmmaker Ken Burns (Brooklyn Bridge, The Civil War, Baseball, Jazz, The National Parks: America’s Best Idea) illuminated this Jeffersonian vision with passing mention to his eponymous documentary on our third president and with application to the Chautauquan week’s substantive theme, sacred space.

Burns’ work has centered on American people, places, and events, and even if he finds the internal contradictions in Jefferson’s life glaring and impossible to ignore, he seems to have taken to heart Jefferson’s aspirational, ongoing directive to be always in pursuit of happiness. Jefferson had a revolutionary outlook (“The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.”), but even those with more conservative attitudes can live always “in pursuit.” This need not be the sort of opportunity cost-driven lifestyle I described earlier, see supra here, in which we can never sit still because each moment is a moment we could be spending making money, developing professional contacts, or inventing Velcro II. Instead, we can maintain a posture in which we are never completely satisfied with the status quo because we know we can do better, as individuals and as a community. The view that we can always improve– in how we treat other people (at home and abroad), other living things, our (natural and built) environment, and our sacred spaces— strikes me as appropriately American: American in that the notion of living always “in pursuit” has Jeffersonian roots in the Declaration and that it speaks to a people always striving to be the best at whatever they do; appropriate, in that the approach is not imperial or domineering, suggesting self and internal improvement rather than external subjugation of others. Jefferson was an idealist (a Hamiltonian knows this if anyone does), but by building into the Declaration a kind of practical idealism, he instituted something to be done, not merely to be pondered under a shady tree.

To continue the pursuit is to continue to validate the Declaration, to continue to declare and protect independence. In other words, the pursuit really is not optional. First, the language of the Declaration places the pursuit of happiness among the core of the unalienable rights that come from the creator, as mentioned above. Surely there is no independence where unalienable rights are violated. Second, there is an American sense of collective individual responsibility. Our country is a project, and we all bear some modicum of responsibility for the furtherance and sustenance of the project. President Abraham Lincoln knew both of America’s greatness and that it could be its own worst enemy. In a statement Burns quoted more than once this week, Lincoln said:

From whence shall we expect the approach of danger? Shall some trans-Atlantic military giant step the earth and crush us at a blow? Never. All the armies of Europe and Asia…could not by force take a drink from the Ohio River or make a track on the Blue Ridge in the trial of a thousand years. No, if destruction be our lot we must ourselves be its author and finisher. As a nation of free men we will live forever or die by suicide.

Burns has studied human, American struggles, achievements, lives, and events from many perspectives. His films, and of equal validity, our own experiences and those we share with others, provide windows on opportunities for all of us to continue our pursuit.

Categories: Action

No Justice is an Island

August 5, 2010 1 comment

This spring, after President Barack Obama nominated his solicitor general, Elena Kagan, to fill the Supreme Court seat Justice John Paul Stevens vacated earlier this summer, speculation about Kagan’s confirmation hearings before the Senate Judiciary Committee abounded. Some predictions and assessments included serious questions about judicial philosophy and demeanor and the proper way in which the Senate should exercise its constitutional advice and consent duties, while others took a less serious approach, looking at social and political issues the nomination and hearings might raise. (All of which existed in the shadow of Kagan’s own view that the “confirmation mess” is a “vapid and hollow charade” that serves “little educational function.”Katherine Miller’s post at Vandy Right was more of the latter variety, and I offered a comment, reprinted here with minor revisions:

Something to remember about the appointment of new Supreme Court justices is the role of time. President Obama’s nominee, when confirmed, will replace what we today recognize as a liberal Justice Stevens. The Court may retain its current balance in the moment, but Kagan will be on the Court much longer than Justice Stevens. That’s obvious, but the point is that even if Kagan is a Stevens clone, it’s like reelecting Stevens to another life term (and she very well may be more liberal than he). And during that term, other justices will depart, and there is no guarantee that they will be replaced by those with similar ideologies. Justice Sotomayor and Kagan could be the leaders of a new liberal majority that won’t blossom for a decade or more. For those who are inclined to go to political battle over these sorts of things, that a nominee is replacing a departing judge of similar ideology is insufficient grounds to lay back and say, “oh, no need to worry about this one.” Time is the essence.

Stevens is a great example of this. President Gerald Ford, now out of office for decades and dead for a few years, appointed Stevens to the Supreme Court in 1975. Even if Barack Obama gets reelected and lives to be as old as Moses, the two justices he appoints in his first term alone will be living embodiments of his legacy for many years after he is out of office. (I’m bracketing for now the separate discussion of how well nominees carry out the policy goals of their appointing presidents. See William H. Rehnquist, The Supreme Court (Vintage Books 2002))

On a related point to the related point, I feel it’s important to appreciate just how liberal (or not liberal) a justice is Stevens. Appointed by Ford, Stevens seems to hold liberal political views, and as a skilled jurist, he reaches liberal political outcomes (I’m bracketing the separate discussion of method versus outcome and whether judges begin with a conclusion and use the law to work backwards from it), but he is, in my view a judicial conservative. Yes, a moderate one, but unlike his colleague, Justice Breyer, who seems to be running a think tank and policy center out of his Supreme Court chambers, Stevens sticks to the traditional methods of interpretation. His reasoning and methods are quite traditional. Yes, he references legislative history– surely to the chagrin of Justice Scalia– but the venerable Justice Rehnquist wasn’t a stranger to the legislative history either. In many ways, Justice O’Connor (and in some weird ways, Justice Thomas) can be seen as a less conservative justice than Stevens.

For some more authoritative statements about Stevens’ position on the ideological spectrum, including the view that the political ground basically shifted under Stevens’ feet to make him look more liberal in comparison to his increasingly conservative colleagues, sift through http://f11f.wordpress.com/2010/04/02/friends-of-f11f.

With this afternoon’s Senate confirmation of Kagan, by a vote of 63-37, we have perhaps the most diverse set of Supreme Court justices in American history. See also here and here. But see here. In reflecting on Kagan’s nomination, it is not clear that we understand the Senate’s proper exercise of its constitutional advice and consent duties any better today than we did in 1788. In that year, Alexander Hamilton offered his views in three writings, Federalist #76-78 (which Senate Minority Leader Mitch McConnell referenced on the Senate floor today). For relevant excerpts of Hamilton’s writing, see here. Your thoughts on the handful of topics raised here are welcome below. For further relevant reading and viewing, see C-SPAN’s collection here.

Categories: Current, Legal, Politics