Rethinking the Social Responsibility of Business
reason.com
reason.com
Mackey does not realize that Whole Food may be putting the customers first, but this is done SOLELY because it would also benefit Whole Food in the first place. It is exactly as Friedman had already stated in his article. Businesses do contribute to the community, but the motive is not (and should not) be without the consideration of the investors.
Mackey keeps talking about "balancing responsibilities to stakeholders". Well, I'm sorry but that's disguising the fact that investors do and should always have higher priority. Sure, Whole Foods did well donating 5%, but imagine a scenario where Whole Foods did bad: donating 15% of its profit, and not getting many customers in return (in other words its disguised marketing fails).
Do you think Whole Foods would continue donating 15% until it goes out of business? Will Mackey be able to use his Whole Foods argument anymore?
1) "The most successful businesses put the customer first, instead of the investors" (which clearly means that this is the way to put the investors first). I really really like this sentence, because it summarized my sentiment perfectly. How could you not see that? If it works for you, great. But you wouldn't be doing it if it doesn't work. Don't even pretend.
Mackey: "Making high profits is the means to the end of fulfilling Whole Foods' core business mission. We want to improve the health and well-being of everyone on the planet through higher-quality foods and better nutrition, and we can't fulfill this mission unless we are highly profitable."
Let's be serious. This is what Mackey wants people to think. What Whole Foods does, is "enhance the pleasure of SHOPPING for food", which I agree. Whole Foods does this well, with all the food literature in its store. It creates a false illusion that you're buying something more than just food (thus justifying its price). I have Michael Pollan's The Omnivore Dilemma next to me. If you read chapter 9 you'd have a different perspective of what Whole Foods is about (different from the one Mackey is advocating here).
Maybe the people of Whole Foods, the entrepreneurs, the investors, the daily stakeholders, are in fact working towards the benefit of society as a whole because that's what motivates them. Many people find their happiness in the growth and happiness of other human beings. It is implied that this other-centeredness is normal only if it is confined to romantic partners, or nuclear family, but who among us isn't moved by the struggles of a population ravaged by natural disaster, war, plague or famine? It may well be that one's motivations, human creatures as we are, might be shoehorned into the rubric of self-interest (misleadingly named though it would be) by saying that other-centeredness makes us feel better. But one might as easily say that one's more self-centered actions are in fact shaped by the entire society as in the invisible hand, designed in fact to help others: your food choices are not, in fact, your own, but shaped by corporate stakeholders for their own interests. You can look at it either way.
The point is that motivations are varied and complex, and cannot be summarized neatly in phrases such as 'utility' or 'self-interest' without hiding demons worth of complexity within them.
I personally work for others, for the people of the world, the whole of its green mantle, the earth's future potential. In this way I extend my extended phenotype, it is true -- in some way I will exist and persist as forces and memes and influences varied and grander and grander, with time, if cloudier, muddied, dilute. But I will also be working for something that has always been and will always be greater than my own small self. There is joy in this, but it is not centered in me.
Sure, they are working towards the benefit society. Anyone who has a job can justifiably claim so, unless they are doing something really evil/wrong. How? That is already covered by Friedman and Rodgers. When you work, you contribute to society in a particular way, and you can/should be proud of it.
Let's get back to Whole Foods. What is really the motive behind a business such as Whole Foods when they do something such as donate their 5% profit? Mackey gives 1 reason himself: "There can be little doubt that a certain amount of corporate philanthropy is simply good business and works for the long-term benefit of the investors." There, so 1 reason is precisely because it benefits the business, thus it benefits the shareholders. The business gains goodwill, an intangible, not taxable asset capable of generating future profit. Nobody is advocating that you should not love your society and donate a little. What's essentially being argued is your core interest. And to pretend that the investors don't have anything to do with it, well that's really just a cloak to disguise business motives.
If the core interest does not involve the shareholders, what happen if the business falls on hard time? Whole Foods may be doing well, but like I said before, what if it donated more and not getting the publicity/customers it wanted, while the business itself is failing? As a business goes through hard time, it will realize the importance of the shareholders interest, to avoid being out of business, which would serve society no good. Which is pretty much why Rodgers called Mackey's article: "How Business and Profit Making Fit Into My Overarching Philosophy of Altruism." To Mackey, what he thinks he's doing leads to profit. To Rodgers, it is profit that leads to what he did, and I agree.
Mackey also claims that it'd be justifiable even if his donation program did not generate PR/profit. To which I don't agree, on what grounds would it be justifiable when you are using someone else's money for your own interest? And also the part where he claims he "hired" his investors. I think Rodgers already talk about that. He can afford to say this only because Whole Foods is doing well. The donation program happened to serve the business needs but that doesn't mean the opposite.
Perhaps I'm not doing a very good job of explaining myself, but Friedman and Rodgers do have very good points in that article that pretty much sums up everything.
Have you ever run a successful business? I come from a family of entrepreneurs, and from that vantage point I can tell you that more often than not someone working for the good of other would be repaid in kind, while those strictly out for themselves faltered. But it was not that the increased likelihood of increased success caused them to pander to the public, looking for a cut. They continued during the worst of times, for their customers, suppliers, employees, themselves. They persisted when hope ran out, and some failed. But they tried and tried again, driven by that same basic goodness, until something clicked.
"holding profit making as important and excluding everything else" is definitely not what should be done. "When Milton Friedman says a company should stay "within the rules of the game" and operate "without deception or fraud," ... he does not mean that a company should put every last nickel on the bottom line every quarter, regardless of the long-term consequences."
I'm merely arguing that it's the profit that results in businesses generating the goodness to the community, not advocating that everyone should drop everything and pursue profit only. Once you're profitable you can choose a way of contributing back to society. But Friedman suggests that corporate philanthropy isn't the only way. "what reason is there to suppose that the stream of profit distributed in this way would do more good for society than investing that stream of profit in the enterprise itself or paying it out as dividends and letting the stockholders dispose of it?"
There are firms and projects which have benefits which cannot be easily turned into a return for investors (either directly or indirectly) but whose benefit far exceeds the investment of dollars and effort, which are currently severely underfunded (with a lot of variation on the input stream) because the government through a combination of politics and incompetence cannot wisely discriminate between potential recipient, because passersby on the street cannot acquire the requisite facts to make an informed decision, and because corporate entities almost all currently buy into the idea that charity investment is a PR stunt, and nothing more.
It is to the benefit of society to invest in these firms and projects, so if an individual is truly other-centered they may push hard in finding and working for these causes, whose profits don't appear on the bottom line but are spread throughout society.
An example? The all around helpfulness of entrepreneurs, investors and advisors in silicon valley, or hackers here on hacker news. These people put an awful lot of effort into helping out their community, often to absurd lengths: the benefits do not solely or even significantly accrue to them (as is typically the case in profit making entities founded upon an exchange of currency for a good or service), but by their participation the community grows stronger along with their standing in it.
I believe the business doesn't really have this responsibility to invest in those firms/projects that you mention. People do. Nothing is stopping the investors to invest. If investors decide that the business can/should donate, then it is the investors decision to fulfill their social responsibilities. In this sense the business is a separate entity that does not have social responsibilities.
"corporate entities almost all currently buy into the idea that charity investment is a PR stunt, and nothing more" - Well, I myself don't believe that it's "merely a PR stunt". As you say it is sorely needed by public firms that don't really generate a return on investment. But precisely because they treat it as a PR stunt that they let their business earn credit for their donation. If it's not for PR, then the business should be unrelated. Whoever made the decision to invest should get the credit instead.
What I see here is Mackey merging his and Whole Foods'. When he says "Put Customers Ahead of Investors", what does that really mean, that they don't care about operating at a loss? Sure, Mackey probably really cares about his customers and society, but Whole Foods as an entity doesn't have any special obligation with that. Whole Foods aim is to increase its profitability. If one way of doing so is donating some money so society, go ahead and do so. But it's not always so convenient this way (if donating scales with profitability, businesses would go ahead and donate all their earning).