Why Haven't Shareholders Revolted Against Social Responsibility?

Last Updated Sep 20, 2010 8:34 PM EDT

Corporate social responsibility (CSR) remains an oddly divisive issue. One camp argues that the business of any publicly traded company is, and can only be, business. This is an argument put forward recently by Jay Richard, whose case is really just a re-hash of the original diatribe by Milton Friedman. Sure, they argue, private companies can do whatever they want. But public companies have to maximize ROI and, besides obeying the letter of the law, that is all they should ever do.

Which begs the question: why has there been no shareholder revolt against CSR? If it is -- as Friedman and his heirs argue -- an unethical misuse of shareholder funds, then why haven't the shareholders risen up against it? Why are they much more steamed up about CEO pay than about doing good in the community?

I think there are two reasons for this. The first is that the companies that invest heavily in CSR are well-known for doing so. When you buy stock in Google, Nike or WalMart, you know that CSR is part of the company's strategic positioning, marketing and competitive (or defensive) edge. Their shareholder documentation goes into it at length. So if you don't like it, don't invest in it.

The other reason is that, in almost all companies, CSR is such an infinitesimally small part of overall expenditure that it isn't worth arguing about. Is there any company out there doing so much on the CSR front that it's seriously eating into profits? If there is, I'd love to hear about it -- but I'll bet their shareholders don't mind.

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    Margaret Heffernan has been CEO of five businesses in the United States and United Kingdom. A speaker and writer, her most recent book Willful Blindness was shortlisted for the Financial Times Best Business Book 2011. Visit her on www.MHeffernan.com.