Apr 7, 2007

Corporate Social Responsibility As Good As Good Government?

Back in “the old days,” it was conventional wisdom that some people and most large corporations, given the opportunity, would do bad things sometimes, and it was the role of government to make or keep them good. Government makes rules and regulations to keep everybody within defined bounds.

Gradually, that idea got twisted around. Now, government is bad and it is up to everybody else to keep it on the straight and narrow. Government spends too much money. Government forces people to do bad things. Government wastes resources. Perfectly good people who enter government service start to do evil things. Government needs to be watched, limited, maybe abolished.

Where before, governments ordered things done or failed to do so, now “socially responsible corporations” are saving the rain forests by buying fair-trade coffee, greasy fast-food companies are selling salads and dictating farm practices, mega-wealthy rock stars and foundations are tackling AIDS and malaria in Africa and movie stars are adopting orphans.

People are trying to prove that we, not government, have the moral fiber, the courage, the will and the right to make the world a better place.

Well, maybe.

It’s my theory that if you make government bad enough, people will rightfully hate it, turn against it, ignore it, move around it and finally repudiate it. It’s also my belief that government should have a powerful role in providing medicine at a fair price, setting minimum wages, preventing or punishing corporate fraud and abuse and watching out for the little guy.

Who might you want to empower to do the right things if not government?

How about Wal-Mart? I don’t know the answer, but I love the question.

Is Wal-Mart a mega-tyrant that ruins small businesses, pays miserable wages, uses illegal practices (like forced, unpaid overtime), muscles suppliers, dictates prices, misrepresents products (like using organics improperly) and generally acts like an 800-pound gorilla? Or is it a socially conscious company that uses its power and influence to do what government should do but doesn’t – adopt good energy policies, sell generic drugs cheaply, eliminate bad products and ban dangerous pesticides and chemicals? Or is it some mish-mash of all of these?

Generally, farmers take both sides. They don’t like the government, but if the government is going to be involved they’d rather it be the federal government making uniform rules nationwide. In fact, when it comes to some issues – like use of pesticides or genetically modified plants in crop production or maybe even fair wages for farm workers – they’d probably support world standards.

But how about retailer standards? Just recently, Wal-Mart, in a measure it called “moving beyond compliance,” listed three chemicals it would ban from products it sells in its stores. Two of these are insecticides that have perfectly legal uses in agricultural production and labels issued by the EPA.

While Wal-Mart has not directly banned from its stores fruits and vegetables grown with these products, that could be the next step. We have already seen fast-food chains like McDonald’s tells its suppliers about humane treatment of the livestock that provide the burger, sausage and eggs in its sandwiches. Wal-Mart has 17 more chemicals on its hit list.

In a sense, these standards set by food product buyers and retailers are no different than the phytosanitary standards countries like Taiwan use to restrict movement of apples or Europeans use to keep out GMO corn and soybeans – or that Americans use to their advantage to supposedly keep out Mad Cows from Canada.

It’s been argued that these phony standards disrupt trade, but far from dying away, they are being implemented at new levels. Now, retailers are doing it.

In the final analysis, of course, it’s not about rationality. It’s about market power. If Wal-Mart has the power and resources to do these things, it gets them from the customers and suppliers who patronize Wal-Mart and give it power and resources. Politicians face the music every couple of years. Wal-Mart faces its voters every day.

The company, while huge, does have competitors. Both customers and suppliers have options. And it has a growing number of critics.

But that still begs the question: At what level should decisions be made? We seem to be opting on a free-for-all at the lowest level rather than rational discovery and implementation of well-formed opinions at the highest level possible.

I’d rather have EPA rule on pesticides than Wal-Mart.