

Rethinking the Social Responsibility of Business - DaniFong
http://reason.com/archives/2005/10/01/rethinking-the-social-responsi

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vantran
Wow. Ok, here goes. Friedman's answer to Mackey is brilliant and exactly as
how I expected it should be. I remember reading Friedman's "The Only
responsibility of business is to increase its profit", which makes Mackey
words here quite laughable.

Mackey does not realize that Whole Food may be putting the customers first,
but this is done SOLELY because it would also benefit Whole Food in the first
place. It is exactly as Friedman had already stated in his article. Businesses
do contribute to the community, but the motive is not (and should not) be
without the consideration of the investors.

Mackey keeps talking about "balancing responsibilities to stakeholders". Well,
I'm sorry but that's disguising the fact that investors do and should always
have higher priority. Sure, Whole Foods did well donating 5%, but imagine a
scenario where Whole Foods did bad: donating 15% of its profit, and not
getting many customers in return (in other words its disguised marketing
fails).

Do you think Whole Foods would continue donating 15% until it goes out of
business? Will Mackey be able to use his Whole Foods argument anymore?

1) "The most successful businesses put the customer first, instead of the
investors" (which clearly means that this is the way to put the investors
first). I really really like this sentence, because it summarized my sentiment
perfectly. How could you not see that? If it works for you, great. But you
wouldn't be doing it if it doesn't work. Don't even pretend.

Mackey: "Making high profits is the means to the end of fulfilling Whole
Foods' core business mission. We want to improve the health and well-being of
everyone on the planet through higher-quality foods and better nutrition, and
we can't fulfill this mission unless we are highly profitable."

Let's be serious. This is what Mackey wants people to think. What Whole Foods
does, is "enhance the pleasure of SHOPPING for food", which I agree. Whole
Foods does this well, with all the food literature in its store. It creates a
false illusion that you're buying something more than just food (thus
justifying its price). I have Michael Pollan's The Omnivore Dilemma next to
me. If you read chapter 9 you'd have a different perspective of what Whole
Foods is about (different from the one Mackey is advocating here).

~~~
DaniFong
How do you suppose their motives? Do you claim to have some sort of window
into the minds of those working at Whole Foods?

Maybe the people of Whole Foods, the entrepreneurs, the investors, the daily
stakeholders, are in fact working towards the benefit of society as a whole
because that's what motivates them. Many people find their happiness in the
growth and happiness of other human beings. It is implied that this other-
centeredness is normal only if it is confined to romantic partners, or nuclear
family, but who among us isn't moved by the struggles of a population ravaged
by natural disaster, war, plague or famine? It may well be that one's
motivations, human creatures as we are, might be shoehorned into the rubric of
self-interest (misleadingly named though it would be) by saying that other-
centeredness makes _us_ feel better. But one might as easily say that one's
more self-centered actions are in fact shaped by the entire society as in the
invisible hand, designed in fact to help others: your food choices are not, in
fact, your own, but shaped by corporate stakeholders for their own interests.
You can look at it either way.

The point is that motivations are varied and complex, and cannot be summarized
neatly in phrases such as 'utility' or 'self-interest' without hiding demons
worth of complexity within them.

I personally work for others, for the people of the world, the whole of its
green mantle, the earth's future potential. In this way I extend my extended
phenotype, it is true -- in some way I will exist and persist as forces and
memes and influences varied and grander and grander, with time, if cloudier,
muddied, dilute. But I will also be working for something that has always been
and will always be greater than my own small self. There is joy in this, but
it is not centered in me.

~~~
vantran
No, I don't claim to have "some sort of windows" into their minds, and I don't
claim to know whatever their motives are. But I do see the pretentiousness
behind what he claims it is.

Sure, they are working towards the benefit society. Anyone who has a job can
justifiably claim so, unless they are doing something really evil/wrong. How?
That is already covered by Friedman and Rodgers. When you work, you contribute
to society in a particular way, and you can/should be proud of it.

Let's get back to Whole Foods. What is really the motive behind a business
such as Whole Foods when they do something such as donate their 5% profit?
Mackey gives 1 reason himself: "There can be little doubt that a certain
amount of corporate philanthropy is simply good business and works for the
long-term benefit of the investors." There, so 1 reason is precisely because
it benefits the business, thus it benefits the shareholders. The business
gains goodwill, an intangible, not taxable asset capable of generating future
profit. Nobody is advocating that you should not love your society and donate
a little. What's essentially being argued is your core interest. And to
pretend that the investors don't have anything to do with it, well that's
really just a cloak to disguise business motives.

If the core interest does not involve the shareholders, what happen if the
business falls on hard time? Whole Foods may be doing well, but like I said
before, what if it donated more and not getting the publicity/customers it
wanted, while the business itself is failing? As a business goes through hard
time, it will realize the importance of the shareholders interest, to avoid
being out of business, which would serve society no good. Which is pretty much
why Rodgers called Mackey's article: "How Business and Profit Making Fit Into
My Overarching Philosophy of Altruism." To Mackey, what he thinks he's doing
leads to profit. To Rodgers, it is profit that leads to what he did, and I
agree.

Mackey also claims that it'd be justifiable even if his donation program did
not generate PR/profit. To which I don't agree, on what grounds would it be
justifiable when you are using someone else's money for your own interest? And
also the part where he claims he "hired" his investors. I think Rodgers
already talk about that. He can afford to say this only because Whole Foods is
doing well. The donation program happened to serve the business needs but that
doesn't mean the opposite.

Perhaps I'm not doing a very good job of explaining myself, but Friedman and
Rodgers do have very good points in that article that pretty much sums up
everything.

~~~
DaniFong
There are probably public services which would not be reasonable profit making
entities but are very helpful for the society as a whole, and whose benefit is
so widespread that it can only be repaid in collective good, goodwill, and/or
taxes. For example, country infrastructure, primary education, healthcare, a
security force, interpersonal relationships, religion, and love. Profit making
organizations do sometimes create wealth and good operating out of their own
self interest (though they also sometimes essentially steal it,) but there are
other parts that need to function for society to be whole. That is the purpose
of philanthropy: supporting the growth and perpetuation of businesses
currently unable the pull together the resources themselves (efficiently, if
possible, though not driven be the desire for maximum investor return.)

~~~
vantran
Sure, I don't doubt that. I'm all for supporting those public services sorely
needed by society. But don't make it into the business's altruistic ideal it
not really is. In the case of Whole Foods, I just don't buy it. Whole Foods
isn't just about natural and organic food, the food literature in there is
amazing. It's not the food that's great, it's the food description that really
got people to buy. For example: "Free-range" is no more than a little door
which remain shut until 2 weeks before the chickens are slaughtered for food,
and by then most of them don't even dare go out because they are already used
to their crowded shed. Of course, customers aren't aware of these things, so
it remains great business.

~~~
DaniFong
Whole Foods is just one case. But it sounds as if nothing will convince you
that businesses can be run in accordance with humanistic ideals, holding
profit making as important and excluding everything else. What makes you think
that we become automatons as soon as we have shareholder responsibility?

Have you ever run a successful business? I come from a family of
entrepreneurs, and from that vantage point I can tell you that more often than
not someone working for the good of other would be repaid in kind, while those
strictly out for themselves faltered. But it was _not_ that the increased
likelihood of increased success caused them to pander to the public, looking
for a cut. They continued during the worst of times, for their customers,
suppliers, employees, themselves. They persisted when hope ran out, and some
failed. But they tried and tried again, driven by that same basic goodness,
until something clicked.

~~~
vantran
No, I think you are reading too much into what I wrote about Whole Foods,
mainly because I myself am being very critical of Mackey and his firm here.

"holding profit making as important and excluding everything else" is
definitely not what should be done. "When Milton Friedman says a company
should stay "within the rules of the game" and operate "without deception or
fraud," ... he does not mean that a company should put every last nickel on
the bottom line every quarter, regardless of the long-term consequences."

I'm merely arguing that it's the profit that results in businesses generating
the goodness to the community, not advocating that everyone should drop
everything and pursue profit only. Once you're profitable you can choose a way
of contributing back to society. But Friedman suggests that corporate
philanthropy isn't the only way. "what reason is there to suppose that the
stream of profit distributed in this way would do more good for society than
investing that stream of profit in the enterprise itself or paying it out as
dividends and letting the stockholders dispose of it?"

~~~
DaniFong
As I would frame it for free market economists:

There are firms and projects which have benefits which cannot be easily turned
into a return for investors (either directly or indirectly) but whose benefit
far exceeds the investment of dollars and effort, which are currently severely
underfunded (with a lot of variation on the input stream) because the
government through a combination of politics and incompetence cannot wisely
discriminate between potential recipient, because passersby on the street
cannot acquire the requisite facts to make an informed decision, and because
corporate entities almost all currently buy into the idea that charity
investment is a PR stunt, and nothing more.

It is to the benefit of society to invest in these firms and projects, so if
an individual is truly other-centered they may push hard in finding and
working for these causes, whose profits don't appear on the bottom line but
are spread throughout society.

An example? The all around helpfulness of entrepreneurs, investors and
advisors in silicon valley, or hackers here on hacker news. These people put
an awful lot of effort into helping out their community, often to absurd
lengths: the benefits do not solely or even significantly accrue to them (as
is typically the case in profit making entities founded upon an exchange of
currency for a good or service), but by their participation the community
grows stronger along with their standing in it.

~~~
vantran
Once again, I do mostly agree with you. Just want to add a few things:

I believe the business doesn't really have this responsibility to invest in
those firms/projects that you mention. People do. Nothing is stopping the
investors to invest. If investors decide that the business can/should donate,
then it is the investors decision to fulfill their social responsibilities. In
this sense the business is a separate entity that does not have social
responsibilities.

"corporate entities almost all currently buy into the idea that charity
investment is a PR stunt, and nothing more" - Well, I myself don't believe
that it's "merely a PR stunt". As you say it is sorely needed by public firms
that don't really generate a return on investment. But precisely because they
treat it as a PR stunt that they let their business earn credit for their
donation. If it's not for PR, then the business should be unrelated. Whoever
made the decision to invest should get the credit instead.

