Karl Marx once remarked, “The last capitalist we hang shall be the one who sold us the rope.” However, Marx had no idea the rope would be corporate social responsibility (CSR) and not greed.
In keeping with CSR doctrine, CEOs are opening their doors to activist groups with great fanfare in hopes of maximizing both “the social good” and corporate profits. Regrettably, these CEO’s are maximizing neither.
Social activists are not concerned with corporate profits, shareholder returns or economic growth. Their sole mission is to transform corporations into agents to advance their social and political agenda.
By allowing social activists to influence business decisions, CEOs are choosing socialism over capitalism and by doing so; they are undermining the very foundations of our free society.
General Electric’s CEO, Jeff Immelt, is a classic example. His management of the $350 billion company using an outdated 1960’s style conglomerate model is failing. Since Immelt took the helm in 2001, GE has significantly underperformed the market – GE’s share price has not increased while the S&P 500 index is up 30%. On top of all this, he is under pressure to fill Jack Welch’s shoes.
Immelt desperately needs a new strategy for growth. Enter CSR. In 2002, a group of Catholic nuns filed a shareholder proposal asking the company for a report on GE’s greenhouse gas emissions and ways for the company to address climate change. According toThe New Capitalists: How Citizen Investors are Reshaping the Corporate Agenda, the nun’s proposal made Immelt recognize the reputation and revenue opportunities by addressing climate change.
Three years later, GE announced Ecomagination – a marketing campaign that promotes environmentally friendly fuel-efficient products including engines, locomotives, wind turbines and clean coal processing technologies.
Not taking any chances with the free-market system, Immelt wants government regulation to guarantee Ecomagination’s success. GE is a member of the United States Climate Action Partnership (USCAP) – a coalition of corporations and environmental activist groups “that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.”
Immelt’s rent seeking math is simple: limits on carbon dioxide will drive sales for his products and the Left will adore him like Al Gore. Unfortunately, for his employees and shareholders, Immelt’s statism strategy is backfiring.