In simple terms, a company that does not look after its financial bottom line will cease to exist. However, Google's motto of "do no evil" is a good starting point.

Any company that makes a profit, employs people, and does no evil, is good for the community. A company that engenders good will amongst the community, will benefit. However, if the cost of this far outweighs the benefits to the company, it is doing neither itself or the community any good. If the company goes under, the community will be sad, but won't lift a finger.

For most large companies, CSR remains in the realm of public relations propaganda.
CSR expenditures are a feel-good operation devoted to heading off community and political resistance to business as usual.
Exhibit A is one of the Australia's Big 4 banks. It is a company with which the author would have some familiarity, because this institution has shown itself consummate in finessing the CSR-do-gooder fraternity.
It's CSR activities are substantial, but it continues to engage in unconscionable treatment of its small business and farming customers. Indeed, it is addicted to corrupt practices in these arenas.
Ironically, if this bank redirected the resources that it currently devotes to malpractice (including expenditure on an army of lawyers) to developing a culture of competence and integrity, its bottom line would probably be improved.
A genuine corporate social responsibility and profit would be mutually enhanced.
The notion that a corporation's traditional motivation is purely directed to the bottom line itself needs reexamination. Power for its own sake appears to be a motivating factor.
This particular company's CSR expenditure's impact is to be measured by the success with which it heads off regulatory impediments to an untrammelled exercise of its power. By this measure, its CSR budget is 'value for money' indeed.
In the meantime, this CSR-bottom line tradeoff debate remains meaningless prattle.

Great article, & just so true.

“For most large companies, CSR remains in the realm of public relations propaganda.”
That’s because it’s meaningless and displays a mistaken understanding of what profit it; and that mistaken understanding itself comes from Marxian propaganda.

Profit arises when a firm removes the maladjustment between where factors of production *are*, and where the masses of people *want them to be* in order to satisfy the wants that they consider most urgent. The greater the profit, the greater the maladjustment removed. No matter how great the profit is, the value created for the consumers must always be greater, otherwise they wouldn’t hand over the price.

The idea that businesses have a social responsibility above and beyond providing the greatest value to their customers, is based on the idea that by doing business, by making profit, by employing people, they are really doing something wrong. But the idea that corporations need to “give something back to the community” implies that they “taking something out” in the first place, in other words, that they are reducing social utility, reducing human welfare.

This idea in turn derives from the overwhelmingly Marxian notions that profit is an immoral quantity – it self-evidently proves the misallocation of resources - and that employing people is intrinsically exploitative – it is a rip-off of “surplus value” that rightfully belongs to the working class.

Suffice to say that these ideas are based on assumptions that are flatly incorrect, and cannot be defended. They are just evergreen slogans of the confused or deliberately dishonest.

So long as all transactions are voluntary (“do no evil”) then that answers all questions of morality so far as the business is able to. It is nonsense to talk of a corporation’s “power”. No-one has a gun at their head forcing them to buy Coca-Cola.

The author’s distinction between “social and financial returns” is a false dichotomy. What do you think financial returns are?

(cont.)

All people tend to prefer satisfaction of a given desire sooner than later, while delayed gratification is desirable as the source of all capital and therefore of all civilization. However the “correct” time preference can only be known through people’s demonstrated time preferences. The arbitrary pontifications as to optimal time preferences the CSR advocates are no better, no more accurate, and no more morally superior, than are the original valuations of the consumers that give rise to profit or loss in the first place.

Whatever the imperfections of private ownership, at least people have the interests of their own property in their own life time as a time horizon. By contrast in a democracy, the time horizon will be limited to the next election, and will always concern the ability to take money from other people. In a democracy, political interference will always tend to promote immoral short-term instant grat, and capital consumption, over longer term prudence and capital accumulatoin. By far the single biggest factor promoting the instant grat mentality, inflation, debt, economic chaose and social injustice in society is government’s vicious addiction to inflation as a means of finance, or rather favouring the political parasite classes at the expense of the productive.

Corporate Social Responsibility (CSR) increasingly appears to be verbiage and that alone. As Shergold points out much of what is touted as CSR is publicity creating appearance.

By contrast and as a construct I’d urge readers to consider Servant Leadership as an economic principle rather than a theological one. Economically the notion of serving the needs of clients, serving the needs of shareholders, serving the needs of employees and serving the needs of society which provides the basis that enables an economy to occur makes sense. That, though, needs to be considered twin paired with the construct of loyalty.

Sustained profitability requires genuine value be created in these four areas. Ignore them and one operates at one’s peril.

The standard definition of companies given in finance texts is that they exist to maximise shareholder wealth. If that is genuinely the case why are unions prevented from maximising the wealth of their members, they are ‘companies’ whose shareholders are its members! “But unions abuse their power and hold the rest to ransom”, look to behaviour of businesses and find abuse of power in the market place. Bank fees are the simplest example to come to mind.

Shergold points to the problem of time frame which is used by decision makers. Max Eggert (http://au.linkedin.com/pub/max-eggert/0/579/69) refers to careers in terms of the 3 Gs – Get, Gobble, Go; a basic 4 year cycle of getting a position, make the most of it then move on. “I am here to maximise my personal utility”.

Behind Hardin’s ‘Tragedy of the Commons’ lies a degree of wisdom; acting indifferently to what goes on around one can create destruction. If one genuinely believes markets will resolve the issues is it time to expose managers and executive forcefully to the long term consequences of their decisions? Is it time to remove the restrictions on employees from working collectively to maximise their utility? MAD is a theory applied to defence – should MAD be applied to economics, let all parties stare down the barrel of a gun in order to get wisdom into the system?