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What Are the Consequences of “Social Responsibility” for Corporations?
That’s the question I ask in my newest column for Defining Ideas from the Hoover Institution.
In recent years, it’s become fashionable to talk about the need for “social responsibility” from the business sector — and one of the ways that has played out is through an emphasis on making sure that foreign supply chains are free of human rights violations like sex trafficking and involuntary servitude. That these practices appall the conscience is clear. That the U.S. government’s efforts to combat them are effective is less so. In fact, we may be living in the worst of both worlds — one where such regulations fail to seriously address the underlying problem but function as a de facto subsidy for domestic firms. As I note:
The effort to control abuse overseas by imposing obligations on head contractors to supervise their remote subcontractors is a bit like pushing on a string. The locus of the enforcement action is too far removed from the site of the abuses to do that much good. Indeed, given the obvious inefficiencies associated with both of these enforcement schemes, it is appropriate to ask the public choice question, namely, whether the named beneficiaries of these programs are the actual beneficiaries.
On that question, there has to be more than a modicum of skepticism. There is little doubt that any legal regime that hits American companies for sins overseas will increase the cost of doing business in those locations. It is hardly clear that these shifts will ultimately benefit the vulnerable workers who are the targeted populations for these measures. Instead, the higher costs could easily lead American firms to abandon foreign markets where the plight of local workers is most desperate, at which point the prime beneficiaries of these programs are the domestic firms for which any inspection, disclosure, or audit obligations are far less onerous.
This is a complicated issue, to be sure — not least because no one of sound character endorses the heinous acts that these laws are meant to combat. To effectively evaluate public policy, however, we have to judge by results, not just intentions. Read the whole thing and let me know what you think in the comments.
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I think it would be fatuous to argue that corporations have zero responsibility for how they influence and affect the wider world.
The crux of the debate is how much responsibility, how those responsibilities should be adjudicated and enforced, and who gets to do the enforcing.
Indeed, this is the crux of virtually any debate about the limits of government.
The progressives have a default position: “If you agree that a party has a responsibility to behave a certain way, then the federal government of the United States of America has a duty to adjudicate and regulate the behaviour of that party.”
Since the Progressives have so much political influence, it often seems like the only way to counter that position is to argue that the party in question has no responsibility in the first place. That seems to me to be clearly incorrect, but it’s pretty difficult to move an alternative strategy forward.
Thanks for the interesting article. I was heavily involved in a supply chain management program addressing environmental, safety and labor issues for several years for the company I worked for. These were industrial manufactured components not consumer goods so a somewhat different profile than the retail suppliers. Although the NGOs we dealt with considered the program under the guise of social responsibility we saw it as necessary to protect the reputation and flow of components to our company; that is, for a business purpose.
Government regulation in this area would be a disaster. It is extremely difficult to run these programs from a corporate perspective as it is. Adding a layer of complex, inflexible legal requirements would make it even more difficult and, as you point out, likely have unintended consequences. It would be the typical government approach of “let’s do something that makes us all feel better and leave the companies to actually figure out how to make it work and if they don’t do it the way we like, we will, employing hindsight, prosecute ’em and get some good headlines”.
“Social Responsibility” is the mentality behind the garbage Conflict Minerals regulations, a massive burden on smaller firms like mine. I have to waste many hours every year now bothering my entire supply chain to gather information on where every possible “conflict mineral” could have originated, then spend hours and hours more compiling this junk into lengthy impenetrable reports. Dodd and Frank should be jailed for this.