Corporate Social Responsibility

Corporate Social Responsibility is quite becoming the term d'jour in Indian Business circles. During the Republic Day Weekend - my son entered a drawing contest/camp where our kids (who are socially "advantaged") interacted with a bunch of kids who are socially dis-advantaged. Unfortunately these kids came (presumably from their homes or social activity center) after three-quarters of the camp was over - but thats besides the point.

A couple of years ago while I was in business school I read a book called "When Corporations rule the world" by David Korten. It's quite the anti-globalization, anti-privatization tome. But I remember one interesting point that he had noted. Corporate Social Responsibility is dictated by the laws of profit. If a corporate leader chooses to do the 'right' thing vs. the profitable thing, and therefore causes its market value to drop he/she will be fired.

Even assuming that a corporation is able to temporarily persuade its shareholders of the long-term benefits of the "social justice motive". In a global economy those corporations that drink the kool-aid of social justice and sacrifice profit, will be driven out of business by their international competitors.

In India many people point to a company called Fabindia as an example of an organization that practices social justice and shares the benefits of its growth with the community of weavers, artisans and farmers that it sources its products from. As a devoted Fabindia customer I can say that the social justice and inclusive development aspect of its business model is NOT what attracts me to its products.

The fact that a major chunk of the 400 Rupee shirt that I bought will make its way to a weaver makes me feel good about myself but that happens AFTER I have spent the 400 Rupees. If the shirt were to be priced at 4000 or even 1000 Rupees I would not have bought it. Even if an expensive shirt might have meant increased earnings for the weaver and his family.

We consumers buy Chinese products because they are good enough and they're cheaper than comparable American/European/Indian products. Consumers practice morality with their wallets. In a world where money is a scarce economic good people will inevitably spend their money where they perceive the highest value to themselves. Most people do not feel rich enough to change the world by paying more than we have to for the goods that we consume.

Organizations that trumpet corporate social responsibility and social justice as being central to their mission are doing their shareholders and themselves a disservice. An approach that relies on corporate and individual social responsibility to change the world - is doomed to failure. This approach will run up against a wall of individual self-interest and stall there.