w2 articles to lect notes

8/10/2019 W2 Articles to Lect Notes

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The Debate Over Doing GoodSome companies are taking a more strategic tack on socialresponsibility. Should they?(BGS W2 2-5, Business Week, 15 August 2005)

It's 8:30 a.m. on a Friday in July, and Carol B. Tom is starting to sweat.The chief financial officer of Home Depot Inc. (HD) isn't getting ready toface a firing squad of investors or unveil troubled accounting at thehome-improvement giant. Instead, she and 200 other Home Depotemployees are helping to build a playground replete with swings, slides,and a jungle gym at a local girls' club in a hardscrabble neighborhood ofMarietta, Ga. Dressed in a white Home Depot T-shirt, a baseball cap,and blue capri jeans, Tom tightens bolts, while others dump woodchips, mix concrete, and sink posts. The company, together withnonprofit playground specialist KaBOOM!, plans to build 1,000 more

such kiddie parks in the next three years -- and spend $25 million doingit.

Is this any way to build shareholder value at Home Depot, where thestock has been stuck near $43, down 35% from its all-time high? ChiefExecutive Robert L. Nardelli and his troops think so. Last year about50,000 of Home Depot's 325,000 employees donated 2 million hours tocommunity service. Now, Nardelli is trying to encourage morecompanies to volunteer at Home Depot's pace. At his invitation,executives from 24 companies and foundations gathered for five hours

at Home Depot's Atlanta headquarters in May to discuss communityservice. Attendees included Lawrence R. Johnston of Albertson's(ABS), F. Duane Ackerman of BellSouth (BSC), Gerald Grinstein ofDelta Air Lines (DAL), and William R. McDermott of SAP America(SAP). On Sept. 1 these CEOs and others will kick off "A Month ofService," an ambitious plan, developed with community group theHands-On Network, to deploy corporate volunteers on 2,000 projectsacross the country, and raise the total number of volunteers by 10%, or6.4 million, in two years. "We look at this activity with the same eye thatwe look at business," Nardelli says.

Yes, companies have long paid lots of money -- and lip service -- tophilanthropy and public service. But as Nardelli's confab indicates,managers from all parts of American business are increasingly seeingsocial responsibility as a strategic imperative. In June, General ElectricCo. (GE) released its first "Citizenship Report" as a way for interestgroups to assess its social performance from air pollution to volunteerhours. That followed the announcement in May of GE's ecomaginationprogram, which will invest billions in environmentally friendlytechnologies. IBM (IBM) uses its On Demand Community -- a 40,000-employee volunteer program -- as a way to bring IBM technologies to
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schools and community centers and plug its brand. Even the legendarilyhard-nosed Wal-Mart Stores Inc. (WMT) has come around to thecause. "We thought we could sit in Bentonville [Ark.], take care ofcustomers, take care of associates -- and the world would leave usalone," CEO Lee Scott said at a recent analyst conference. "It doesn'twork that way anymore."

BEHOLDEN TO MANYWhat's behind this realization? At the very minimum, it's clear thatcompanies recognize it takes a robust, sharp public-relations strategy tonavigate through the mines of today's operating environment. Amongthem: increased regulatory scrutiny; a global, 24-hour news cycle; andcommunities hostile to scandal-tarred big businesses. But what Nardellisuggests is something deeper. In fact, it's a growing embrace of so-called stakeholder theory, which posits that companies are beholdennot just to stockholders -- but also to suppliers, customers, employees,community members, even social activists. That's quite a departurefrom the long-dominant notion that corporations' only duty is to increaseprofits for shareholders. "Things have become a lot moreinterdependent," says Nardelli. "There are a broader range ofconstituents."

Such platitudes, of course, make critics cringe. The Nobel prize-winningeconomist Milton Friedman, 93, casts a long intellectual shadow overthe debate. In a seminal 1970 New York Times Magazinearticle, hedeclared social initiatives "fundamentally subversive" because theyundermine the profit-seeking purpose of public companies and wasteshareholders' money. Even today, Friedman, a senior fellow at StanfordUniversity's Hoover Institution, rails at the idea that managers electedby shareholders to run companies should spend their profits on socialcauses. "Adam Smith said in 1776: 'I have never known much gooddone by those who profess to trade for the public good.' It's a goodquote," says Friedman.

There's no doubt that a surge in community outreach and do-gooddeeds is, in large part, a gussied-up bid for good favor. Tarred by a raftof corporate scandals from Enron to WorldCom, social outreach can bea way to regain the high ground. That's probably one reason corporategiving hit $3.6 billion last year, an all-time high, up from $3.5 billion in2003, according to philanthropy research group the Foundation Center.Indeed, Nardelli argues that a "dark veil" hangs over big business. It isexacting tangible penalties: Based on its $91 billion market cap, HomeDepot was required to shell out an estimated $1 million last year to fundthe Public Company Accounting Oversight Board, an outfit created by

the Sarbanes-Oxley corporate reform bill to monitor the work ofauditors. In effect, say Home Depot executives, all public companies
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are paying for the sins of a few.

But more than mere public relations appears to be at work here.Companies are being forced to address the concerns of customers,employees, and investors -- in order to keep them. Such pressure iswhy last year Gap Inc. halted relationships with 70 of its overseasfactories over alleged labor abuses, and has for the past two yearsissued a social responsibility report. Or why Nike Inc. is now a worldleader in setting safety standards for overseas workers. When thecontroversy over its sweatshops erupted several years ago, managersmistakenly believed they could afford to ignore the outcry simply bycranking out hip shoes. "It is no longer an option to sit on the sidelines,"says Bradley K. Googins, executive director of The Center for CorporateCitizenship at Boston College.

YOUTHFUL IDEALISMMore important, the calls for change are coming from inside thecorporate walls. A new generation of employees is demanding attentionto stakeholders and seeking more from their jobs than just 9-to-5 workhours and a steady paycheck. The number of Gen Yers -- those bornbetween 1977 and 1994 -- in the working world has grown 9.2% since1999, while the number of Gen X workers remained flat, and babyboomers declined 4.3%, according to Robert Szafran, a sociologyprofessor at Stephen F. Austin State University in Nacogdoches, Tex.

As a result, Home Depot and others are finding that burnishing animage as a socially responsible company helps to attract youngerworkers, at all levels. "One of the things we compete most for in themarketplace is our associates," says Nardelli. "I'm not sure that was thecase [two decades ago]."

Take Sewell Avant. The 25-year-old senior procurement analystgraduated from the Georgia Institute of Technology in 2002. Duringcollege, he cleaned churches and did regular social projects withfraternity brothers. Now he's carrying on that tradition at Home Depot.

He took a day off, without pay, to help mix concrete at the playgroundproject in Marietta. His entire department will do more kiddie-parkconstruction on a weekend in August. For Avant, volunteering addsmeaning to his day-to-day job. "Employees are trying to marry theirwork and nonwork lives. If the company gives them a chance to do that,then they're happier," says C.B. Bhattacharya, associate professor ofmarketing at Boston University's School of Management.

That's why younger companies are baking the social responsibilityconcept into their culture -- and demanding investors accept the cost.

Costco Wholesale Corp. has long offered generous compensation to itsworkers, to the scorn of Wall Street and the detriment of its stock price.


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In the 1980s, networking giant Cisco Systems Inc. (CSCO) opened itsfirst office in East Palo Alto, Calif., a run-down neighborhood amid theprosperity of Silicon Valley. Cisco Chairman John Morgridge worked as"principal for the day" at a school next door. "We're in business to getresults. This is just a different currency," says Tae Yoo, Cisco's vice-president for corporate affairs.

Indeed, it has been a rude awakening for companies that have notembraced a more strategic approach to social responsibility. For yearsWal-Mart has been a top corporate donor. But as the company's imagewas pummeled by labor unions and lawsuits, research showed itsfragmented giving generated little goodwill. The reason: Few peoplecould remember exactly what -- or whom -- Wal-Mart supports. Now, it'sgiving its community outreach a sharper focus. "Society has changed,"says Betsy Reithemeyer, executive director of the Wal-Mart Foundation."If you are the gathering place of the community, then you have aresponsibility to it."

In fact, some executives argue that a company should develop a socialresponsibility platform -- even if it doesn't add to the bottom line. In2003, Wayside Cross Ministries, an Aurora (Ill.) shelter for abusedwomen and men, couldn't obtain enough ground beef for meals. Onhamburger days at Wayside, some residents ended up eating buns,lettuce, and tomato -- no burger. Then grocery giant Albertson's,

through Jewel, its Midwest grocery chain, launched Fresh Rescue toboost supplies of perishable meat, dairy, and vegetable products forlocal food banks. The result: Last year, the Northern Illinois Food Banksupplied 386 shelters with 740,000 pounds of meat, double the numberfrom the year before. The payoff for Albertson's: goodwill -- and perhapsa few more shoppers. "We don't look for any statistics," says CEOJohnston. "This has to be in the DNA of a company."

Even evangelists such as Nardelli stop short of saying that companiesshould divert money from other strategic priorities to support corporate

social responsibility. But at corporations like Home Depot and GE, goodworks are being bred into Big Business. "It's just the right thing to do,"says Nardelli. Good PR? Sure. Money well spent? The goodwill refundcould be in the mail.
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Palm Oil Controversy (BGS W2 2-7)

So far the 21st century has not proved to be the paradise we had been once

told it would be. Instead of living a life based on advanced technologies that

commercials, cartoons and theme parks predicted, we are struggling to devisesolutions to vexing issues on a wide selection of fronts.

Were looking for out healthy foods, scrambling for option sources of energy

and attempting to maintain the economic engine going whilst protecting a

fragile environment. Wouldnt it be nice to obtain a solution that addressed all

3 concerns?

Not that numerous years ago some pundits claimed palm oil fit that

description. As a substitute fortrans fatty acids,or trans fat, palm oil is now

discovered in thousands of items which includes bread, crackers, chips,margarine, cereal, soap and even lipstick. It\s a natural oil, derived from the

palm tree, and serves as a feedstock for biofuel production. So 1 may well feel

that palm oil is the perfect product, a savior of sorts, benefiting the planet on

all fronts. But a look behind the scenes reveals a distinctive story.

The use of palm oil has been a significant point of controversy for the past 5

years. To some it is looked upon as an acceptable option, despite its

shortcomings, whilst a lot of other people present it as a product with

negative effects that far outweigh any positive attributes it could possiblypossessa pariah of sorts.

I cant recall having ever seen such a headline for olive oil orcanola oil,and

whilst Greenpeace has a reputation for taking extreme measures to make a

point, the factors for their protest in this case bares investigation. According

to Bustar Maitar, Greenpeace Southeast Asia Forest Campaigner:

Greenpeace is taking action to expose the disastrous impacts of the palm oil

and logging industries on Indonesias peatlands, forests and on the global

climate.

Ape Habitats and Poverty

According to the United Nations Environment Programme (UNEP):

Ape habitats are essential to all species as a source of food, water, medicine

and timber and as a regulator of our changing climate. Secure local

communities living in harmony with the forests are the most effective

guardians of this precious wildlife heritage. Endangered apes co-exist with
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millions of poor, rural men and women in Africa and Asia. Saving apes and

lowering human poverty are intertwined.

Ninety percent of the worlds palm oil exports come from plantations in

Malaysia and Indonesia, most of which are located on the islands of Borneo

and Sumatra. The issue with palm oil production is that the palm oil business

favors the exact same lowland forest that functions as the only remaining

habitat of the orangutan.

In a report entitled Cruel Oil, published in 2005 by the Center for Science in

the Public Interest:

Oil palm plantations, along with logging, fires, and other reasons, destroy

rainforest habitat, hinder migration patterns, and block travel corridors. Roads

and plantations fragment the rainforest, facilitate encroaching settlements,and make animals accessible to illegal hunting and poaching.

Plantations also pollute the soil and water with pesticides and untreated

palm oil-mill effluent, trigger soil erosion and increased sedimentation in

rivers, and trigger air pollution due to forest fires.

On the Health Front

Concerns about palm oil in a healthy diet are not new. In 2005, Jeff Novick,

Director of Nutrition at the Pritikin Longevity Center & Spa in Aventura,

Florida, commented on the use of palm oil in our food items.

This is nuts! All these tropical oils are extremely saturated fats. Like butter,

cheese, and meat, tropical oils raise LDL cholesterol and clog arteries with

plaque, growing your risk of a heart attack.In fact, tropical oils can have

additional cholesterol-raising saturated fat than even butter, emphasizes Jeff.

Coconut oil is 92% saturated, making it much more saturated than butter, beef

tallow, or even lard. Palm oil, though it include much less saturated fat (50%),

is full of a kind of saturated fat, palmitic acid, which appears to be most

conducive to heart illness.

Fueling the Controversy

Unlike fossil fuels, palm oil was originally regarded as to be carbon-neutral, as

the carbon dioxide emitted from burning it is roughly the identical as the

quantity absorbed throughout the growth cycle. But the result of destructive

farming strategies has been to release far far more greenhouse gases than the

quantity saved. It is estimated that on an annual basis 600 million tons of

carbon dioxide seep into the air from drained swamps, whilst an far more 1.4


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billion tons are produced from the fires which are employed to clear

rainforest for planting palm tree plantations.

Jennifer Clare Mohamed-Katerere of the International Union for Conservation

of Natures (IUCN) Commission on Environment, Economic, and Social Policy

(CEESP), commented in 2007:

The main causes of unprecedented deforestation in Indonesia contain land

clearing for agriculture and timber estate plantations, which includes oil palm

and pulpwood plantations. The European target for growing biofuel usage is

creating a marketplace that can drive the expansion of palm oil plantations.

What the world is studying from a thorough review of the biofuel business is

that there is no panacea to be discovered when converting plants to fuel.

Regardless of whether the product is palm oil or ethanol, a holistic view whichexamines the complete cycle, from planting to production to refining to

ultimate end use, need to be taken. Deforestation, pollution, erosion and

water usage all produce long range effects on the wildlife, the environment,

and the population.

A Hopeful Future Ahead

To address the troubles raised with regard to the creation and management

of palm oil plantations, High Conservation Value Forest (HCVF) initiatives have

been implemented to identify areas for palm oil development with respect to

habitat conservation and sustainable land use in countries including Borneo

and Sumatra.HCVFs are defined as having at least 1 of the following

attributes:

Containing main biological diversity resources.

Containing rare, threatening or endangered ecosystems.

Supplying fundamental services of nature which includes watershed

management or erosion control.

Supplying fundamental wants of the local community, with historicaland/or cultural significance.

Under significant public pressure to answer the significant complications being

caused by palm oil production, the business finally came together. The initial

meeting of the Roundtable on Sustainable Palm Oil (RSPO) was held in August

of 2003 in Kuala Lumpur. This meeting included over 200 delegates from

businesses and unique interest groups which represented 16

countries.Although the group adopted a Statement of Intent throughout that

meeting, and forty-seven companies have subsequently signed on, it is still a

non-legally binding document and environmental groups have criticized the


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member firms for not adhering to the documents objectives, two of which

state:

Sustainable production implies legal, economically viable,

environmentally suitable and socially advantageous management and

operation.

Sustainability should result from consultation and informed consent by

all stakeholders, that could possibly contain residents in areas of

production, palm oil plantation providers, smallholders, actors along

the whole supply chain, persons, governmental, intergovernmental and

non-governmental businesses.

So what progress has been made in the five years because the RSPO was

formed? Only now is the initial production of sustainable palm oil being

shipped to Europe. Such progress is welcome, if not long overdue, but the sadnews is that the RSPO is estimating that only 1.5 million tons of sustainable oil

will be produced in 2009, a mere 4% of world production.

And the controversy on conformance continues to rage on, as Greenpeace is

claiming that even this very first shipment fails to meet the criteria for

sustainable production.

Solutions to troubles including improving our health, protecting the

environment and solving the energy crisis wont come uncomplicated, and

several times our 1st attempts wont pan out as expected, but the significant

from a Global Patriot perspective is to try out new selections and monitor the

progress of initiatives underway with the objective of continuous

improvement.

What initiatives are you formulating to produce a much better world?

Mark Lovett is focused on promoting the belief that everybody deserves to

live on a healthy planet, in peace and prosperity, utilizing sustainability,

compassion and respect as our guiding principles. Please go to the GlobalPatriot Blog and leave comments as a way to foster intelligent conversation on

crucial topics. You can also join the Global Patriot Foundation on Facebook.


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those embodied in law and those embodied in ethical custom. Of course,

in some cases his employers may have a different objective. A group of

persons might establish a corporation for an eleemosynary purposefor

example, a hospital or a school. The manager of such a corporation will

not have money profit as his objective but the rendering of certainservices.

In either case, the key point is that, in his capacity as a corporateexecutive, the manager is the agent of the individuals who own the

corporation or establish the eleemosynary institution, and his primaryresponsibility is to them.

Needless to say, this does not mean that it is easy to judge how well he is

performing his task. But at least the criterion of performance is

straightforward, and the persons among whom a voluntary contractualarrangement exists are clearly defined.

Of course, the corporate executive is also a person in his own right. As a

person, he may have many other responsibilities that he recognizes or

assumes voluntarilyto his family, his conscience, his feelings of charity,

his church, his clubs, his city, his country. He ma}. feel impelled by these

responsibilities to devote part of his income to causes he regards as

worthy, to refuse to work for particular corporations, even to leave his

job, for example, to join his country's armed forces. Ifwe wish, we mayrefer to some of these responsibilities as "social responsibilities." But in

these respects he is acting as a principal, not an agent; he is spending his

own money or time or energy, not the money of his employers or the time

or energy he has contracted to devote to their purposes. If these are

"social responsibilities," they are the social responsibilities of individuals,not of business.

What does it mean to say that the corporate executive has a "social

responsibility" in his capacity as businessman? If this statement is notpure rhetoric, it must mean that he is to act in some way that is not in the

interest of his employers. For example, that he is to refrain from

increasing the price of the product in order to contribute to the social

objective of preventing inflation, even though a price in crease would be

in the best interests of the corporation. Or that he is to make expenditures

on reducing pollution beyond the amount that is in the best interests of

the corporation or that is required by law in order to contribute to the

social objective of improving the environment. Or that, at the expense of

corporate profits, he is to hire "hardcore" unemployed instead of better


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qualified available workmen to contribute to the social objective ofreducing poverty.

In each of these cases, the corporate executive would be spending

someone else's money for a general social interest. Insofar as his actionsin accord with his "social responsibility" reduce returns to stockholders,

he is spending their money. Insofar as his actions raise the price to

customers, he is spending the customers' money. Insofar as his actionslower the wages of some employees, he is spending their money.

The stockholders or the customers or the employees could separately

spend their own money on the particular action if they wished to do so.

The executive is exercising a distinct "social responsibility," rather than

serving as an agent of the stockholders or the customers or the

employees, only if he spends the money in a different way than theywould have spent it.

But if he does this, he is in effect imposing taxes, on the one hand, anddeciding how the tax proceeds shall be spent, on the other.

This process raises political questions on two levels: principle and

consequences. On the level of political principle, the imposition of taxes

and the expenditure of tax proceeds are governmental functions. We have

established elaborate constitutional, parliamentary and judicial provisionsto control these functions, to assure that taxes are imposed so far as

possible in accordance with the preferences and desires of the publicafter all, "taxation without representation" was one of the battle cries of

the American Revolution. We have a system of checks and balances to

separate the legislative function of imposing taxes and enacting

expenditures from the executive function of collecting taxes and

administering expenditure programs and from the judicial function ofmediating disputes and interpreting the law.

Here the businessman

self-selected or appointed directly or indirectly by

stockholdersis to be simultaneously legislator, executive and, jurist. He

is to decide whom to tax by how much and for what purpose, and he is to

spend the proceedsall this guided only by general exhortations from on

high to restrain inflation, improve the environment, fight poverty and soon and on.

The whole justification for permitting the corporate executive to be

selected by the stockholders is that the executive is an agent serving the

interests of his principal. This justification disappears when the corporateexecutive imposes taxes and spends the proceeds for "social" purposes.


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He becomes in effect a public employee, a civil servant, even though he

remains in name an employee of a private enterprise. On grounds of

political principle, it is intolerable that such civil servantsinsofar as their

actions in the name of social responsibility are real and not just window-

dressing

should be selected as they are now. If they are to be civilservants, then they must be elected through a political process. If they are

to impose taxes and make expenditures to foster "social" objectives, then

political machinery must be set up to make the assessment of taxes and todetermine through a political process the objectives to be served.

This is the basic reason why the doctrine of "social responsibility"

involves the acceptance of the socialist view that political mechanisms,

not market mechanisms, are the appropriate way to determine the

allocation of scarce resources to alternative uses.

On the grounds of consequences, can the corporate executive in fact

discharge his alleged "social responsibilities?" On the other hand,

suppose he could get away with spending the stockholders' or customers'

or employees' money. How is he to know how to spend it? He is told that

he must contribute to fighting inflation. How is he to know what action of

his will contribute to that end? He is presumably an expert in running his

companyin producing a product or selling it or financing it. But nothing

about his selection makes him an expert on inflation. Will his hold ing

down the price of his product reduce inflationary pressure? Or, by leavingmore spending power in the hands of his customers, simply divert it

elsewhere? Or, by forcing him to produce less because of the lower price,

will it simply contribute to shortages? Even if he could answer these

questions, how much cost is he justified in imposing on his stockholders,

customers and employees for this social purpose? What is his appropriate

share and what is the appropriate share of others?

And, whether he wants to or not, can he get away with spending his

stockholders', customers' or employees' money? Will not the stockholdersfire him? (Either the present ones or those who take over when his actions

in the name of social responsibility have reduced the corporation's profits

and the price of its stock.) His customers and his employees can desert

him for other producers and employers less scrupulous in exercising theirsocial responsibilities.

This facet of "social responsibility" doc trine is brought into sharp relief

when the doctrine is used to justify wage restraint by trade unions. The

conflict of interest is naked and clear when union officials are asked to

subordinate the interest of their members to some more general purpose.


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responsibility," he is spending his own money, not someone else's. If he

wishes to spend his money on such purposes, that is his right, and I

cannot see that there is any objection to his doing so. In the process, he,

too, may impose costs on employees and customers. However, because

he is far less likely than a large corporation or union to have monopolisticpower, any such side effects will tend to be minor.

Of course, in practice the doctrine of social responsibility is frequently acloak for actions that are justified on other grounds rather than a reasonfor those actions.

To illustrate, it may well be in the long run interest of a corporation that

is a major employer in a small community to devote resources to

providing amenities to that community or to improving its government.

That may make it easier to attract desirable employees, it may reduce thewage bill or lessen losses from pilferage and sabotage or have other

worthwhile effects. Or it may be that, given the laws about the

deductibility of corporate charitable contributions, the stockholders can

contribute more to charities they favor by having the corporation make

the gift than by doing it themselves, since they can in that way contributean amount that would otherwise have been paid as corporate taxes.

In each of theseand many similarcases, there is a strong temptation to

rationalize these actions as an exercise of "social responsibility." In thepresent climate of opinion, with its wide spread aversion to "capitalism,"

"profits," the "soulless corporation" and so on, this is one way for a

corporation to generate goodwill as a by-product of expenditures that areentirely justified in its own self-interest.

It would be inconsistent of me to call on corporate executives to refrain

from this hypocritical window-dressing because it harms the foundations

of a free society. That would be to call on them to exercise a "social re-

sponsibility"! If our institutions, and the attitudes of the public make it intheir self-interest to cloak their actions in this way, I cannot summon

much indignation to denounce them. At the same time, I can express

admiration for those individual proprietors or owners of closely held

corporations or stockholders of more broadly held corporations whodisdain such tactics as approaching fraud.

Whether blameworthy or not, the use of the cloak of social responsibility,

and the nonsense spoken in its name by influential and prestigiousbusinessmen, does clearly harm the foundations of a free society. I have

been impressed time and again by the schizophrenic character of manybusinessmen. They are capable of being extremely farsighted and


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clearheaded in matters that are internal to their businesses. They are

incredibly shortsighted and muddleheaded in matters that are outside their

businesses but affect the possible survival of business in general. This

shortsightedness is strikingly exemplified in the calls from many

businessmen for wage and price guidelines or controls or income policies.There is nothing that could do more in a brief period to destroy a market

system and replace it by a centrally controlled system than effectivegovernmental control of prices and wages.

The shortsightedness is also exemplified in speeches by businessmen on

social responsibility. This may gain them kudos in the short run. But it

helps to strengthen the already too prevalent view that the pursuit of

profits is wicked and immoral and must be curbed and controlled by

external forces. Once this view is adopted, the external forces that curb

the market will not be the social consciences, however highly developed,

of the pontificating executives; it will be the iron fist of Government

bureaucrats. Here, as with price and wage controls, businessmen seem tome to reveal a suicidal impulse.

The political principle that underlies the market mechanism is unanimity.

In an ideal free market resting on private property, no individual can

coerce any other, all cooperation is voluntary, all parties to such coopera-

tion benefit or they need not participate. There are no values, no "social"

responsibilities in any sense other than the shared values andresponsibilities of individuals. Society is a collection of individuals andof the various groups they voluntarily form.

The political principle that underlies the political mechanism is

conformity. The individual must serve a more general social interestwhether that be determined by a church or a dictator or a majority. The

individual may have a vote and say in what is to be done, but if he is

overruled, he must conform. It is appropriate for some to require others to

contribute to a general social purpose whether they wish to or not.

Unfortunately, unanimity is not always feasible. There are some respects

in which conformity appears unavoidable, so I do not see how one canavoid the use of the political mechanism altogether.

But the doctrine of "social responsibility" taken seriously would

extend the scope of the political mechanism to every human activity.

It does not differ in philosophy from the most explicitly collectivist

doctrine. It differs only by professing to believe that collectivist ends

can be attained without collectivist means. That is why, in my


16/16

book Capitalism and Freedom, I have called it a "fundamentally

subversive doctrine" in a free society, and have said that in such a

society, "there is one and only one social responsibility of business

to use it resources and engage in activities designed to increase its

profits so long as it stays within the rules of the game, which is to say,engages in open and free competition without deception or fraud."

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