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Should Companies Put Profits Before Social Responsibility?

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Published January 19, 2021

The belief that corporations should prioritize social responsibility over profits is misguided for two reasons. First, it falsely assumes that prioritizing profits means treating employees poorly. Second, companies that don’t make money risk not being able to pay their employees. Ultimately, the best defense for workers is for there to be a healthy and competitive market.

Discussion Questions:

  1. What is the best way to protect workers?
  2. What compels corporations to be socially responsible?

Additional Resources:

  • Read “Cheated by Collectivism,” by George Shultz, Michael Boskin, John Cogan, and John Taylor via Hoover Digest. Available here.
  • Read “Some Thoughts on the Business Roundtable’s Statement of Corporate Purpose,” by George Shultz, Michael Boskin, John Cogan, and John Taylor via RealClearMarkets. Available here.
  • Read “Social Responsibility of Business,” by Milton Friedman via the New York Times. Available here.
View Transcript

There is a growing movement for corporations to prioritize social responsibility over profits. It is a well-meaning notion, but it is ultimately misguided for two key reasons.

The first is that it rests on the assumption that when companies prioritize profits, they necessarily treat their employees poorly or break the law in their pursuit of making money.

But companies that don’t comply with the law or operate unethically are either fined or shut down.

And in competitive markets, when they don’t treat them well enough, their workers and their customers go elsewhere.

These days, the pressure to treat employees well is global. Think of how international labor standards have risen in response to allegations of poor working conditions.

The second problem is companies that don’t make money don’t survive.

Those that go beyond what is responsible in the name of serving the greater social good risk not being able to pay their employees or offer lower prices to their customers.

Only successful companies are able to keep paying their employees well, especially in the long-run.

Our continued economic prosperity is dependent on firms that compete with one another for our business.

Ultimately, the best defense for workers is for there to be a healthy and competitive market.