The Corporate Response to the New Indiana Law

“Whether blameworthy or not, the use of the cloak of social responsibility, and the nonsense spoken in its name by influential and presti­gious businessmen, does clearly harm the foun­dations of a free society. I have been impressed time and again by the schizophrenic character of many businessmen. They are capable of being extremely farsighted and clearheaded in matters that are internal to their businesses. They are incredibly shortsighted and muddle­headed in matters that are outside their businesses but affect the possible survival of busi­ness in general.” This was not a conservative response regarding the Indiana law, rather it’s from the 1970 New York Times Magazine article by Milton Friedman, whose free-market, the “business of business” motto set the direction for American business for the last half of the 20th century.

Yet the fundamental business principles espoused by Friedman were debunked and proved empty by the belief in the corporation’s social responsibility to only its shareholders, its community, to all who are part of its supply chain and indeed, to the sustainability of the earth itself. And corporations have logical business reasons to be “responsible” – Millennial’s will spend more money on a product sold by a company that is socially responsible; the brightest employees want to work for these companies; pension funds will divest from socially irresponsible companies; if the earth’s natural resources are not sustained, businesses will suffer – the short term gain is not worth the long term consequence.

So perhaps, we have arrived at crossroads – some corporate executives, now unilaterally representing the moral positions of public corporations, articulate their shareholders’ morality and are making business decisions that may have unintended consequences.

Just when we were sure that corporate social responsibility was important, necessary, justified and just plain good, corporations may be overstepping their rights. Perhaps examining Apple’s actions, Starbuck’s recent race campaign and others, will lead us toward a more rational equilibrium.

James Abruzzo, Consultant, Consulting, Executive Search, Nonprofit Compensation, Expert Witness, Corporate Response