“Corporate social responsibility and the ‘game of catallaxy’: the perspective of constitutional economics”, by Viktor Vanberg.

http://hdl.handle.net/10.1007/s10602-007-9022-4

Abstract The paper examines the issue of corporate social responsibility (CSR) from the perspective of constitutional economics, focusing on the distinction between a political community’s constitutional choice of the rules of the “market game,” and the market players’ sub-constitutional choice of strategies within these rules. Three versions of CSR-demands are identified and discussed, a “soft,” a “hard”, and a “radical” version. The soft version is concerned with the issue of how “socially responsible” corporations ought to play the market game within existing rules. The hard version is about how the rules of the market ought to be changed in order to induce “socially responsible” corporate behavior. And the radical version questions the compatibility of CSR and the logic of the market game, calling in effect for adopting some alternative economic regime.

Also see John Hasnas' “The Social Responsibility of Corporations and How to Make It Work for You,” [.pdf] 44 The Freeman 332 (1994) and “The Normative Theories of Business Ethics: A Guide for the Perplexed,” 8 Business Ethics Quarterly 19 (1998) For a .pdf version of that last article, go here.

My sympathies for having a debate partner with the last name “Crook,” given the proposition and the current economic climate.

May the force be with you!

http://www.berkshirehathaway.com/letters/1987.html

A recent survey reported that about 50% of major American
companies match charitable contributions made by directors
(sometimes by a factor of three to one). In effect, these
representatives of the owners direct funds to their favorite
charities, and never consult the owners as to their charitable
preferences. (I wonder how they would feel if the process were
reversed and shareholders could invade the directors' pockets for
charities favored by the shareholders.) When A takes money from B
to give to C and A is a legislator, the process is called
taxation. But when A is an officer or director of a corporation,
it is called philanthropy. We continue to believe that
contributions, aside from those with quite clear direct benefits
to the company, should reflect the charitable preferences of
owners rather than those of officers and directors.

http://www.berkshirehathaway.com/letters/1993.html

Berkshire's practice in respect to discretionary philanthropy
- as contrasted to its policies regarding contributions that are
clearly related to the company's business activities – differs
significantly from that of other publicly-held corporations.
There, most corporate contributions are made pursuant to the wishes
of the CEO (who often will be responding to social pressures),
employees (through matching gifts), or directors (through matching
gifts or requests they make of the CEO).

At Berkshire, we believe that the company's money is the
owners' money, just as it would be in a closely-held corporation,
partnership, or sole proprietorship. Therefore, if funds are to be
given to causes unrelated to Berkshire's business activities, it is
the charities favored by our owners that should receive them.
We've yet to find a CEO who believes he should personally fund the
charities favored by his shareholders. Why, then, should they foot
the bill for his picks?

Let me add that our program is easy to administer. Last fall,
for two months, we borrowed one person from National Indemnity to
help us implement the instructions that came from our 7,500
registered shareholders. I'd guess that the average corporate
program in which employee gifts are matched incurs far greater
administrative costs. Indeed, our entire corporate overhead is
less than half the size of our charitable contributions. (Charlie,
however, insists that I tell you that $1.4 million of our $4.9 million overhead is
attributable to our corporate jet, The Indefensible.)

Below is a list showing the largest categories to which our
shareholders have steered their contributions.

(a) 347 churches and synagogues received 569 gifts
(b) 283 colleges and universities received 670 gifts
(c) 244 K-12 schools (about two-thirds secular, one-
third religious) received 525 gifts
(d) 288 institutions dedicated to art, culture or the
humanities received 447 gifts
(e) 180 religious social-service organizations (split
about equally between Christian and Jewish) received
411 gifts
(f) 445 secular social-service organizations (about 40%
youth-related) received 759 gifts
(g) 153 hospitals received 261 gifts
(h) 186 health-related organizations (American Heart
Association, American Cancer Society, etc.) received
320 gifts

Three things about this list seem particularly interesting to
me. First, to some degree it indicates what people choose to give
money to when they are acting of their own accord, free of pressure
from solicitors or emotional appeals from charities. Second, the
contributions programs of publicly-held companies almost never
allow gifts to churches and synagogues, yet clearly these
institutions are what many shareholders would like to support.
Third, the gifts made by our shareholders display conflicting
philosophies: 130 gifts were directed to organizations that
believe in making abortions readily available for women and 30
gifts were directed to organizations (other than churches) that
discourage or are opposed to abortion.

Last year I told you that I was thinking of raising the amount
that Berkshire shareholders can give under our designated-
contributions program and asked for your comments. We received a
few well-written letters opposing the entire idea, on the grounds
that it was our job to run the business and not our job to force
shareholders into making charitable gifts. Most of the
shareholders responding, however, noted the tax efficiency of the
plan and urged us to increase the designated amount. Several
shareholders who have given stock to their children or
grandchildren told me that they consider the program a particularly
good way to get youngsters thinking at an early age about the
subject of giving. These people, in other words, perceive the
program to be an educational, as well as philanthropic, tool. The
bottom line is that we did raise the amount in 1993, from $8 per
share to $10.

The link to the Economist debate goes to YouTube, I think that is an error.

On the CSR debate, a lot of it comes down to how you handle externalities. Those that don't believe in CSR believe that the government should handle them and businesses should just play by the rules that the government sets. Those that do believe in CSR think that corporations (which really means investors, employees and customers) should “internalize the externalities” and deal with them directly even if that means lower profits, lower salaries or higher prices.

Two posts you might find helpful: The Economist Doesn't Get CSR and the investment section of Buddhist Economics.

And, of course there's lots of stuff by Stephen Bainbridge. Including this paper.

He links to this post by Brad DeLong, which is also very good.

http://ksgnotes1.harvard.edu/Research/wpaper.ns...

http://www.colorado.edu/studentgroups/libertari...

It should be noted that most corporations have listed in their charters, the mission of maximizing profits for their shareholders. Non-profitable CSR (e.g. charitable giving) would seem to directly violate the corporate charter. The “business judgment rule” prevents directors and management from being liable for such indiscretions though.