Ethical Performance
inside intelligence for responsible business


Attack on ‘flawed’ CSR provokes global response

October 2010

CSR practitioners from around the world have rallied to defend the concept of corporate responsibility in the wake of a prominent Wall Street Journal article attacking it as ‘fundamentally flawed’.

An opinion piece by Aneel Karnani, associate professor of strategy at Michigan University’s Ross School of Business, argues that the idea that business can act voluntarily in the public interest is a ‘potentially dangerous’ illusion.

‘Very simply, in cases where private profits and public interests are aligned, the idea of CSR is irrelevant,’ he says. ‘Companies that simply do everything they can to boost profits will end up increasing social welfare.

‘In circumstances in which profits and social welfare are in direct opposition, an appeal to CSR will almost always be ineffective, because executives are unlikely to act voluntarily in the public interest and against shareholder interests.’

Karnani argues that while companies ‘sometimes can do well [financially] by doing good, more often they can’t, because in most cases, doing what’s best for society means sacrificing profits’. Business should therefore be left to concentrate on delivering profits and growth, while governments regulate and intervene to solve social and environmental problems, says Karnani, adding that the voluntary approach to CSR actually gets in the  way of meaningful government action.

‘The danger is that a focus on social responsibility will delay or discourage more effective measures to enhance social welfare in those cases where profits and the public good are at odds,’ he says. ‘As society looks to companies to address these problems, the real solutions may be ignored.’

Karnani, who also authored a critique of the late C.K. Prahalad’s ‘bottom of the pyramid’ theory in 2006, has come under attack for the article, headlined ‘the case against corporate social responsibility’.

Discussion of his argument has attracted widespread interest on social media outlets, and the New York-based public relations consultancy Fenton held a ‘webinar’ on the piece last month, featuring Matthew Bishop, US business editor of The Economist magazine, Aron Cramer, chief executive of Business for Social Responsibility, and Kernani himself.

Many others have also contributed opinions. One respondent to the article, Elaine Cohen, of the Beyond Business CSR consultancy, said: ‘It frightens me that a Michigan professor thinks like this.’

Kernani has since pointed out that ‘I strongly believe in social justice and that [firms] should not be left free to pursue the greatest possible profits without regard for social consequences’.
However, Tim Mohin, CSR director at the multinational software company AMD, said the ‘deliberately provocative’ Karnani may actually have ‘added momentum to the [CSR] movement’ by ‘having stirred up legions of impassioned objectors’.

Although once common, attacks in the media on the value of corporate responsibility have died down over the past few years. One of the staunchest  initial critics of CSR theories, The Economist, now runs regular supplements and events on the topic.

Aneel Karnani | Global | CSR

Further Information

3BL Media News
Sign up for Free e-news
Report Alerts
Job Vacancies
Events Updates
Best Practice Newsletter