Wednesday, July 27, 2005

Becker and Posner On Corporate Social Responsibility

Gary Becker and Richard Posner at the Becker-Posner Blog are answering the question "Do Corporations Have a Social Responsibility Beyond Stockholder Value?". T

Becker's answer:
...My answer is "no", although maximizing value, meeting contracts, and obeying laws help achieve many of the goals by those claiming corporations should be "socially responsible" by taking care of the environment, considering the effects of their behavior on other stakeholders, and contributing to good causes. Still, laws and contracts, and individual use of their own resources, rather than corporate behavior, should be the way to implement various social goals.
Posner adds:
I agree with almost everything that Becker says, but will suggest a few qualifications. I can think of one situation in which "pure" charitable donations by corporations, i.e., donations that do not increase profitability, could benefit shareholders. Assuming that most shareholders make some charitable donations, they might want the corporations they invest in to make modest charitable donations on the theory that a corporation will have more information about what are worthwhile charitable enterprises than an individual does. For example, charities differ greatly in the amount of money that they spend on their own administration, including salaries and perquisites for the employees of the charity, relative to the amount they give to the actual objects of charity. Presumably corporations are in a better position to determine which charities are efficient than individuals are; if so, then shareholders may impliedly consent to some amount of charitable giving by their corporations. But not much. The reason is that one person's charity is another person's deviltry: a shareholder who is opposed to abortion on religious grounds would be offended if his corporation contributed to Planned Parenthood. The practical significance of this point is that corporations avoid controversial charities, so that the issue of implied consent becomes whether the shareholder would like his corporation to make a modest contribution to some set of uncontroversial charities.
For the whole piece(s), click here and here.

Ben and Jerry's is a perfect example of Posner's comment that "one person's charity is related to another person's deviltry". If you want to spark some good classroom discussion of these issues, Michael Schill has case titled Ben & Jerry's Homemade that's based in large part on this issue. The link takes you to the abstract on SSRN, and you can download it by clicking on the link at the bottom of the page. It's pretty "low-tech" and doesn't require much in the way of finance sophistication, so it would even be good for a low-level undergraduate class. .

2 comments:

Dr Purva Pius said...

Hello Everybody,
My name is Mrs Sharon Sim. I live in Singapore and i am a happy woman today? and i told my self that any lender that rescue my family from our poor situation, i will refer any person that is looking for loan to him, he gave me happiness to me and my family, i was in need of a loan of $250, 000.00 to start my life all over as i am a single mother with 3 kids I met this honest and GOD fearing man loan lender that help me with a loan of $250, 000.00 SG. Dollar, he is a GOD fearing man, if you are in need of loan and you will pay back the loan please contact him tell him that is Mrs Sharon, that refer you to him. contact Dr Purva Pius, via email:(urgentloan22@gmail.com) Whats App +91-8929509036 Thank you.

Mr Abdullah Ibrahim said...

We offer personal Business loans services around the world. We strive to provide high quality service and high customer satisfaction, while possible financial services. We pride ourselves on our commitment to our customers; We can give you personal loans, auto loans, business / investment loans, short term loans. You can contact us for an affordable loan now at 2% interest rate. Contact us now via E-mail: abdullahibrahimlender@gmail.com
WhatsApp Number +918929490461
Mr Abdullah Ibrahim