The current issue of Reason has a
debate about corporate social responsibility (I will post the link
next month when it is available.) The debate is between Milton
Friedman, John Mackey CEO of Whole Foods and T. J. Rodgers CEO of
Cypress Semiconductor. (Disclaimer: I was a key founder of the
corporate social responsibility movement but no longer hold my
original views.)
The debate is exciting and fascinating for me. As I read each position I was convinced.
As I read each position I was convinced.
Friedman makes his
classic argument that the shareholders can do a better job for
society by using the profits for their own purposes than a
corporation can do with philanthropy. The same is true for the
corporation's uses of its profits with alternative investments in its
own business. Friedman finds Mackey's arguments about supporting
employee and community philanthropy to be a subterfuge. Those are,
if well done, directed at greater profit.
Rodgers argues that a singular goal of
corporate profit is a clear goal that results in a constant reduction
of prices (his firm makes computer components) which has a far
broader benefit for the society (than corporate philanthropy) in
lowering everyones' costs, spreading technological improvements and
creating employment.
John Mackey argues that corporate
philanthropy improves employee morale and productivity, creates
stronger relations with suppliers and has great benefits in community
relations which translates into significant customer loyalty and good
marketing.
Each of these arguments is persuasive to me. The reason they sound like the blind men describing different parts of the elephant is that is precisely what they are doing.
The world doesn't realize it yet, because virtually no one has read my Gods of Commerce (now free online) but there are three different forms of commerce. Gods of Commerce is based on my thirty years experience in business with thousands of clients including the rare experience of being founder of a hippy business network.
Gods of Commerce explains that there
are three distinct forms of business: trade, industry and clientry.
Friedman is talking in abstract terms that has little bearing on
individual businesses --- an economics background is
counter-productive for a business person. Economics is theoretical
--- business is empirical. What he says is theological and nice but
not relevant to real business as Mackey and Rodgers both point out.
T. J. Rodgers has a radically different view of business because he
runs a pure industrial company that has no direct retail customers
and functions best by reducing costs. That is my exact definition of
industrial commerce: cost reduction.
Mackey has a clientric business. His goal is stable long term relations with customers for whom a variety of elements create a desirable relationship. A long term relationship is based on a wide range of elements ranging from trust, quality, recourse, information.... etc, etc. A clientric business will do anything necessary, including philanthropy, to maintain a long term stable customer relationship.
The debate is great, but it will be a long time before the world realizes that it isn't a debate it is a description of different modes of commerce that require different corporate practices.