The Deadman Night Rider

A forum for evening students of the SMU Dedman School of Law and other outlaws..

Wednesday, September 28, 2005

For any Milton Friedman fans out there -

Here's a great online debate in Reason featuring ol' Uncle Milt, Whole Foods' CEO John Mackey, and Cypress Semiconductor CEO T.J. Rodgers discussing the concept of corporate social responsibility. You have to scroll down to the middle for Friedman's comments, which are (of course) the best part. The basic question is whether a corporation has any 'social duty' other than to maximize value for its shareholders. Friedman and Rodgers say no, while Mackey takes the other view by reiterating the shaky idea that a corporation's 'stakeholders' include the community at large. Rodgers correctly labels this as collectivist theory, but that charge is a little too harsh - in the case of Whole Foods I think it's really just heartfelt schtick.

Friedman hints at this, but he's too polite to flat-out say that it's disingenuous for Whole Foods to lecture other businesses about the concept of social responsibility since it's really not a choice for them: it's their business model. Whole Foods is able to maintain higher profit margins than industry-standard precisely because of their positioning as the conscience of the grocery biz, which allows them to charge a higher price - call it the 'perceived virtue premium'. You're not just shopping for food there - you're making a statement. Of course, the difference between the virtue premium and what they actually pass on to charity goes right to the bottom line. Granted, that in and of itself doesn't detract from their charitable contributions, but not every business's customers are susceptible to this marketing angle, especially in business-to-business purchasing.

Aside from that, consider this - who is really serving a higher social purpose here? Have a look at the consumers shopping at your nearest Whole Foods, then take a trip to Wal-Mart. Whole Foods can justifiably point to its largesse, but I bet they don't see many of the recipients in their aisles.


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