Adam Smith Institute on Corporate Social Responsibility

The Adam Smith Institute (ASI) has taken against those who think Corporate Social Responsibility might be a ‘a bit Marxist’, or that Tory leader David Cameron’s support for the concept marks ‘a betrayal of capitalism’ by making the case that ‘honesty and decency… [is]… actually good for business, where reputation is the basis of long-term success’. And quite right.

Yet, the think tankers appear to not quite get it. They argue that enhancing the rights of shareholders is the route to responsible business practice. There is no evidence to support this view. In fact the primary obligation in law on a public company’s board of directors is to shareholders (although, as ASI points out, boards often put themselves first). Other stakeholders including customers, suppliers, local communities and, to a lesser extent, employees are rarely protected from the externalities of economic transactions (that is, the by-products of activities that are often not factored into price by the market). For example, there may be much profit to be gained from a process that pollutes a local river. It takes a corporate social responsibility programme that considers environmental impact (not just shareholder value) to stop that getting out of hand.
Contact Stephen Newton

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