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A CHORUS OF VOICES from non-government organizations, shareholder activists and other groups is suggesting that corporations take the lead in addressing social issues around the world. Even the United Nations is pressuring chief executives to expand their social responsibility spending. Kofi Annan, that great paragon of virtue, is arguing that for CEOs, it's €˜principles' versus €˜profits.'
For a CEO, there is a trap in going down this path (and we are indebted to the Competitive Enterprise Institute in Washington for some of this analysis): The corporation exists to create wealth for shareholders, managers, employees, suppliers and customers. By dispersing wealth to these constituencies, the corporation allows them to go out into the world and advance their values through religious, political and social institutions. The corporation should be evaluated solely on how much money it makes.
But the social responsibility mavens are arguing that the corporation is a social institution that has a duty to directly address larger problems. It's tempting for CEOs to embrace that view because they have been on the defensive for so many years. Embracing a broad view of social responsibility could be a way to reclaim lost legitimacy.
But it's a slippery slope because once a CEO accepts the argument that he or she has a €˜social responsibility,' the activists will argue that the elimination of poverty and disease, the dismantling of discrimination and the promotion of religious freedom are the responsibility of the corporation. Under the moral framework they are attempting to establish, companies should not be involved in alcohol, tobacco, gambling, nuclear power, firearms, defense contracting or animal testing. Clearly, this agenda would cause a company to spend heavily on unrelated activities.
There's a fine line, to be sure. It makes sense that a CEO like George David of United Technologies should be concerned about how much energy his company uses and how well his products perform in terms of energy consumption and environmental impact. All that's directly related to his bottom line. It makes sense that a CEO should care about worker safety, the economic impact of a factory on a local economy and other issues that directly affect profitability over the long term.
So CEOs should engage in some corporate philanthropy and community or government affairs, but those activities should be tightly concentrated on achieving corporate goals. It's wrong to, in effect, apologize for the fact that a corporation makes money. Rather than playing to the social responsibility crowd, CEOs should gear their public relations and marketing efforts to demonstrate the positive impact their goods or services have had on the quality of American lives and on society as a whole. | 
