Tuesday, September 19, 2006

Do Corporations Have a "Social Responsibility"?

My friend reacted poorly to my entry on “Fair Trade” standards. “Chris,” he said, “by your logic we shouldn’t buy our favorite clothes either, because they were probably manufactured in a sweat shop. How can you blame the companies?” And how can you? Is not every corporations sole obligation that towards the shareholder? Should a corporation not be concerned exclusively with profit?

My friend’s protestations of my attacks on the Starbucks corporation bring up a question that has existed as long as the corporation itself: should corporations be held morally and socially responsible?

The answer is obviously too complicated to be answered with a simple yes or no, but it is my opinion that corporations should indeed be held morally and socially responsible. At the same time, however, a corporations primary objective should be to maximize profits and benefit shareholders. So clearly a balance is required, between a corporation concerned solely with the welfare of society, and not its actual business, and one that is ruthless and merciless in its pursuit of the almighty dollar.

I draw the line at two issues, and both relate to the economic stability and welfare of society at whole: transgressions of the law, and misinformation.

I believe corporations should be held entirely responsible for staying within the boundaries of the law, whatever they be, at all costs. The law helps provide stability and predictability to a market, which, if followed by all parties, insures competing ends that any transactions they enter will be able to be backed in court, and upheld. Without adherence to the law, individuals and corporations alike would not be able to determine if transactions they undertake are fair to them, thus an adherence to the law is absolutely necessary for corporations and individuals alike.

Misinformation (also known as lying,) a subject a remarked on yesterday, hinders the ability of individuals to make decisions that benefit themselves, impeding the efficiency of markets. Starbucks, in falsely advertising that its coffee is “Fair Trade,” misleads the consumer into buying coffee that he/she believes to be environmentally friendly and ethically grown. Corporations must ensure that information they give the buyer or consumer is factually correct, and although often not upheld stringently by the law, as is the case with the Starbucks situation, it is a responsibility that corporations must undertake and accept.

So while I do not believe that corporations have the ‘social responsibility’ that many claim, such as the responsibility to provide healthcare and benefits to employees, or to be more environmentally friendly than is required, I do believe that corporations must operate within certain simple bounds, that, when transgressed, do harm society and the ability of the markets in which the corporations exist to operate efficiently.

So to my friend, when he asks me “how can I blame the corporation?” I answer quite simply that I can blame the corporation because it does not uphold its duties as a component of a free-market system, that works on the availability of information and operating within the law.

1 comment:

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