Today, August 23 2010, there is a very provocative op-ed piece in the Wall Street Journal by Prof. Aneel Karnani, an associate professor of strategy at the University of Michigan's Stephen M. Ross School of Business. Click here for the Podcast

In a nutshell, Karnani argues that when corporate profits and public interests are aligned, the idea of corporate social responsibility is irrelevant, because the driving force is not a commitment to social welfare but to maximization of profits. And when profits and social welfare conflict, an appeal to social responsibility will be ineffective, because executives will not act in the public interest and against shareholder interests. In addition, by taking about corporate social responsibility we target the wrong actor and look for solutions where we should not. Government regulation, watchdogs, and self-regulation are the real solutions to social welfare, he suggests.

Let me select a quote and test your reactions:
"Still, the fact is that while companies sometimes can do well by doing good, more often they can't. Because in most cases, doing what's best for society means sacrificing profits (...) So now what? Should executives in these situations heed the call for corporate social responsibility even without the allure of profiting from it? You can argue that they should. But you shouldn't expect that they will."

You can click here to access the whole article, together with comments from the readers. The man in the video is Nobel-Prize winning Milton Friedman, the most serious advocate of the case against corporate social responsibility.


  1. Besides many comments in the WSJ web site, I got this email from a well-known colleague, George Watson, who teaches at Southern Illinois University Edwardsville.
    On the small off-chance you have read today's WSJ banner report titled "The Case Against Corporate Social Responsibility" and that some of your more
    sociopathic students may actually take it seriously, I offer a few counterpoints to the debate
    1. Propositions: Dr. Karnani maintains that social responsibility is either redundant (because the corporate interests and society's interests are linked) or these policies are ineffective (because CEO's cannot be expected to act against the interests of shareholders). To counteract these "realities" Karnani supports increased government regulation.
    2. Counterpoint:
    a. The sad and somewhat fatigued argument Karnani proffers (It's first incantations emanating from Chicago and Friedman decades ago) ignores that any single minded pursuit (of profit or anything else) by definition, ignores the means of achieving those ends. He would, it appears, prefer to defer the interests of the society in which the corporation operates, to politicians who are, in large part, elected by the currently unrestrained (Wasn't the 14th amendment liberating!) funds donated to the campaigns. Let's see how this is working for us:
    i. BP: Creates an Environmental mess in the Alaskan Tundra because it did not want to spend the money to maintain the oil pipeline there (Thank you EPA for not checking sooner and thank you Congress for not demanding penalties high enough so that they cannot be ignored). BP: Near Houston an oil refinery explodes killing fifteen people - an accident - read negligence - avoidable by proper maintenance of a pressure indicator (Thank you OSHA). BP: Gulf Oil rig explodes killing more workers, due, it appears, to taking short cuts in venting gas build up in the well.(Thanks again OSHA
    and others). Mortgage meltdown, peanut butter and salmonella, billions of eggs and salmonella .. In Karnani's world consumers must pay three times for their goods and services; first, they pay the provider, second they pay a regulator to make sure what the producer provides is worth the money, and third they pay in suffering when it occurs that the first two payments were actually fraudulent.let's hope they have health insurance...but not if shareholders must bear the cost.

  2. (second part)
    b. Karnani understands these problems however, because he maintains that it costs a company to do the right thing. he just wants to externalize this cost to the society in general, I suppose to allow for million dollar birthday parties and "competitive" bonuses. Interestingly, Canales et al., on the same page as Karnani's report, argues that business schools need to do a better job teaching values - These authors, throw their hands to heaven and ask: " Why should and how can it be possible for business to self-regulate it's behavior?" They're all for a free market.. it's just that the seller in this market is a recalcitrant child without conscience or
    will to do anything other than correct for price and those with the responsibility to discipline the child work in business schools...hmmm...
    c. Of course, with appropriate leadership, companies can and do achieve remarkably effective social policies (see the Tylenol recall, Merck's battle
    with River blindness in the 70's, etc.) -, they can self-regulate and must because:
    i. People's lives are in jeopardy (Over 5000 workplace deaths year)
    ii. People's health is in jeopardy (Hope you liked your omelet Matilda - 1300 salmonella poisonings so far )
    iii. People are exploited (Nike)
    iv. People's privacy and speech are curtailed
    v. The world's biosphere is in jeopardy (If you think I'm radical read Hawkings' latest).
    vi. The livelihood of all organizational members is at stake (Enron, Worldcom).
    3. Take this, Associate Professor Karnani's, position as meritorious at your personal peril. Because in this country, it is highly unusual that a
    Harvard educated, Michigan based educator has immediate family members in the coal mines, on oil rigs, spreading insecticides by hand through a garden needed to sustain life, sowing shirts for Walmart at 11 cents an hour. No, he prefers you pay the price he will likely never have to pay.

    There will be a quiz at the bar over beer this afternoon.

    Warm Regards,


  3. Another reply, from Mike Valente (Univ. of Western Ontario):
    Where I Disagree
    1) My greatest concern with this article is the author’s presumption that business merely represents a passive recipient to market and regulatory trends as reflected in his examples of the auto sector and health food sector. We’ve known for quite some time though that companies have played a proactive role in shaping the market and regulation for food, vehicles, and many other products and services. General Motors played a very influential role in curbing government imposition of taxes on gasoline so that larger gas-guzzling vehicles would still be attractive to the market. The private sector’s role in ‘killing’ the electric car was, according to many, not a result of any lack of market demand but the preservation of corporate interests, suggesting that business exercises the power to build and dismantle markets.
    2) I would argue that there are indeed situations when firms are best positioned to respond to social and ecological issues regardless of the relevance to business operations. This is especially the case in the global south where substantial public service gaps exist and companies have stepped in to fill governmental roles like, for example, the efforts of several multinational corporations in Kenya to address public service gaps after the post-election conflict in 2008. While I agree that in an ideal world, government or other public bodies may be best positioned, in reality these actors are not always available and it is instead business that finds itself better positioned (see Private, but Public WSJ, 2009). 3) Even when activists, NGOs, and civil society groups do exist to address some of these issues, we find that business is typically brought in as part of the solution. Many unique business models of the global south represent innovative responses, suggesting that business is not merely a passive recipient to market trends but an active player in the solution to these issues. The point is that firms represent architects in finding ways to align profit with social goals. Exemplary scholars like Ed Freeman argue that it is the responsibility of business to migrate to areas that ultimately maximize value for multiple stakeholders, including shareholders, concurrently. Put another way, managerial options may not be limited to being responsible on the one hand and sacrificing profits on the other OR vice versa.
    In sum, the views put forward in the WSJ article, while relevant at a time when public and private roles were distinct and clearly defined, are quite outdated. It may be time to let go of the theoretical niceties associated with pigeonholing roles and responsibilities to different actors and recognize that the blurring lines between them may represent a future reality that requires the attention of managers, business scholars, and policy makers.