The perennial argument against CSR is that a company’s sole responsibility is to maximize profits.
On Economix, a business blog on NYTimes.com, Edward Glaeser agrees with CSR critics Milton Friedman and Lawrence Summers that the overriding moral obligation of companies is “to fulfill their fiduciary duties and maximize shareholder wealth”. Glaeser questions the effectiveness of hybrid institutions like Freddie Mac and Fannie Mae that seek to maximize financial and social returns. However, he does concede that organizational innovation has the potential to create “shared value” without compromising financial returns.
To some extent Milton Friedman was correct: companies are responsible to their stakeholders and should limit their do-gooding for the sake of do-gooding. It is irresponsible to spend shareholder money on purely philanthropic purposes. However, companies are now operating in a new market context where social impact is a valued commodity. Thus companies should consider social innovation as one of several strategies they can be used to generate business value. The strong financial returns from GE’s Ecomagination and Unilever’s sub-market products disprove the paradigm that financial value is sacrificed when social strategies are employed.
-Erin Simmons & Aneesa Arshad
