Is there a place for philanthropy in business?

Reason Magazine has a pretty fascinating discussion of what a company’s responsibilities are in terms of charitable giving. The discussion comprises very interesting treatises by Milton Friedman, the Nobel laureate for economics who thirty-five years ago wrote an article titled “The Social Responsibility of Business Is to Increase Its Profits”; Whole Foods’ CEO and founder, John Mackey; and Cypress Semiconductor’s CEO and founder, T.J. Rodgers. It’s not short, but I found it fascinating to see the different ways in which these guys see the role of public companies–economically, socially, and morally. Things get sort of heated by the end of the exchange.

I have selected what I’d consider to be a characteristic passage for each man (although you should really read the whole thing–don’t be so lazy):

Mackey:

I’m a businessman and a free market libertarian, but I believe that the enlightened corporation should try to create value for all of its constituencies. From an investor’s perspective, the purpose of the business is to maximize profits. But that’s not the purpose for other stakeholders—for customers, employees, suppliers, and the community. Each of those groups will define the purpose of the business in terms of its own needs and desires, and each perspective is valid and legitimate.

Friedman:

Whole Foods Market’s contribution to society—and as a customer I can testify that it is an important one—is to enhance the pleasure of shopping for food. Whole Foods has no special competence in deciding how charity should be distributed. Any funds devoted to the latter would surely have contributed more to society if they had been devoted to improving still further the former.

Rodgers:

John Mackey’s article attacking corporate profit maximization could not have been written by “a free market libertarian,” as claimed. Indeed, if the examples he cites had not identified him as the author, one could easily assume the piece was written by Ralph Nader. A more accurate title for his article is “How Business and Profit Making Fit Into My Overarching Philosophy of Altruism.”

Mackey spouts nonsense about how his company hired his original investors, not vice versa. If Whole Foods ever falls on persistent hard times—perhaps when the Luddites are no longer able to hold back the genetic food revolution using junk science and fear—he will quickly find out who has hired whom, as his investors fire him.

With the caveat that I’m basically ignorant and stupid about the subject, I believe in free market economics. I think that all three of the men involved in the roundtable do, too, but they certainly diverge in their interpretation of what that means. For what it’s worth, I believe that Friedman is right, but I think that Mackey is doing what I would do if I were in his position. Oh, and Rodgers scares me.