(Bloomberg View) -- “There is one and only one social responsibility of business — to use its resources and engage in activities designed to increase its profits.”
So wrote Milton Friedman, the great economist and Nobel laureate. Someone should tell today’s corporate leaders, who are responding to the age of Trump in part by spending energy on activities other than directly increasing profits. “Corporate social responsibility” has become the topic of the day, and chief executives are entering the political fray with unusual frequency. And sometimes they’re doing so in ways Friedman might not have found objectionable.
This has been happening since the early days of the administration of President Donald Trump. Some recent examples: Since the high school shooting in Parkland, Florida, that left 17 people dead, several prominent companies have cut ties with the National Rifle Association. United Airlines, Delta and several rental car companies will no longer offer discounted rates to the NRA. The First National Bank of Omaha has ceased offering an NRA-branded credit card.
It’s been striking to watch corporations become more politically active over the past year. How to make sense of it?
It reflects the times. Customers are changing, and are demanding more social and political involvement from the companies they patronize. Social media has amplified their voices and the speed with which they mobilize. It’s hard to understand why anyone would care whether, say, their car rental company has chosen sides in the latest public debate. But apparently many people do, and they are using the power of social media to put pressure on corporations.
This must say something about the deepening tribalism that characterizes American life. Not only do people want their friends and their news and their social networks to be part of their tribe, now they want their banks to be members, too. This is unhealthy. Politics are important, but nobody should need agreement from an airline on climate regulation.
Of course, some of this activism is self-interested, as well. It’s no surprise that many companies have defended socially liberal causes that are also championed disproportionately by younger people and the college-educated. They want good workers, and are in part motivated by their recruiting needs. And they want to attract and maintain a loyal customer base. In other words, they might be maximizing profits, as Friedman would want.
But recent political action from corporations and their leaders isn’t only a reaction to social media, unhealthy tribalism, or the pursuit of self-interest in a new media environment. Some of it stems from genuine personal conviction.
Recall Trump’s shameful response to the white nationalist protest in Charlottesville, Virginia, last August. Merck CEO Kenneth Frazier resigned from the president’s American Manufacturing Council in protest, and others followed. Earlier this month, Mr. Frazier discussed for the first time why he resigned. “It was my view that to not take a stand on this would be viewed as a tacit endorsement of what had happened and what was said,” he said. “I just felt that as a matter of my own personal conscience, I could not remain.”
From an African-American businessman whose grandfather was born into slavery, this rings true.
Or consider the 350 executives who signed a letter this fall urging Trump not to end the Deferred Action for Childhood Arrivals program, which lifts the threat of deportation and grants work permits to certain young people who were brought to the U.S. illegally as children. (The president ended up terminating the program with a delay.) Major tech leaders including Apple CEO Tim Cook and Amazon CEO Jeff Bezos signed the letter, along with Warren Buffett. Political action around this issue reflected in part concerns about fairness — that you shouldn’t be punished because of what your parents did, and that the U.S. hand of welcome shouldn’t be withdrawn once offered.
Some recent corporate political action might also stem from long-term thinking. In his response to the Charlottesville protests, Trump gave a wink and a nod to white nationalists. Business leaders are rightly interested in social stability. Lending support and credibility to a president whose actions threaten that stability in order to stay out of the day’s headlines was a trade Mr. Frazier and those CEOs who followed him didn’t want to make.
All that said, too much shouldn’t be made of what’s happened so far. Resigning from presidential advisory boards, issuing statements and ending discounts are significant actions. But they probably won’t make a noticeable difference in a corporation’s bottom line. Other actions that would have a more direct business impact — such as refusing to do business with those who hold different political and policy views — are much less common.
Whether this current wave of political action is laudable depends on the specific case and on one’s political views. But what would be unquestionably good would be a vigorous defense by corporate leaders of the post-World War II liberal order. If corporate leaders are to increase their involvement in political debates, they shouldn’t let their agenda be determined by the day’s headlines. Instead, they should focus on the values, policies and institutions that create long-term security and well-being.
Strong American leadership, an embrace of free trade and globalism, openness to immigration, a commitment to democracy, and strengthening international institutions have helped create seven decades of prosperity in the developed world. Though the postwar system is not championed by the Trump administration and many European leaders, it is necessary to ensure prosperity in the future. For this reason, its promotion is in the interest of the business community.
Because over the long run, what’s good for business is good for us all.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Michael R. Strain is a Bloomberg View columnist. He is director of economic policy studies and resident scholar at the American Enterprise Institute. He is the editor of “The U.S. Labor Market: Questions and Challenges for Public Policy” and the co-editor of “Economic Freedom and Human Flourishing: Perspectives from Political Philosophy.”
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