October 24, 2005
CSR Debate in Reason (the magazine)
Posted by Christine Hurt

Tyler Cowen analyzes a debate in Reason magazine between Milton Friedman, John Mackay (Whole Foods) and T.J. Rodgers (Cypress Semiconductors).  Friedman maintains his long-held view that social responsibility means maximizing shareholder wealth (without fraud, etc., of course).  The interesting aspect of the article to me is Mackay's view of what I would call the stakeholder theory of the corporation.  He wants us to know that Whole Foods was founded to make the world a better place, with better nutrition and better places to work.  However, his justification for this is what I will call today "entrepreneur primacy":

I believe the entrepreneurs, not the current investors in a company’s stock, have the right and responsibility to define the purpose of the company.

Mackay even admits that if a founder creates a company solely to make profits, like Cypress, then it is being social responsible by following that aim. However, he says that Whole Foods and thousands of others were created with different goals.

I have two comments.  First, maybe that's the answer.  State your mission in your articles of incorporation at IPO, and let's let the investors sort themselves.  Then, we'll see (1) if there is a difference in the success of each company and (2) if investors really want what they say they want.  Second, I can't read the article without thinking that Mackay's company has a brand.  And so, if Mackay gets in Reason magazine and starts saying that the sole responsibility of a corporation is to maximize profits, that could hurt the Whole Foods Brand, make the share price go down, and hurt profits.  And then my brain started to hurt.

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