India Syndicate 2.0

Milton Friedman once wrote:

“there is one and only one social responsibility of business–to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”

I do not know yet if that is the definitive last word on Corporate Social Responsibility (a.ka. CSR). However, I do have something against CSR.

Lets take a walk and read this interview with author and economist Geoffrey Heal:

CSR is a carefully thought-out response to minimize companies’ social and environmental impacts. If a tobacco company gives money to the Metropolitan Opera, it may be good philanthropy and it may be good public relations, but it’s not CSR because it does not address the social and environmental problems caused by a tobacco company.

Consider Starbucks, which has gone to some lengths to minimize the negative environmental impact of growing coffee. Starbucks pays its employees at a higher rate than is typical in the retail food trade, it offers employees more benefits and it buys from fair-trade growers as much as possible. Starbucks has fought through the classical social and environmental problems associated with being in that business.

The bottomline is: if there is an ROI on CSR, the company should relentlessly pursue it. ROI is not just limited to brand image. It could also involve impacts such as increase in the employability of people where the company operates (examples are educational/training institutes founded and run by corporates), improvement in the life-style of the locals so the company’s products have a larger user-base etc. The point is, if the company can link the ROI on CSR to an increase in its bottomline/topline, it should be pursued. Period.

However, what gets my blood boiling is when a CEO starts using this as way to boost his/her personal image as a good samaritan. When you work your ass off to make profits for your company, and the CEO feels it is OK to use part of those profits to help himself towards a Nobel Peace Prize (or a Bharat Ratna or whatever), it definitely will make your blood boil. It makes me angry because it reminds me of government - spend someone else’s money on someone else so you get to be the good guy with zero personal investment.

Its high time shareholders start applying the same standards towards CSR that they do with other investments that a company makes.