By: Maria Nardell, onPhilanthropy, 11/29/06

… First of all, it is a challenge to develop a method of benchmarking second-grade reading improvements and translating that output (e.g., the number of students who pass a reading diagnostic test) into terms equivalent to the given input (e.g., volunteer time). Second, even if such a formula were devised, Thompson observed, how would one compare the impact of education programs in places as diverse as Vermont and India?

Most companies rely upon their nonprofit partners for the statistics to measure social impact. As with corporate giving programs, however, there is no single standard by which nonprofits gather, analyze or present that data, and so Thompson would question a company that states it has exact data detailing the impact of its giving. …

According to Farron, “You can look at social return in a couple of ways.” One way is non-monetary. That is, social change is measured by quantity times quality, allowing for “customizable social units of outcome,” such as the number of lives saved by a vaccine or the number of people educated through a scholarship program. The other way is to think about social return in a monetary sense. The socio-economic value of corporate giving investments can consist of the money society saves or the increased number of people contributing toward the tax base. Some companies also measure the market value of their investments, although Farron points out that most companies don’t accurately determine the percentage of goods and services actually being used. (For example, brand-new donated computers sitting in an organization’s closet don’t do anyone any good.) …

http://www.onphilanthropy.com/site/News2?page=NewsArticle&id=6845&JServSessionIdr011=lyn38jsak1.app6b

By HENRY G. MANNE, Wall Street Journal, November 24, 2006; Page A12

Milton Friedman famously declared that the sole business of the managers of a publicly held corporation was to maximize the value of its outstanding shares. Any effort to use corporate resources for purely altruistic purposes he equated to socialism. He proposed that corporation law should prevent managers from straying off the reservation to join the altruists, a power now almost universally granted them by state legislation.

At a conference 34 years ago, celebrating Friedman’s 60th birthday, I presented a paper questioning that dictum by noting that the vast part of apparently nonprofit-oriented behavior by corporate managers was really — and necessarily — a profit-maximizing response to business, social or political pressures dressed up to look like something else. For such a strategy to be successful, the behavior had to appear to be nonprofit maximizing, and, of course, had to be called something like “social responsibility.”

Since it was difficult or impossible to distinguish a profit motive from a charitable motive in any particular corporate action, a strong rule against corporate altruism, as Friedman was advocating, would invite judges to examine the propriety of a significant set of managerial decisions. I argued that American corporation law had traditionally had a strong “business judgment” rule whose principle aim was to prevent judges from even engaging in that kind of examination, which they were perhaps more likely to get wrong than to get right. Thus, if any plausible basis existed for a bona fide managerial decision, no matter how charitable it looked, I argued, we did not want a stronger rule that would invite judges to second guess managers.

The assembled audience of Friedmanites, as we were sometimes called — Are we all Friedmanites now? — was aghast that I dared to counter one of the master’s most pointed proposals, and the immediate response from the audience was hostile. Well, it was, until Friedman took the floor to declare that “I agree with everything that Henry said.” That settled that. I assumed that I would not hear Friedman again declaring that corporate social responsibility was the equivalent of socialism. Consequently, I was chagrined over the ensuing years to hear him make the same pronouncement many times, though to my knowledge not with any explicit proposal for a change in the legal rule.

* * *

Now I realize (I should have known) he was absolutely correct about the significance of proposals for socially responsible corporate behavior, whether they emanated from within or outside the corporation. These proposals reflect, as well as anything else happening today, the inability of many commentators to distinguish between private and public property — in other words, between a free enterprise system and socialism. Somehow large-scale business success, usually resulting in a publicly held company, seems mysteriously to transform the nature of numerous individuals’ private investments into assets affected with a public interest. And once these corporate behemoths are “affected with a public interest,” they must either be regulated by the state or they must act as though they are owned by the public, and are therefore inferentially a part of the state. This attitude is reflected not merely by corporate activists, but by many “modern” corporate managers.

An integral part of the older notion of public utility regulation required that the enterprise be, or act like, a monopoly (whether “natural” or not), in order to be affected with a public interest. But in today’s confusion, there is no such requirement. No arguments, weak as they are, about natural monopoly, market failure, government creation of corporations or the alleged government gifts of limited liability and perpetual existence, are required to justify the demands now regularly placed on business entities. Any large enterprise, no matter how competitive its industry and no matter how successfully it is fulfilling the public’s desires, has a social responsibility — a term that makes mockery of the idea of individual responsibility — to use part of its resources for “public” endeavors. Today’s favorite causes are environmental protection, employee health, sales of goods at below-market prices, weather modification, community development, private enforcement of (not merely abiding by) government regulations and support of cultural, educational and medical facilities.

How did this transposition from private to public responsibility come about? After all, even the largest corporation started simply as an idea in someone’s head. At first this person hires employees, borrows capital or sells equity, produces goods or service and markets a product. Nothing about any of these purely private and benign arrangements suggests a public interest in the outcome. But then the business begins to grow, family stock holdings become more diffused, additional capital is required and, voilà, another publicly held corporation. In other words, another American success story.

But what has happened to implicate public involvement in the management or governance of these enterprises as they grew from a mere idea? Nothing. And if that nothing be multiplied by tens or hundreds or thousands, the product is still zero. So where along the line to enormous size and financial heft has the public-private nexus necessarily changed? True, there are now a large number of complex and specialized private contracts, but every single one of these transactions is based on private property, freedom of contract, and individual risk and reward. If one apple is a fruit, even a billion apples do not become meat.

The origins of this transformation lie in the minds of people who do not like or appreciate the genius of capitalist success stories, including always politicians, who will generally make any argument in order to control more private wealth. Of course, the social responsibility of corporations is always tied to the proponents’ own views of compassion or justice or avoidance of a cataclysm. But the logic of their own arguments requires that essentially private corporations be viewed as somehow “public” in nature. That is, the public, or the preferred part of it, often termed “stakeholders” (another shameful semantic play, this time on the word “shareholders”), has a pseudo-ownership interest in every large corporation. Without that dimension in their argument, free market logic would prevail.

The illusion of great and threatening power, the superficial attractiveness of the notion, and the frequent repetition of the mantra of corporate social responsibility have made this fallacy a part of the modern corporate zeitgeist. Like the citizens who were afraid to tell the emperor that he was naked, no responsible business official would dare contradict the notion publicly for fear of financial ruin, even though the practice continues to cost shareholders and society enormous amounts. This is especially so in large-scale retail businesses like Wal-Mart or Coca-Cola or BP that are highly vulnerable to organized public criticism. Our laws against extortion do not function effectively when it comes to corporations. And so to some extent these private entities have indeed, via the social responsibility notion, been converted into crypto-public enterprises that are the essence of socialism. Milton Friedman was right again.

Mr. Manne is dean emeritus of the George Mason University School of Law.

By ALAN MURRAY (regular columnist of the Wall Street Journal) , Oct. 26, 2006

… Still, the economic backdrop for election 2006 should raise a warning flag about the future. Large numbers of Americans seem to have lost their belief in John F. Kennedy’s famous aphorism that a rising tide lifts all boats. “They know the economy is white hot,” says political analyst Charlie Cook, “but they also know they aren’t in it….There’s a feeling that some people are getting theirs, but we aren’t getting ours.”

There’s a well-known litany of reasons for that. Median earnings have been growing at a disturbingly slow pace, even as profits and high-end pay have soared. Health-care costs are not only increasing, they increasingly are being paid by consumers, not by employers or the government. Pensions are disappearing, as is job security — and any sense of long-term loyalty from employers. As pollster Peter Hart puts it, “there’s no gold watch” waiting at the end of a career these days. He cites a cartoon in which the boss says: “Mr. Jones, the reason we are letting you go is because you’ve given us the best years of your life.” Meanwhile, a thin slice of America is enjoying unprecedented prosperity. CEO pay is one of the most visible manifestations, rising in the past decade at triple the rate of the median worker’s pay. …

by Terrence Scanlon, Aug. 22, 2006

… Who would have guessed that the world’s second-largest oil company would fail to maintain its own facilities? Unlike the Middle East or the Gulf of Mexico, Alaskan oil production hasn’t been considered risky. There are no wars or hurricanes. But America’s domestic energy supply is in jeopardy now because BP put the rhetoric of corporate social responsibility ahead of minding its own business — literally.
BP should spent some of its advertising budget and corporate philanthropy on fixing its pipeline.

http://www.washtimes.com/commentary/20060821-094831-8514r.htm

from The Australian
Corporate social responsibility is a con job. If we needed reminding
about this absurd craze sweeping the business world, it came a few
weeks ago when AWB boss Andrew Lindberg resigned. His company had paid
$290 million in illegal kickbacks to Saddam Hussein’s tyrannical
regime in Iraq.

Yet, while those illegal bribes were being siphoned off to Iraq under
the UN oil for food program, Lindberg was being hailed by newspapers
hawking the latest Corporate Responsibility Index as one of the
leaders of corporate social responsibility in Australia. Why? Because
talk about corporate social responsibility fell off Lindberg’s lips as
easily as Australian wheat rolled into Iraq, lubricated by AWB bribes.
 
 

From Pres. Bush’s address to the Second White House National Conference on Faith-Based and Community Initiatives, March 9, 2006

… a recent survey of our Office of
Faith-Based and Community Initiatives, … of 20 large
corporate foundations, found that only about 6 percent of their grants went
to faith-based groups. …

I would urge our corporate foundations to reach beyond the
norm, to look for those social entrepreneurs who haven’t been
recognized heretofore, to continue to find people that are running programs
that are making a significant difference in people’s lives.

When we studied 50 large foundations, we found that one in five prohibited
faith organizations from receiving funding for social service programs. In
other words, there’s a prohibition against funding faith programs from
certain foundations in the country. I would hope they would revisit their
charters. I would hope they’d take a look at achieving social objectives
— make the priority the achievement of certain social objectives before
they would make the decision to exclude some who are achieving incredible
progress on behalf of our country….

from the Wall Street Journal Online

Sky-high oil prices haven’t been kind to mutual funds with a mandate for socially responsible investing.

Over
the past 12 months, equity funds with a socially responsible bent have
gained 11.54%, nearly four percentage points less than the average for
all equity funds, according to investment-research firm Lipper. Over
three years, it’s an annualized 17.2% for socially responsible
portfolios versus 20.67% for all equity funds. SRI equity funds account
for only 0.62%, or $32.4 billion worth, of all equity-fund assets.

Though
criteria vary, socially responsible funds generally avoid sectors that
go against certain ethical guidelines. The biggest such sectors are
alcohol, tobacco, defense, pornography and gambling.

¹ SOCIALLY RESPONSIBLE FUNDS

 

• These nine funds are² top performers in their categories and have low costs.
 
MORE ON FUND SCREENS

 

For more information about Fund Screens, sign up for a free trial at www.smartmoney.com/wsj_fund³.

Energy
stocks, particularly those that focus on fossil fuels like oil and
coal, also violate the tenets of many socially responsible funds. Much
of the group’s underperformance of late can be attributed to its
relative distaste for the energy concerns that have led the market for
the better part of three years. The top two funds on our screen this
week, Ariel Fund and Ariel Appreciation, eschew the sector entirely.

But
before we paint socially responsible funds into the
too-constrained-can’t-compete corner, it’s worth noting that Lipper
only requires that they include some sort of moral criteria in their
investment philosophy. That’s a pretty low entry barrier that leaves
room for a large amount of discretion from fund to fund — and a lot of
stock-picking options for most socially responsible fund managers.

This
week, we searched for equity-fund portfolios tagged with the socially
responsible investing label. We demanded five-year returns in the top
50% of each fund’s classification and expense ratios in the bottom 50%.
Each of the nine no-load funds on our list is open to new investors,
requires a minimum initial investment of $5,000 or less and has total
net assets of at least $50 million.

From the International Herald Tribune, Dec. 1, 2005

… “The social contract was that if we build a quality product, we’re
going to have jobs, our kids are going to have jobs, and the plant will
still be in town,” he said. “Now, that idea is gone.” …

Next year, in a move that presages the end to GM’s grand experiment,
the company will shut down one of two assembly lines at what is
arguably the most famous factory in the country, where workers and
managers started out making decisions together at a sprawling complex
nestled in rolling farm country near Nashville.

GM’s short attention span prompted it to neglect Saturn just at the
point where it needed more investment. Instead, it poured money into
sport utility vehicles and pickups, hoping to outwit the Japanese –
only to see them invade those markets, too.

From the Wall Street Journal, Dec. 3, 2005, p. A9

… An independent study done last month by the National
Bureau of Economic Research says Wal-Mart does adversely affect
employment and wages. Retail workers in a community with Wal-Mart earn
3.5% less, the study says, because Wal-Mart’s low prices force other
businesses to lower prices, and hence their wages. Wal-Mart pays its
employees on average about $9.68 an hour. NBER says it is possible that
lower wages, which result in decreased earnings, could result in a
strain on the tax base if lower-paid workers must seek food stamps and
Medicaid. The study also found that Wal-Mart’s presence reduces retail
employment by 2% to 4%, although there is some evidence that total
employment increases.

Wal-Mart counters with a study it funded from Global
Insight, an economic-forecasting firm. The study found that, since
1985, Wal-Mart’s openings around the country have cut consumer prices
about 3%, saving consumers $263 billion in 2004 alone. While nominal
wages go down about 2% on average nationwide, the study says, prices go
down even further, causing an increase in consumers’ real disposable
income…
Retail
workers earn 3.5% less, according to the first study. Even if they went
down only 2%, are the workers supposed to be happy because they spend
all their money at cheap Wal-Mart stores?

Whoa! Be activist …go to spa … watch the fat melt on the global scale!

From csrwire.com
In addition to addressing social responsibility on a global scale, this week’s
press releases include an opportunity to explore social and environmental
justice through personal activism. Utne magazine founder and
Editor-in-Chief Nina Utne is inviting women to a
transformational retreat November 10-13 at The Crossings Wellness Spa outside
Austin, Texas. There, they will learn more about becoming what Utne calls
“rEVOLUTIONary women” with the help of women who define this term that combines
natural growth and radicalism, including Diet for a Small Planet authors
Frances Moore Lapp