The Business of Business

"The business of business is business."
-Milton Friedman

In the midst of an economic crisis, corporate social responsibility (CSR) is gaining support against the old view that businesses ought to only concern themselves with the bottom line. Last Sunday, I had the pleasure of attending a spirited debate sponsored by The Economist, testing Friedman's assertion that the business of business is business. Daniel Franklin moderated an Oxford-style debate between Clive Crook of the Financial Times and Will Wilkinson of the Cato Institute, who argued in support of the proposition, and Professor John Ruggie of Harvard's Kennedy School of Government and Bennett Freeman of Calvert, who opposed it.

Mr. Crook spoke first in support of the proposition. He argued that business is accountable to 3 parties: customers, business owners, and citizens, and that these obligations form the “economic constitution of capitalism”. Crook went on to argue that adding other obligations, to workers and suppliers, neighbors, and society, is inappropriate. Managers should not concern themselves with more than the bottom line, Crook claimed, because attention paid to those obligations comes at the expense of attention to the 3 core areas of accountability. He went on to argue that “muddled economic constitutions” are to blame for the failures of Fannie Mae and Freddie Mac, and that, “public policy is the basis of government”.

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Professor Ruggie spoke first in opposition of the proposition. He argued first that government is not independent of business, and that, “you can’t have it both ways”, that is, if businesses oppose government provision of healthcare and government regulation, they will be left to bear those burdens. Ruggie also argued that corporate social responsibility has developed into a social institution to fill the space between legal requirements and social expectations, and that this gap is largest in developing nations with weak rule of law. Ruggie concluded that the proposition does not reflect reality.

Mr. Wilkinson spoke next in support of the proposition, arguing that executives are not necessarily qualified to balance the conflicting interests that CSR brings up. He continued, asking why we ought to expect executives to be effective stewards of sustainability, when there isn’t a clear consensus of the definition or demands of CSR.

Mr. Freeman gave the final speech, and opposed the proposition. He argued that we cannot ignore the “irreversible mainstreaming of CSR,” and cited GE and Wal-Mart as examples who have adopted sustainable practices, and been rewarded for their efforts.

After the opening statements, the panelists took questions from the audience, and were given a chance to make concluding remarks. An informal poll before the debate showed that 40% of the audience disagreed with the proposition that the business of business is business, while 60% agreed. After the debate, the audience sentiment was tied, with about 15% reporting that they had changed their mind (in one direction or another).

What do you think? Is the business of business business? Why or why not?