Tuesday 20 March 2012 8:43 pm

Ideological companies are not the way to go

APPLE has accumulated a “cash pile” of about $100bn. Until yesterday, when its chief executive, Tim Cook, announced a plan to pay out $45 billion in dividends, there was speculation about how the money might be spent. Some suggested philanthropy. Cook should be proud of resisting the temptation. “Corporate philanthropy” is one of those expressions designed to obscure its true nature. Had Cook directed $45bn not to Apple’s shareholders but to Greenpeace, the RSPCA, Save the Children or some other good cause, he would have been doing one of two things: neither of which is philanthropy. The first possibility is embezzlement. A CEO who gives corporate funds to a charity, wishing for no benefit except to do good, is no better than someone who steals money from your wallet to give to his favourite charity. The relationship between Robin Hood and those he robbed is surely not the principal-agent relationship shareholders seek with their corporate executives. The second possibility is marketing. Some claim that consumers prefer companies that are “socially responsible”. By donating his shareholders’ money to a good cause, a chief executive may be serving their commercial interests; the cost of the donation may be more than covered by increased sales. Maybe it will. But then the virtue of the donation’s recipient is irrelevant. Making the donation is a commercial decision like any other. It exploits the preferences of target customers for the sake of profit. Identifying the “good causes” to be supported requires no moral integrity but mere opinion polling. Such “corporate philanthropy” will direct money to popular causes, whether or not they are good. The common idea that “corporate social responsibility” must be encouraged to offset the harm caused by the profit motive is dangerously ill-conceived. The profit motive helps us humans get along because we all share it. We all want to exchange something we possess (such as our labour) for something else we value more (such as a salary). This makes us keen to cooperate. The shareholders and employees of my firm disagree on many political and religious issues. But we put aside these differences to invest and work for the common cause of making money. Because the firm has no ideological agenda, we can leave such matters aside and get along. And our customers can get along with us too, regardless of any ideology they may hold. But suppose our management decided that we should donate to Greenpeace, Friends of the Earth or some other environmentalist charity. Now we would all be working in support of environmentalism. And not all of us want to do that. By working for my firm, I would not just be making a living; I would be taking a political position. The pluralism and tolerance of market capitalism depends on the idea that we are just doing business. By selling you my labour or my silk robes or whatever, I am not endorsing your religion or politics or lifestyle. Nor are you endorsing mine. Alas, the goody-goods who promote “corporate social responsibility” reject this idea. They think that must not just do business; we must be on a moral mission. That is why they are a threat to our open society. Jamie Whyte is a senior fellow of the Cobden Centre.

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