A Zinger: CSR Now Seen As ‘Potentially Dangerous’

I’m stymied by another article from The Wall Street Journal challenging the plausibility and benefit of corporate social responsibility.  In “The Case Against Corporate Social Responsibility” Aneel Karnani takes the Friedmanite view that companies are primarily responsible for maximizing shareholder profits.

To make his point that profit trumps social good, he focuses on the relationship between company executives and shareholders, “Even if executives wanted to forgo some profit to benefit society, they could expect to lose their jobs if they tried–and be replaced by managers who would restore profit as the top priority.”  This argument is untenable because in reality businesses are judged by more than shareholders–namely consumers.  And increasingly, consumers are choosing not to support companies that exploit the environment, employees, suppliers–even customers’ own health.  The relationship between Nike and its shareholders was irrelevant, for example, when Nike lost licensing agreements and student groups and advocacy organizations pressured the brand to compensate Honduran workers who lost their jobs when two subcontractors closed their factories. In the end, Nike gave $1.54 million as a relief fund for the workers. Karnani fails to mention these myriad drivers of business decisions. (Although whether this was an act of corporate social responsibility or a case of back-up-against-the-wall is another debate entirely).

What I find more amazing than Karnani’s neo-Friedmanite argument is his belief that CSR is “an illusion and a potentially dangerous one.”  He writes, “As society looks to companies to address these problems, the real solutions may be ignored…. 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.”

Even if this were true (and I believe we have ample problems that require numerous solutions and partnerships between all sectors), there’s an ocean between using business to save the world and accepting that business bears no responsibility for its impact on society and the environment.  Somewhere in this ocean is corporate social responsibility.

Perhaps in the end Karnani and I stand together against corporate social responsibility. He believes it’s an impossible expectation and I believe it’s not enough.

Image credit: Homedir

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  1. Steve Davies August 24, 2010 at 11:20 am #

    Olivia, great post. I read that article when I had just a little time, and put it aside (in my reread pile) because its conclusions felt wrong, but the simple pieces were plausible individually.

    Thanks for taking it apart for me. There are too many other forces at work to just argue simplicities.


  2. Olivia Khalili August 24, 2010 at 12:09 pm #


    Thanks for your comment. I admit I didn’t know where to start with my rebuttal. I tried to focus on one or two points, but I had a running page of notes with phrases like “No! Not true. Counter example = ”

    One can argue almost anything depending on how it’s framed. Karnani framed his argument too tightly to fit reality. And it’s great that reality, in this case consumer preference, is shifting toward sustainability.