A Tough-Minded, but Sympathetic, Approach to Corporate Social Responsibility

Abstract

As John D. Donahue explains: sometimes corporate social responsibility is simple hokum. More often it is sincere but incoherent, wishful thinking. Introducing social objectives that might, in the misty long run, align with shareholder interests threatens to muddy private-sector accountability. Corporate social responsibility can thus become both irresponsible and anti-social. With this in mind, we draw on the notion of externalities from economics and cost-benefit analysis from capital budgeting literature to suggest some rules that could help managers make wiser choices. The first rule: Pay attention to competencies when developing program alternatives and attend carefully to their execution, remembering always that management attention is a scarce resource. The second rule: Develop a framework to assess all corporate initiatives, not just social programs or short-term, profit-driven programs in isolation.