"Corporate Social Responsibility" is "bunk"?

So says Henry Manne, dean of the George Mason University School of Law, in this opinion piece, "Milton Friedman was Right."

An integral part of the older notion of public utility regulation required that the enterprise be, or act like, a monopoly (whether "natural" or not), in order to be affected with a public interest. But in today's confusion, there is no such requirement. No arguments, weak as they are, about natural monopoly, market failure, government creation of corporations or the alleged government gifts of limited liability and perpetual existence, are required to justify the demands now regularly placed on business entities. Any large enterprise, no matter how competitive its industry and no matter how successfully it is fulfilling the public's desires, has a social responsibility--a term that makes mockery of the idea of individual responsibility--to use part of its resources for "public" endeavors. Today's favorite causes are environmental protection, employee health, sales of goods at below-market prices, weather modification, community development, private enforcement of (not merely abiding by) government regulations and support of cultural, educational and medical facilities.

How did this transposition from private to public responsibility come about? After all, even the largest corporation started simply as an idea in someone's head. At first this person hires employees, borrows capital or sells equity, produces goods or service and markets a product. Nothing about any of these purely private and benign arrangements suggests a public interest in the outcome. But then the business begins to grow, family stock holdings become more diffused, additional capital is required and, voilà, another publicly held corporation. In other words, another American success story.

But what has happened to implicate public involvement in the management or governance of these enterprises as they grew from a mere idea? Nothing. And if that nothing be multiplied by tens or hundreds or thousands, the product is still zero. So where along the line to enormous size and financial heft has the public-private nexus necessarily changed? True, there are now a large number of complex and specialized private contracts, but every single one of these transactions is based on private property, freedom of contract, and individual risk and reward. If one apple is a fruit, even a billion apples do not become meat.

The origins of this transformation lie in the minds of people who do not like or appreciate the genius of capitalist success stories, including always politicians, who will generally make any argument in order to control more private wealth. Of course, the social responsibility of corporations is always tied to the proponents' own views of compassion or justice or avoidance of a cataclysm. But the logic of their own arguments requires that essentially private corporations be viewed as somehow "public" in nature. That is, the public, or the preferred part of it, often termed "stakeholders" (another shameful semantic play, this time on the word "shareholders"), has a pseudo-ownership interest in every large corporation. Without that dimension in their argument, free market logic would prevail.

The illusion of great and threatening power, the superficial attractiveness of the notion, and the frequent repetition of the mantra of corporate social responsibility have made this fallacy a part of the modern corporate zeitgeist. Like the citizens who were afraid to tell the emperor that he was naked, no responsible business official would dare contradict the notion publicly for fear of financial ruin, even though the practice continues to cost shareholders and society enormous amounts. This is especially so in large-scale retail businesses like Wal-Mart or Coca-Cola or BP that are highly vulnerable to organized public criticism. Our laws against extortion do not function effectively when it comes to corporations. And so to some extent these private entities have indeed, via the social responsibility notion, been converted into crypto-public enterprises that are the essence of socialism. Milton Friedman was right again.

What say you, Mark Sargent?  Let's have a "Law Deans Corporate Law Smackdown."