The Pen is mightier than the sword, but the Pen must sometimes move the sword against corruption if the corrupt are not moved by the pen.. An idea without an implementer is useless. "The Rulers do not carry the sword in vain"Rom 13:4

Saturday, January 11, 2014

The Proper Limits of Corporate Social Responsibility.

This is a much discussed question and issue. "What" is the appropriate extent of social responsibility of a corporation?   It seems that we have a duality here. "Total Profit motive" and "Total Social Care".

Neither of these extremes will see a company endure for long. In the first case it will become a hated entity that eventually collapses on it's own, and the latter will see it go broke due to over spending.  When it comes to total authority and total liberty (socially) John Stuart Mill said the line between these extremes is that thing where "most work needs to be done". He also said that the position of that line changes between generations and countries and time. Each  cannot figure out why the previous or other does not establish the line in the same place as them, or..why the other might have a difficulty in accepting the line that 'we' draw.

So there is a place for that line between making money and acting socially responsibly. Sadly the enlightenment became the endarkenment when it unleashed 'human reason' on the decision making processes of mankind in relation to social issues. (reason is essential in mathematics and physics etc).
Suggest to three people they should decide where this 'line' (above) should be and you will get three different answers, even if they belong to the same political party most likely.  One mans cleared up back yard is another mans 'environmental devastation and habitat destruction'.

My task here is to try to avoid extremes and lay some reasonable foundations for 'the line'... but the basis for my reasoning is 'revealed' truth, not human rationality.  It is important to highlight the importance of 'revealed' truth here, because if our position has no higher validation than our own opinion, it's really no better than the opinion of others. At this point some one will pipe up "But if science shows the best way.. we should all follow it"  hah!  One mans science is another mans junk, it all depends on who funds the research and what they were expected to discover. (e.g the Tobacco lobby when confronted with claims that smoking caused lung cancer)

Revealed truth. 
Firstly that God made the world/Universe. (implication.... if we are reckless with it we will be judged)

Secondly "Do for others as you would have them do for you"  which is self explanitory.  We might rephrase this "If we do to others what we would not want them to do to us, don't be suprised if they do it back!"

So with these principles in mind. 

To whom does a corporation owe it's primary loyalty?  The share holders!  This is obvious because without the start up and running capital, the corporation could not begin or exist.  Given this fundamental reality, it should be obvious that a corporation which engages in manufacturing or trade, must keep it's costs as low as possible.  But then, what would a corporation be if it did not have workers? It would be a lot of machines and offices doing nothing. So it has a responsibility to employ people and keep them happy and productive.
Problem!  The previous seems reasonable, and it is. But who determines how much employees get paid? Clearly initially it is the corporations accountants and managers. It has to be because they look at the big picture, and the simple equation of "Assets-Liabilities=Equity" applies.  If your liabilities are greater than your assets you don't have a corporation you have a problem like GM when:
The filing reported US$82.29 billion in assets and US$172.81 billion in debt This is not a company it is a negative or non-company. It's just a pile of debt!

When a corporation is established, it will advertise for employees. It will interview people and make an offer of xyz dollars per week in exchange for the labor of that person.  If the person feels it's too low, they will decline to proceed and will go elsewhere. Let's jump ahead now an assume the corporation has a full workforce.  It should provide some amenities for the workers to keep a happy environment... logic says this.   
Now we have the stage set for serious problems.  The world is blighted with people who seem to think that the totality of human history has been some kind of 'class struggle' and that workers by default are exploited. I refer to trade Unions. When such vile creatures approach otherwise happy employees, they will try to persuade them that they are hard done by, exploited, used up and expendable.  The reason they do this is to gain power over the corporation and to feather the nest of the Union leaders. 

I have a neighbour who finally handed the keys to his factory to his remaining employees who had been infected by Union propaganda. Of course there was nothing left, it shut down. All lost their jobs. He was paying above award wages, but this was not enough, the Union wanted 'power' more than wage justice.

Then there are other areas of necessary responsibility.  The environment is one. It would be utter reckless stupidity for a corporation to decimate a location in such a way that it cannot without great cost to local inhabitants, be restored to reasonable and habitable condition.  Effluent, toxic gasses, smoke, polution of waterways etc.. all are examples of the need for environmental social responsibility.

Should a corporation's social responsibility extend to providing pension and health  benefits for not only the worker, but also his family, and for life?   This was demanded by Walter Reuther of the United Auto Workers Union in the USA.   Once that had been achieved, at the general conference of the UAW in 1965 ish, he stated unambiguously, "This is only the beginning".   He would have been more accurate saying "This...is the beginning...of the end".  The "End" did not come for a few decades later, but come it did. All the costly extra's that the UAW had demanded and demanded over the years, accumulated to make vehicle production in the USA astonishingly expensive.

As soon as lower labor cost imports arrived.....the financially challenged public lapped them up like thirsty Wilderbeasts!  The end came with the declaration by GM what is was seeking bankruptcy protection, and needed a massive financial bail out from the Government to even stay afloat.  We can see how much of GM finance is taken up by the pension liabilities...it's $59 BILLION! for hourly workers and $29 billion for salaried. 

Funny thing...I don't have anywhere remotely resembling a pension other than the old age pension provided by our own government when it's due.. oh wait..that's now! (I'm 65)  but I'm not thinking of retiring.. good grief I'm so alive, I have a country to change! I'm working on a little operation to be carried out soon that will probably put myself and a few others in the news for a few days which would be a welcome change compared to the rubbish we see at present about the serial pest professional protesters who are very irritating.

But I digress. A well rounded approach to financial, environmental and human capital resources is the only way to fly for a company these days. That's it.

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