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| Stuart Hayashi |
Earlier, I've argued that the "corporate social responsibility" doctrine -- that businesses should donate their capital to charities, avoid utilizing cheap labor in foreign countries, etcetera -- comes at the unfair expense of shareholders. Corporations should only maximize profits and then allow stockholders to take those profits and give to the charities of their own choosing, if any at all.
What must be addressed, however, is a prominent objection to my case
-- the "economies-of-scale" argument.
One could say it's more efficient for a corporation to donate money to certain charities on the shareholders' behalf, rather than let each investor decide for himself, due to economies of scale. Because a corporation has pooled together all the millions raised from newly-issued shares, it has a large concentration of capital, which is more effective in funding non-profits institutions than having an individual investors plunk down a small amount of money that he gained from selling his own shares.
Let's say "SuperCorp" has one million shares, and each is worth $10, making the company's market capitalization $10 million. An individual investor named Joe owns 100 of its shares and thus has $1,000 in the company.
If SuperCorp lets each individual investor turn over his corporate earnings to whichever foundation he chooses, then each investor might donate to a different charity, resulting in just a small amount of money going to each non-profit organization. Joe can only donate $1,000 to the cause of his choice, which is like a "drop in the bucket."
Maybe Joe wants to bestow that $1,000 upon the Humane Society. But if SuperCorp uses its tremendous pool of capital, then economies of scale allow it to more efficiently help just a few non-profits. Maybe it bequeaths $5 million to Greenpeace at its stockholders' expense. That $5 million is so highly concentrated that it's bound to help this group much more than some "drop-in-the-bucket" alms from some individual investor, which is so comparatively small that it practically counts for nothing, an advocate of "corporate social responsibility" may say.
However, that argument ignores a few points. First, why is the welfare of a certain charity more important than that of an individual investor, especially one who, knowing of social security's unreliability, invested in corporations to secure his retirement? He's counting on those firms to maximize their profit; not to lose his retirement savings or redistribute it to people he doesn't even know.
Society's dogmas notwithstanding, a person isn't a pawn of the "village" he lives in, with some mystically-imposed moral requirement to serve "the public interest." Under the sole condition that he abrogates no one else's rights, it's perfectly ethical for someone to live for his own sake.
Secondly, why should top management decide which charities are more important than others? If SuperCorp gives most of its money to Greenpeace, then what about shareholders who distrust this organization and would rather take the money they have in SuperCorp and hand it to the Vatican instead? Let each shareholder decide for himself where his own money goes.
Thirdly, "drop-in-the-bucket" endowments do add up. When celebrities held the 2001 "Tribute to Heroes" concert to raise money for 9/11 victims, it wasn't as if just 10 huge corporations donated all that cash; it came from a huge assortment of individuals, many of whom plunked down a "drop-in-the-bucket" contribution. All those "drops" accumulated to the mammoth sum of $1 billion (how it was distributed is another story). And individual investors, who got their money from corporations dedicated to maximizing their profit, easily could have been among the donors.
Finally, are low-paid Mexican laborers so undeserving of their occupations? If factories aren't opened up in that country, then those workers won't have any jobs and therefore won't have any income at all. $10 a day beats zero cents a day.
Despite politically-correct propaganda, a business has no duty to lose money for selfless purposes. It's absurd that, today, for-profit enterprises are expected to partially behave as something they were never meant to be -- non-profits.
We'd do well to remember that, provided one inflicts no force upon others' person or property, every individual has the right to profit, whether he's middle-class, poor, or even rich. A responsible corporation is one that, at nobody's expense, enriches its owners any way it can.
So if we really believe that corporations should be responsible, let us urge them to make every honest dollar possible and to retain all that wealth for distribution to their actual designated beneficiaries -- the stockholders.
Stuart K. Hayashi graduated from Hawaii Pacific University as an Entrepreneurial Studies major in May 2003, and he is the former president of the Reason Club of Honolulu, though his opinions do not necessarily reflect that of either organization. He is the founder of a news Web log, "The Fiftieth Star," at: http://50thstar.blogspot.com to be unofficially centered around activities at the University of Hawaii at Manoa, and he can be reached at: mailto:radical_individualist@hotmail.com
Recommended Links:
"Corporate 'Social Responsibility' Is Irresponsible" by Yaron Brook, Ph.D.
http://business.aynrand.org/social_responsibility.html
"Holding Up the Shareholder" by T. J. Rodgers, Ph.D., CEO of Cypress Semiconductor Corp.
http://www.cypress.com/aboutus/press_release.cfm?objectid=C48E49D5-8283-4DAC-954D0D9306600664&pr_type=ceo
"Cypress [Semiconductor] CEO Responds to Nun's Urging a 'Politically Correct' Board Make-Up" by T. J. Rodgers, Ph.D.
http://www.cypress.com/aboutus/press_release.cfm?objectid=246F3C3A-388F-4645-A39A6FB9AD3FD3B4&pr_type=ceo
"The Meaning of Jack Welch's Cave-In" by Edwin A. Locke, Ph.D.
http://capmag.com/article.asp?ID=1870
"An Open Letter to CEOs: Defend the Profit Motive -- or Perish" by Alex Epstein
http://microsoft.aynrand.org/defendprofit.html
"What to Do With Ralph Nader?" by Carter Laren
http://capmag.com/article.asp?ID=1367
See first part at: "Corporate 'Social Responsibility': Inherently Irresponsible - Part 1"
