Government and corporate social responsibility

In his lecture last block, Robert Reich talked about the importance of government coming in to set “socially responsible” rules for companies to play by. His argument was that it is not the responsibility, nor should it even be the goal, of a company to develop and implement practices that are universally deemed to be “socially responsible,” whatever that may mean.

Companies exist for one reason, he argued, and that is to make money. Any notion of them taking on some sort of social moral authority was a waste of time and shareholder money.

Personally, I find this argument to be very persuasive. How should a company know what is “socially responsible?” How can we ask companies to act in a certain way if there are no rules or incentives to make them act that way? Managers provide incentives and rules to foster a certain behavior from employees, why shouldn’t government do the same for companies?

I know this all smacks of excessive government-intervention, and that is not at all what I mean here. In fact, I’m even proposing less, but more organized government intervention. If there is one set of rules that governs all companies, then those companies are spared the excessive confusion and expense of dealing with a hodge-podge of different—and often contradictory-- local rules.

Some examples of industry asking government for guidance:

Tech Firms Seek Action on Net Censorship

Michael Samway, deputy general counsel at Yahoo, also appealed for more action from Washington.

The State Department has the tools to engage foreign governments on openness,'' Samway said. ``We do have significant leverage as companies, but the government has the most significant amount of leverage, and we do need the government to be in play.''


Industry executives urge Bush to accept mandatory action against climate change

WASHINGTON: The chief executives of 10 major U.S. corporations are saying that voluntary efforts to combat climate change are inadequate and want Congress to require limits on greenhouse gases this year.

The many faces of globalization

NY Times has an interesting profile of Dani Rodrik, a Turkish born economist who pushes alternative theories on globalization.

I gotta be honest, I haven't read any of Rodrik's work but he does seem intriguing based on this profile.

In fact, I'm not sure what he's saying is all that different from a lot of other economists, that ultimately global trade is good for populations as a whole. But where he seems to take the discussion one step farther is admitting that while global trade is good on the whole, it is not good for everyone and he highlights that there are individuals (if not entire industries) who suffer as a result of it.

Rodrik seems to posit that rather than going after trade as a single minded goal, go after it with a two pronged approach; with the second prong being a thoughtful series of policies on how to assist those who are inevitably harmed by trade.

Seems like a pretty sound strategy to me. Again, I haven’t read anything else by Rodrik so I’m just going off of what’s on the profile. However, I think I am more pro-trade than he is. If I read Rodrik correctly (based on this profile), he is much more cautious about free trade and would probably advocate keeping certain barriers up (or even returning some barriers) while certain industries improve and can become globally competitive.

I see the logic here, but I’m not sure I could support it. Wouldn’t increased global competition encourage slow industries to improve? I guess he would counter that a certain amount of protection would help these industries grow and strengthen, but unfettered competition would wipe them out before they’ve had a chance to establish themselves.

I dunno, I still can’t really buy it. But I applaud that he is able to thoughtfully point out the challenges of globalization and even when doing so, does not dismiss globalization outright.

As usual, there is a lively debate on Mankiw’s blog about this story.

Cross post from IP Penguin

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