To whom is a manager, any manager, responsible to?

This is a complex question! The first and primary loyalty and responsibility of any manager must be to the owners or shareholders, followed by their own managers. Many managers also feel a responsibility to their customers and their employees. In last ten years, many activists have been advocating that businesses and therefore managers must have as their primary loyalty the welfare of the general public, specifically their local community. This is generally referred to as corporate social responsibility. Corporate social responsibility is often defined as “the managerial obligation to take action that protects and improves the welfare of society as a whole”; with organizational interests being second. This normally means charitable giving from the financial resources of the business. Supposed examples of this are funding corporate nonprofits, foundations, scholarships, and sponsorships.

Is this emphasis on “corporate social responsibility” a good thing? Many, perhaps most people, might say yes. They might argue that every business has a moral obligation and a financial interest in protecting and improving the welfare of society as a whole and therefore passivity is not enough. They further argue that business institutions, as citizens, have the responsibility to become involved in certain social problems that are outside their normal areas of operation.

A significant number of thoughtful people, including myself, reject the current concept of corporate social responsibility believing it to be inherently unjust. They object to the interests of the stockholders or owners being downplayed. They say that people buy stocks to make money, and when the companies spend that money on charity instead of giving it to the stockholders, they are stealing from the stockholders. They point out that most corporation stocks are owned by mutual funds and retirement funds that are holding the investments of average working people. They say that when you take money that is due stockholders, you are stealing for them.

Some in the labor union movement have also opposed corporations giving to charities, arguing that if a corporation has money to give away, they should instead use it to raise the pay of the employees or give bonuses to the employees.

Many small business owners are offended by the phrase “giving back to the community” that proponents of corporate social responsibility often use. The implication that they, as business people, are “taking from the community” is offensive and, they believe, incorrect. They point out that they pay taxes, create jobs and provide needed services and products to the community. They also point out that small business owners often work long hours for limited financial gain. Many business leaders and their managers have simply bowed to the pressure of social responsibility activists, reasoning that it is good public relations and marketing. Many business leaders and managers actually feel coerced into supporting charitable activities.

Managers of businesses have most of the responsibility for determining how much corporate social responsibility is enough. When it is primarily a public relations effort, they will monitor and evaluate the public perception of them. Certainly stakeholders, particular investors and shareholders will express their opinions. Ultimately management must make the decision.

My advice is to never surrender to blackmail. If you or your employees, of their own free will, want to give or work for a charitable cause, then do so, and enjoy the feeling of virtue that comes with voluntary sharing, but never do so under duress. There is no virtue in surrendering to blackmail, and justifying surrender as a “marketing cost” is just an ethical failure.

Dr. Doug