The Social Responsibilities of Corporations

In previous posts I have professed my support for integrated corporate philanthropy and the model of devoting 1% of employee time, profits, and pre-IPO equity to a charitable cause. I believed at the time – and still do – that corporations can do good by doing well and that there are a number of unquantifiable morale benefits in the workplace when employees feel like they are part of a bigger cause above and beyond profits. That being said, I admit to drifting right in my support for free markets and minimal government interference. (In general, I find some liking in some neoconservative tenets.) So, I found Richard Posner’s recent posts (part one, part two) on the social responsibilities of corporations provocative to say the least. As you can imagine, Posner, given his propensity to link everything to markets and economics, thinks corporations provide maximum social benefits by maximizing return to shareholders. There is a lot to be said for this viewpoint. Both he and Becker venture into other areas of corporate law and economics on which I do not have sufficient understanding to comment intelligently. I will, though, excerpt this quote from Posner where he veers off course:

One comment that I am quite sympathetic to is that the social return to profit-maximizing activities may actually be higher than the social return to corporate philanthropy, when “corporate philanthropy” isn’t just a fancy name for public relations. As I argued in an earlier post, philanthropy directed at poor countries may actually reduce the welfare of those countries, and the same is probably true to an extent of purely domestic charity. The general effect of charity is to postpone the making of difficult decisions. For example, philanthropic gifts, private or public, to the arts retard serious efforts by artists and artistic organizations to create work for which there is a genuine interest on the part of the public, and philanthropic gifts to universities help to shield them from competitive pressures.

A commenter has smartly replied: “Who decided that popularity was the purpose and overarching goal of art? Did I miss a meeting? The primary rationale for supporting arts with philanthropy is the desire to encourage art that is potentially unpopular but hopefully mind-expanding.”