Social Responsibility Activists Do Not Play Fair

Posted: Nov 23, 2007 11:03 PM
Social Responsibility Activists Do Not Play Fair

According to the Merriam-Webster dictionary, one of the definitions of fairness is “conforming with the established rules.” Based on this definition of fairness, the actions of Corporate Social Responsibility (CSR) activists are unfair.

In pursuit of self-interest, companies can also act unfair. Take for example, the story of Preston Tucker – the entrepreneur who dared to challenge the entrenched automobile industry by designing innovative and stylish vehicles in the 1940s. Vividly brought to life in the 1988 movie Tucker: A Man and his Dream; the automobile industry used the legal and regulatory system as a competitive weapon to block Tucker’s vision.

The Preston Tucker example illustrates that when the heavy hand of government is used to change the rules of the game entrepreneurs are prevented from creating better products and consumers suffer the consequences. Over the long-term, a reduction in innovation and risk taking occurs. And, fewer entrepreneurs results in slower economic growth and reduced standards of living.

Thankfully, the Tucker story is the exception and not the rule in the U.S. economy.

However, the looming influence of CSR represents a new threat to our future prosperity. For example, the role of CSR in the global warming debate. Global warming is a concern of many people, and there is a strong movement in the U.S. to reduce our emissions of carbon dioxide and other greenhouse gasses (GHGs). Regardless of one’s view on the necessity to reduce GHGs, the strong desire of many people to lower their own personal greenhouse gas emissions implies that there may be a profitable market serving these desires. Entrepreneurs and entrepreneurial firms can, and should, provide products and services that profitably fill these desires. To the extent that CSR activists encourage such products, they are playing by the rules and are being fair.

Unfortunately, CSR activists do not want the free-market to decide who wins or loses in the global warming and energy debate. The rise and influence of CSR threatens to fundamentally “change the established rules” guiding the role of business in America’s society. Our welfare is best served when everyone plays their proper roles: businesses serve our needs and desires for private goods and services; and government ensures the provision of public goods and services. CSR activists prefer big government solutions and actively pursue cap & trade global warming legislation.

As noted by Alan Greenspan in his new book The Age of Turbulence, reducing carbon emissions means a “large number of companies will experience cost increases that make them less competitive. Jobs will be lost, and real incomes of workers constrained." Environmentalists may find it difficult to convince Congress to implement their vision given such daunting costs. To overcome this hurdle, the CSR activists have borrowed a page from the Tucker playbook: If you may not win under the current rules, then change the rules.

Using pressure tactics that would make Jimmy Hoffa proud, CSR activists “encourage” companies to advocate for cap & trade regulations on their behalf. While there is, and should be, a healthy dialogue between the public and private sectors, the manner in which CSR activists pursue this dialogue represents a significant change in the established rules.

Despite hollow rhetoric to the contrary, CSR activists do not represent the private interests of corporations. Instead, CSR activists represent their own personal interests and viewpoints on public issues. If these individuals were to play by the established rules of the U.S., then they would take their grievances on public issues directly to their elected officials.

CSR activists simply ignore the established rules: CSR activists take their grievances on public issues, such as global warming concerns, to private businesses. Once sufficient pressure on these corporations has been applied, corporations have been “convinced” to advocate for public issues on their behalf.

But, this process has unfairly changed the rules. Whereas Tucker’s enemies used the government to advance their own private interests, CSR activists are pressuring private interests to advance their government policies. Both actions violate the proper roles that the private sector and the public sector should be playing – one of the fundamentals responsible for our wealth and prosperity. They are also unfair.