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Corporate social responsibility – is it socialism by the back door?

“When I hear businessmen speak eloquently about the `social responsibilities of business in a free-enterprise system,’ I am reminded of the wonderful line about the Frenchman who discovered at the age of 70 that he had been speaking prose all his life. The businessmen believe that they are defending free enterprise when they declaim that business is not concerned `merely’ with profit but also with promoting desirable `social’ ends; that business has a “social conscience” and takes seriously its responsibilities for providing employment, eliminating discrimination, avoiding pollution and whatever else may be the catchwords of the contemporary crop of reformers. In fact they are–or would be if they or anyone else took them seriously – preaching pure and unadulterated socialism. Businessmen who talk this way are unwitting puppets of the intellectual forces that have been undermining the basis of a free society these past decades.”

Milton Friedman

If you want to wind up a certain kind of activist in the realms of modern investment, one of the quickest ways to get their pulse rate up is to quote the late Chicago economist above about what he thought was the sole responsibility of business owners. He stated that this was to maximise shareholder value. Period. To do anything else is tantamount to an act of theft:

“In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom. Of course, in some cases his employers may have a different objective. A group of persons might establish a corporation for an eleemosynary purpose – for example, a hospital or a school. The manager of such a corporation will not have money profit as his objectives but the rendering of certain services.”

This seems fair enough to me and stated with Friedman’s admirable clarity. The key is that the purpose of the firm is set by the folk who created it and those who own it. If it meets customers’ needs it will thrive, and if it doesn’t, it goes out of business. If you and I, dear reader, found a business to sell chocolate ice cream, at what point do we suddenly become “responsible” in some sense to “society” or “the environment” or “God” in how we run things unless we have expressly chosen to make those considerations part of our business mission?

It is crucial to be clear on this point. If a group of individuals band together to create a corporation that expressly states that it shall distribute 30 per cent of profits to a specific charity/cause, or that it will source its supplies from a particular group on ethical grounds, or hire as equal a balance of men and women as possible, regardless of other considerations, then anyone who becomes, say, a shareholder in that business cannot complain if things go wrong. And in fact there are more and more cases of firms that go out of their way to brandish their ethical principles, with varying levels of credibility or cant. Also it turns out that firms which are run by honest people, publish transparent accounts and don’t treat staff like crap tend, according to some metrics, to outperform their peers over the long term (see a study claiming this here). As Adam Smith might have noted, if people pursue their rational self-interest it tends to be the case that dealing with decent, honest people tends to work out better than dealing with shysters.

In my present working life I am bombarded with press releases and material from investment firms talking about the wonders of environmental, social and governance-related (ESG) investing, and also what is called “impact” investing (putting money to work to achieve a specific result, both financial and non-financial). To the extent that fund managers use their market muscle to achieve these goals in a free market rather than bring in the State to do their bidding, that’s all fine by me. After all, why should not, say, a libertarian fund management firm be able to state that it will refuse to invest in any business that knowingly produces services/products that threaten privacy and expand the reach of the state, such as firms that act as contractors to certain governments? (How about Classical Liberal Wealth Management Inc?) In other words, in this view the purpose of a firm or other legal entity is to enable the wishes of its creators to be brought about, whether making a profit, advancing world peace, spreading the ideas of Ludwig von Mises or whatever.

There will be investment funds that will want to focus on holding stakes in firms, be they listed, or unquoted, that focus 100 per cent on becoming more valuable and profitable no matter what else it does, because those investment funds’ clients expect and hope to fund a decent retirement, for example. In an ageing population, beset by growing strains on public finances, it is going to be difficult sometimes to square some of the supposed high-minded desires of corporate social responsibility activists with the desires of millions to have something to live on in old age. The point is that balancing those things must ultimately be the investors’ decision, not that of a government.

The issue becomes more problematic when government steps in. Firms that claim CSR is good for the shareholder in the long run may simply be rationalising what they have to do anyway by force of law. Investor pressure to save the earth as well as make money may be misguided in some ways, but at least it is not coercion. But things take a different turn when the state intrudes. An article here by Quinn Connelly makes this point well:

“Empirically speaking, the market has moved against Friedman’s philosophy. The largest firms in America and Britain spend more than $15 billion a year on CSR, and new research suggests this spending may create monetary value for companies. As The Economist concludes, “even if you accept Friedman’s premise and regard CSR policies as a waste of shareholders’ money, things may not be absolutely clear-cut.” Indeed, they may not be, but not for the aforementioned reasons. In the current environment, it may be rational for companies to adopt CSR policies in order to contend with regulatory and competitive pressure; however, this says little about the inherent value of the policies themselves, or the principles behind them. In fact, a cynic might point to the increase in CSR spending as an indicator of reverse regulatory capture, or merely as an exercise in public relations.”

To sum up, ideas such as ESG investing or corporate social responsibility can in some ways sit alongside an entirely free market view of the world, but I am wary. In a recent phone call, one advocate of these ideas talked about how “we are in an era of late-stage capitalism”. I pointed out to this person that such a term has been used as long as capitalism has been a word. The phone call did not go well.

48 comments to Corporate social responsibility – is it socialism by the back door?

  • Gary Taylor

    CSR can be correct in 2 senses:

    1. Businesses should be cognisant of, and attend to, externalities.
    2. Some businesses are selling ‘values’ as much as they are selling products. Good luck to them. Personally I think if you are buying your values from a store you need professional help, but each to their own.

    The rest is horseshit

  • neonsnake

    I don’t have a problem with it.

    I assume that this blog, broadly speaking, was supportive of that baker’s right to not make a wedding cake for a gay wedding? I don’t see this as being much different. If a business wants to have certain values – and I very much like your example of Classical Liberal Wealth Management, Inc – then I have no problem with it.

    If it has values that I don’t agree with, then I exercise my right to take my business elsewhere. There are plenty of businesses that I refuse to deal with, or shop with, or whatever, because I simply don’t like their values.

    If I really don’t like their values, then I have plenty of avenues to express that dislike and attempt to persuade others to do the same – but what I shouldn’t have the right to do is to force them (via recourse to the law) to give up their values.

  • All corporations are formed with some expressed intent. In most cases, when they embark on these social justice endeavors, that is an indication the corporation has been highjacked. Perhaps they could be returned to their original intent if those responsible are found and thrown in jail. But given the possibility that those responsible will find ways to hide, it may be necessary to end the corporation and sell all its assets so that something approximating actual market behavior can be done with those assets.
    No matter whether they are in private or public spheres, bureaucrats conspire. We can’t just take a hands off approach.

  • Runcie Balspune

    I notice that companies who proudly display their CSR credentials don’t seem to have the same considerations when partnering with foreign contractors that come from regions of world that are less than exemplary in such stakes. In such a way a company can exploit the good CSR publicity whilst generating profit from elsewhere it does not apply.

  • bobby b

    Ben and Jerry’s ice cream is of middling quality, but they have a large and devoted market because of their social-justice stance and their charitable giving.

    “Smug” adds value to your product if you’re aiming at a market that values “smug.”

    So, no one has really “moved against Friedman’s philosophy.” We’ve just become clearer about what “our product” entails.

  • Fred Z

    It’s another part of the left’s long march through the institutions.

    Watch carefully. The corporate executives who wreck corporations will have no stake in them. When their corporation is destroyed, bankrupt, gone, their fellow travelers in other host corporations not quite dead yet will give them jobs and a chance to exercise their wrecking skills again.

  • Quakers were very big in the start of the industrial revolution. In part, this was because George Fox was actually quite sensible when it came to business and the book of rules has good advice. Being extremely cautious about taking on debt (“always consult with some older and experienced Friends”), and scrupulous about honouring it, was one. Treating your staff well was another and practicing Christian charity in the community was of course stressed. Usually, in those days there were no shareholders, so it was “giving of your own money”. The biblical injunctions against virtue-signalling were of course preached to them (“let not thy right hand know what thy left hand doeth”, etc.), but of course their right hands usually had a pretty good idea. 🙂

    It would be interesting (and complicated) to contrast then with now. You could certainly claim that capitalism – or at least, the industrial revolution and its free enterprise – started in a fairly ethical and ‘socially-aware” (more precisely, “Love God and love your neighbour”-aware) style. I suspect a difference between the old Quakers, settling debts and maintaining the health of their businesses first then handing out charity with some slight attempt at modesty, and the modern CEOs and board members, handing out shareholders money and milking the publicity benefits to themselves before moving on to another gig from a company in which they were far less invested. (I may of course be romanticising the past.)

    One huge difference is that the old Quakers were very free to be charitable or not as far as the government was concerned, and more free than now to do what they chose with their own as regards society. The chief effect of government on them was to force them into business by closing off state avenues of advancement. If I could be assured that some modern firm’s “social conscience” was sincere, not corrupt or cringing, I’d respect it more. I have seen the most blatant anti-factual scams run on firms by activists who get paid because to the firm the sum is small and it seems easier to pay, plus those making the decision are too ignorant to see its absurdity – or are in HR and activists themselves.

  • Gavin Longmuir

    “In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires …”

    Good Old Milt! If the ideal world he described ever existed, it has long gone. The shareholders who nominally own the business today have the attention spans of hummingbirds, buying and selling at a great rate. The shareholders are no longer likely to be long-term value investors with an interest in how the company grows its business; they are likely to be third party agents using algorithms to day-trade with other people’s money. And the CEOs often enough turn out to be agents looking out for Number One, not agents looking out for the shareholders interests.

    As for company Directors, many of them do not have skin in the game. I still remember the shock on a co-worker’s face when he realized that he owned more shares in the company we worked for than most of the Directors.

    “Corporate Social Responsibility” is a reflection of the dysfunctional legal structure under which today’s corporations operate.

  • James Hargrave

    An annual misery is to receive a company report, invariably longer than last year’s, and probably twice as long as that of ca 1990, in which all this social responsibility junk is prated, plus what we are or are not doing about white slavery or this or that concern of the moment. And whereas companies of old probably told you too little to make sense of the accounts, now they tell you too much, with the same result. Codes of this, codes of that. Pure bull dust. How about saying: ‘we try to be behave honestly and within that to make as much money as possible for our owners’?

  • Julie near Chicago

    Johnathan,

    You have outdone yourself with this essay. Excellent, and thanks. 😀

    .

    From your second quote from Dr. Friedman:

    That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to their basic rules of the society, both those embodied in law and those embodied in ethical custom.

    Of course, the part I have put in boldface is precisely the point of contention — What is “ethical custom”? What should it be? Is “ethical” custom a proper subset (in the mathematical sense) of “custom” in general?

    Which is the issue regarding Facebook, Twitter, Amazon even ….
    .

    Runcie April 18, 2019 at 5:23 pm,

    Surely no well-established and highly profitable business concern would do such a thing. I assume therefore that you are speaking purely hypothetically. /sarc

    “Google”? Never heard of it. 😈
    .

    By the way — I take this issue very seriously indeed. Perhaps it is not really O/T to note that there’s a very interesting podcast of a Federalist Society panel on “Social Media and Free Speech” from Jan. 30, 2019 included at

    https://fedsoc.org/commentary/podcasts?contributor=richard-epstein

    It is lengthy, and I’ve only heard the first half so far, but in particular there is a description of China’s “Social Credit” system by a woman who’s experienced it first-hand.

    One might argue that Inke, for instance, is nothing for us to worry about since it’s strictly a Chinese concern. BUT —

    There are those here who are working at selling the idea that this is some sort of good idea for us to consider — Lite, of course.

  • fcal

    The future lies with funds that are smart, sustainable or have equality as one of their objectives. What about a Sustainable Healthy Living Fund or a Smart Energy Fund or a Global Gender Equality Impact Equities Fund?

  • fraser orr

    The baker’s case is completely different. Here the baker owns the company in its entirety and can consequently change the purpose of the business however he sees fit. This is quite different than, for example, Amazon raising their minimum wage to $15 to be socially responsible. Jeff Bezos does not own Amazon, it is own by its shareholders, including me. On the contrary, he works for me, and his instructions are “make as much shareholder value as possible.” If he wants to do some good for society he should do it with his own money, not mine. The baker, on the other hand, is doing it, entirely with his own money.

    That does not deal with the argument that Amazon paying its low skill workers a large minimum wage will somehow make them do a better job. This seems very unlikely to me, and it would to anybody familiar with the hedonistic treadmill.

    It also does not deal with the argument that Amazon being perceived as “woke” will make more people want to buy from it. But all the woke peeps are already complaining about Amazon shutting down the Mom and Pop local stores, so I find that argument unconvincing.

    I find it far more convincing that Jeff Bezos is burnishing his image, his legacy and whatever other personal reasons he might have. Personally, I’d rather he didn’t pay for that with my money.

    That baker? He can do whatever he wants with his own money and property.

  • Nullius in Verba

    “The future lies with funds that are smart, sustainable or have equality as one of their objectives. What about a Sustainable Healthy Living Fund or a Smart Energy Fund or a Global Gender Equality Impact Equities Fund?”

    What about a climate futures fund? The fund supports a negotiable financial instrument that pays out at a favourable interest rate when (if) sea levels rise past one metre, and is rendered null and void in 2100 (and the fund returned to the issuer) if that does not happen.

    People who believe in climate change consider it valuable. People who don’t consider it valueless. So you can pay your social responsibilities in such assets, and keep everyone happy. One side think the debt is paid, the other side think they’ve paid nothing.

    What about a promoting freedom fund, or a fighting censorship fund, or an economics education fund? Why are such funds not seen as virtuous by corporations?

  • Gavin Longmuir

    Fraser Orr: … his instructions are “make as much shareholder value as possible.”

    There is more to it than that. Over what time-frame is Bezos supposed to maximize shareholder value?

    Many businesses could engineer a short term boost in share price by cutting back on capital investment, eliminating R&D, trimming marketing, boosting the dividend, and buying back shares — maybe using borrowed money. The algorithms would see the rising Free Cash Flow, the increasing earnings per share, and the higher dividend — and start buying. The smart investor who read the reports would sell before the inevitable decline. The shareholder who thought he was holding a long-term good investment would be out of luck.

    Shareholder value in the next quarter and in the next decade are very different objectives, and probably even incompatible.

  • Stephen K

    There is a piece of analysis I would love to do: get the annual reports for every FTSE100 company, ctrl-F for the CSR buzzwords therein, and add up how many times they appear. Then invest in the 20 companies whose reports contain the fewest instances of those words.

  • neonsnake

    Jeff Bezos does not own Amazon, it is own by its shareholders, including me. On the contrary, he works for me, and his instructions are “make as much shareholder value as possible.”

    It might well be the case for Amazon (I’ve not read their Charter, but certainly they used to have “We believe that a fundamental measure of our success will be the shareholder value
    we create over the long term” as a guiding principle), but corporations are not required to maximise shareholder value; a corporation can be set up for any lawful purpose whatsoever – and those purposes do not have to include increasing shareholder value. The profits of a corporation can be used in any fashion that the board of directors decides (including paying dividends if they so choose, of course, but they’re not limited to that).

    The question of ownership is a sticky one; shareholders only strictly own their shares – not the company itself. Shares are a contract between yourself and the company in question, which grant you some rights (usually) to dividends, and rights to vote on corporate issues (this can vary).

    As an example, were you, as an Amazon shareholder, fall into debt, no part of Amazon can be seized by bailiffs in order to pay that debt. Neither can you dispose of part of Amazon at your own desire, and so on – only the shares themselves. A corporation is its own entity, with limited rights, and cannot be, strictly speaking, “owned” (it’s fuzzy, and quite fascinating) any more than a person can.

    All that aside, I totally agree that Bezos is looking to burnish his own reputation!

  • Alex

    Milton Friedman was describing the classical limited company / limited liability corporation wherein a group of people can cooperate on a venture while limiting their liability to the stake they put up – their share(s). Very few people traditionally would have wanted to put money in without a corresponding share in any profit made by the venture.

    In that original and successful form of corporate structure and financing risk and reward are closely linked. Corporations quite quickly deviated from this clear format with different classes of shares but the general principle remained.

    Nowadays limited liability seems to be more misused than well-used with phoenix companies taking advantage of limited liability to renege on their debts and start over. I have seen some companies in my local area wind up with hundreds of thousands of pounds debt and re-form a few weeks later with the same name and clients.

    Personally I think that is a misuse of limited liability but when companies are financed by bank loans and not from investment by individual private investors it is hardly surprising that the shares become worthless vestigial artefacts of the limited liability form rather than closely linked to company profit.

    While the trend in small companies may seem irrelevant to the large PLCs being discussed, I think it is not. If individual investors only have shares in large PLCs then there is little to compare their investment with. Furthermore the shares of PLCs, being publicly tradeable, have intrinsic value beyond that of a supposed share in the profit of the company. This, combined with the lack of viable alternative investments remaining to private investors, goes some way to explaining a lack of motivation among private investors to try to keep PLCs to the classical risk-reward compact represented by the share and (rightly) argued for by Milton Friedman.

  • Gavin Longmuir

    Alex: “… classical risk-reward compact represented by the share and (rightly) argued for by Milton Friedman.”

    We stand between two poles — the way the world ought to be, and the way the world actually is.

    We human beings have a tendency to focus on the “ought to be”, and forget that sometimes it is a very poor representation of the “actually is”. If Milton Friedman thought he was describing the distant goal of some future well-organized share-owning society — Great! Many of us would love to see that kind of ownership structure for corporations, where shareholders are keenly focused on the business and executives act as true agents for the owners. But if Mr. Friedman thought he was describing reality, he was kidding himself.

    This is relevant to the current discussion because an underlying question is — Are the individuals who make the big decisions (such as pushing Corporate Social Responsibility) in companies acting as agents on behalf of the shareholder owners, or are they acting on their own behalf? The answer is obvious. Now we know how the world actually is, how do we move it towards the way it ought to be?

  • Paul Marks

    Big Business, many (most?) large Corporations, are subsidising groups that are controlled by the far left – the MARXIST left.

    The capitalists (at least many of them) are actively subsidising groups controlled by Marxists.

    How did we come to this? And how can it be stopped? For if it is not stopped then the West is doomed.

    Businessmen and Corporate Managers must learn that “Social Justice” is NOT good – “Social Justice” is EVIL. “Social Justice” should not be supported – it should be OPPOSED.

  • Nullius in Verba

    “Are the individuals who make the big decisions (such as pushing Corporate Social Responsibility) in companies acting as agents on behalf of the shareholder owners, or are they acting on their own behalf?”

    Mostly I think they’re doing it as a marketing and PR exercise. They don’t care about the issues they support – they care about the company’s brand reputation, because that affects sales. Leftist attacks and boycotts are bad for business, things to be avoided – and most of them will cheerfully put short-term profit ahead of things like supporting/protecting freedom. The only way to stop that would be to make it known that failing to support freedom results in even more lost business.

    But sometimes people think they need to pause, stop being so focussed exclusively on the job and the profit and the money and so on, and do a little something to make the world a better place. The issue of course being that we disagree on what constitutes ‘better’.

    They have their own ideas on how the world ought to be. They’ve been handed a great deal of power, which could be used in a small way to change the world. What should they do with it?

    “The answer is obvious. Now we know how the world actually is, how do we move it towards the way it ought to be?”

    Exactly. Who decides for everyone else what way it ‘ought’ to be?

  • neonsnake

    They have their own ideas on how the world ought to be. They’ve been handed a great deal of power, which could be used in a small way to change the world. What should they do with it?

    Whatsoever they wish, within the boundaries of the law, and their own stated purpose.

    And then let them live or die under the scrutiny of the marketplace of ideas.

  • Greg

    Steven K, or perform a backward analysis on such companies. When sorted as you suggest, how have the various categories of companies performed over the past 1,3,5,10 years? Simple enough, though time consuming, to do.

  • Jerry Musial

    I work for one of these companies and where we used to celebrate the number of widgets we sold and how we were growing, we now celebrate how many ‘freaks’ we hire. Interesting the inverse relationship between our stock price and amount of diversity. The price is 20% lower than the all time high 13 years ago. Fortunately I do not get options.Sad.

  • Nullius in Verba

    “I work for one of these companies and where we used to celebrate the number of widgets we sold and how we were growing, we now celebrate how many ‘freaks’ we hire.”

    They hire you, don’t they?

    Liberty is worth celebrating too.

  • neonsnake

    Interesting the inverse relationship between our stock price and amount of diversity. The price is 20% lower than the all time high 13 years ago.

    I can’t imagine that anything else has changed in the last 13 years than your company hiring, uh, ‘freaks’, which may have affected it’s share price. Clear causation, right there.

  • neonsnake

    Steven K, or perform a backward analysis on such companies. When sorted as you suggest, how have the various categories of companies performed over the past 1,3,5,10 years?

    I suspect that you’ll find that they’ve outperformed their competitors.

    The old tired trope of “get woke, go broke”, is most likely not true.

    And, frankly, that supports Libertarianism. What we believe, with all our hearts, is that it is not the government’s place to enforce such regulations.

    But we do believe in Liberty, and when companies or individuals, of their own volition, non-coerced by the state or government, decide to give to charity, this is exactly what we want. When they decide to overhaul their recruitment policy and celebrate that they’re hiring “freaks”, then what we’re describing is a clear win for Libertarianism, because they are doing it not at the end of the proverbial “barrel of a gun”, but because they believe as private individuals that these things are a “good” thing to do.

    All we believe, is that society, individuals, can solve inequalities better through voluntary means, than government can through enforced means. There is nothing in Libertarianism that pretends that inequality does not actually exist, only that state intervention is not the way to solve it – but that private individuals can solve it. So when we start to say that corporations have no right to do so, we’re moving dangerously close to “private individuals” do not have the right to do so.

    At best, that’s tyranny of the majority. At worst, that’s pure Authoritarianism.

  • Jerry Musial (April 20, 2019 at 3:53 pm), hiring for diversity first and competence second, and/or sacking for questioning this strategy more swiftly than for lack of competence (as Google and others appear at least sometimes to do), is very relevant to this post’s topic: whether a company does (and/or should) focus first and foremost on its function or on social goals.

    Common sense says that preferring any attribute above competence in hiring will degrade a company’s performance, other things being equal. However I note one confounding factor. What you describe suggests that HR is dominating the hiring process in the company you know. (A team that hired a ‘freak’ would do so for their competence, not their freakiness as such, and so make little remark on it.) Such HR dominance can degrade things all by itself, before any specific effect of their preferred categories even come into play. Over the years, several commenters on this blog have described horror stories of HR harming the company’s function – and/or just being very annoying to the people who earn the money that pay their wages – through valuing some HR concern over what earns money from customers.

    Thomas Sowell (in Race and Economics and elsewhere) presents evidence that companies were more willing to hire blacks than universities in the old days, when it was not fashionable, and correspondingly less so after it became very fashionable. He argues that when a company is just focussed on getting the job done then this makes it lean against the fashionable prejudices of its society, whatever they are. Now that some companies (their HR functions at least) are following the fashions of universities, updating the data may be harder.

  • Gavin Longmuir

    “Common sense says that preferring any attribute above competence in hiring will degrade a company’s performance, other things being equal.”

    It is worth remembering the original promise of Affirmative Action. The situation back at the end of the Jurassic was that competent American plumbers, electricians, lawyers of African heritage would not even bother applying for jobs at particular companies, because ‘everybody knew’ those companies hired only Americans of Italian origin. The idea of Affirmative Action was that companies were legally required to make efforts to encourage ALL qualified individuals to apply, and then hire the best person for the job from that larger pool of competence.

    Then, as so often seems to happen, a Far Left judge stepped in and perverted the whole concept, by requiring that hires matched the statistical distribution of the general population. The ideal of a hand-up to the competent was replaced with the reality of a hand-out to whoever could make the case for being an aggrieved minority (or even in the case of women, an aggrieved majority).

    One of the best arguments for Limited Government is that, so often, well-intentioned governmental actions have unintended damaging consequences.

  • Nullius in Verba

    “He argues that when a company is just focussed on getting the job done then this makes it lean against the fashionable prejudices of its society, whatever they are.”

    Which ones? The old ones, or the new ones?

    If leaning against fashionable prejudices is evidence of company quality, then it would make sense to advertise that one is doing so. If fashionable prejudices exclude talented individuals from employment, then those irrationally rejected unfashionable groups should contain a higher proportion of talent, and companies can profit by recruiting them. The marketplace imposes its own penalty for irrational prejudices, it’s own reward for rejecting them.

    No, it makes commercial sense for a company to dismiss irrelevant characteristics in its search for talent, and to advertise (and celebrate) doing so. It also makes sense for them to be unhappy about other employees who wreck their strategy by making recruits feel unwelcome on the basis of characteristics other than their talent.

    The problems from a libertarian perspective are when they take that too far, and try recruiting unfashionable minorities purely for the social credit, rather than their skills and experience, or when they step beyond the requirement that other employees merely not sabotage their efforts, and demand instead their belief. If your belief in the fashionable prejudices of your own time doesn’t affect how you do your job, then it’s no business of your employer.

    Everyone is a ‘freak’ to someone else. Everyone does things and believes things that other people oppose, or think is wrong, or disgusting. So if we want a world where we ourselves don’t suffer for that – because somebody else considers our beliefs and activities ‘freaky’ – then it’s worth encouraging and celebrating companies who don’t let their employees differences put them off. Ultimately, it benefits us too. But we have to take care to distinguish tolerance from new varieties of intolerance. It’s no use getting rid of old forms of irrational intolerance only to replace them with new ones.

    It’s a distinction we’re often all too careless about. There’s much to be critical of in the way HR enforce the new fashions in prejudice, but we mustn’t confuse resistance for new prejudices with continuing support for old ones. Those who still hold to the old prejudices are entitled to their beliefs, but they’re not libertarian.

  • neonsnake

    I suspect that most of the commentary here is from people who are not senior enough to actually conduct interviews or to actually understand HR procedures. What is being described does not match actual reality.

    Gavin:

    The idea of Affirmative Action was that companies were legally required to make efforts to encourage ALL qualified individuals to apply, and then hire the best person for the job from that larger pool of competence.

    The reality of that (and I have 20 years of actual hiring experience in companies that everyone in the UK have heard of) is that when a position comes up, we hire *quickly*, because realistically – we need the “bums on seats”. We don’t hire to match a statistical distribution, that’s a total myth.

    If anything, we’re actually less likely to hire “aggrieved minorities”.

    Think it through: any company worth their salt doesn’t let people interview without proper training; one of the things we’re taught to watch for is the “aggrieved minority”, as they (apparently) will sue us if we don’t hire them (another myth, but whatever). In order to protect ourselves, if someone appears to us to be, during the interview, an aggrieved minority, then we pay special attention, and note down very clearly everything that is a valid reason to not employ them, just in case I’m required to defend my decision.

    TLDR: refer to your other half as “my partner” during an interview, and all my flags go up, and I start looking very closely for flaws that i wouldn’t do otherwise. Congrats, the state! (you cannot understand my bitterness at this, I promise you)

  • neonsnake

    Those who still hold to the old prejudices are entitled to their beliefs, but they’re not libertarian.

    This, a million times over.

    I defend your right to hold your belief and to express it.

    I do not defend your belief. I will exercise my right to be the sand in the gears and disagree with it.

  • Nullius in Verba (April 20, 2019 at 8:35 pm), Sowell was not arguing that companies were consciously leaning against the prejudices of their day (i.e. mostly the old ones in his studies). He was arguing that the drive of commercial reality – as against a university – meant there was a cost to prejudice.

    For example, neonsnake above mentions “the need to get bums on seats”, and so to hire quickly – something I can confirm from my own experience of hiring. That is one reason why, back in the day when there was no affirmative action but its opposite, a company might hire a competent black instead of waiting longer for a competent white to walk through their doors whereas a university, not under the same commercial pressures to fill a position promptly, would find it easier to indulge their prejudice.

    it would make sense to advertise that one is doing so

    Sowell is not arguing they are of intent and policy doing so. He is arguing that commercial reality has that effect. In his “A Conflict of Visions”, Sowell has interesting discussion (with example) of how left-wing and right-wing economic argument can sail past each other because the former treats intent as causative whereas the latter does not. It matters not whether prejudiced team leaders in the past hired blacks because they consciously, knowingly sacrificed their preference to their need to get the job done, or whether team leaders who just got the job done were promoted over those who did not and so did more of the hiring, or what. The market rewards the action, regardless of the intent behind it.

  • bobby b

    neonsnake
    April 20, 2019 at 8:52 pm

    “I suspect that most of the commentary here is from people who are not senior enough to actually conduct interviews or to actually understand HR procedures. What is being described does not match actual reality.”

    Ad hominem. Some of the commentary closely matches my experience. You’ve obviously never worked in law firms. 😕

    A decade or two ago, there was a big push from corporate clients to ensure that their hired legal guns were “representative of the community.” This started at the same time that law schools felt the same pressure.

    This caused a panic in law schools and law firms, because they had up until then been lily-white. The law firms had a good excuse for it at that point – there just weren’t many non-white lawyers graduating from the law schools. The law schools’ had the excuse that they were admitting qualified applicants based on LSAT scores, and the people making the cutoff were primarily white.

    Thus began a panicked rush by law schools to admit non-white applicants. For whatever reason you care to argue, there simply were not many non-white applicants hitting the required LSAT scores, and so non-white applicants were ultimately given a 30% up-leveling score.

    Many if not most of the new admittees lacked the level of proficiency in the high school and college subjects that make a person into a good lawyer. (That’s presumably why they scored low on their LSATS.) They failed law school in droves. After six or eight years of this, the law firms were still (truthfully) pointing out that they couldn’t hire more non-white lawyers if the law schools weren’t producing them.

    Thus began the dumbing down of the law schools and the bar tests. (Some states didn’t, and still don’t, participate in this, to their credit.) Finally, the schools were producing enough non-white “lawyers” to satisfy the law firms’ needs.

    But the unpreparedness of those new lawyers then took its toll on the law firms. It became a standing joke that you should take around your young AA lawyers when you visited your corporate clientele to reassure them of your diversity, but heaven help you if you let them work on anything substantive.

    It’s my impression that things are improving now, as the K-12 and college preparation for non-whites is catching up to the level that we’ve always provided for the more favored white population. This difference, I believe, accounted for much of the problem two decades ago. But it’s been a rocky couple of decades, at least in legal circles, and, like all such stories, it doesn’t fade overnight.

    Perhaps you’ve only worked in areas driven by merit and logic and fairness. Good on you. Not all of us have, but it’s still reality for us.

  • In order to protect ourselves, if someone appears to us to be, during the interview, an aggrieved minority, …. Congrats, the state! (you cannot understand my bitterness at this, I promise you) (neonsnake, April 20, 2019 at 8:52 pm)

    Maybe not, but I have known some kinds of this bitterness. I tell those I know who are entering the job market that every hire is a gamble, that an employer will know what you can and cannot do for them much better after a year than in the job interview, so an important factor is: “the one they’d rather hire is the one they can (safely) fire.” When an interviewer sees someone with a physical disability, they may at first guess what the interviewee can do with only one leg (say) by what they themselves could do if abruptly they had only one leg. I’ve known those who understand how natural this is and present as “All I ask is the chance to show you how well I can meet the physical needs of this job – I who have been managing my body for years.” It can be tedious to the point of embittering for both sides when modern PC flavours this honest, sensible offer with fear. The unknown interviewee struggles to renounce convincingly the social, let alone legal, protection the PC force on them. The interviewer struggles with the fear that, the chance being honestly given, it will later not be their decision, let alone their safe decision, to be indeed convinced or else honestly unconvinced.

    I try to preach and practice honesty (and the courage it takes) to fellow team-leaders, managers, etc.. I’ve known those who were not at all prejudiced (old-style or new-style) – just not at all brave.

  • Gavin Longmuir

    Neonsnake: “We don’t hire to match a statistical distribution, that’s a total myth.”

    Thank you, Neonsnake, for the implication that I am a mere callow youth! It is the nicest thing anyone has said to me in a long while. 🙂

    If you have 20 years of actual hiring experience, presumably that is all in the UK where maybe they do things differently. As words like “competent American plumbers” might have suggested, I was referring to the consequences of Affirmative Action in the United States of America. Bobby b gives a good explanation of how trying to match a statistical distribution has made life difficult in one sphere of activity in the United States of America — analogous tales can be told about recruitment & promotion in many other disciplines.

    Since you have 20 years of actual hiring experience, you might be interested in how a number of US organizations try to balance the need for fast “bums on seats” with getting quality employees while simultaneously navigating the legal rapids — use of contractors. There is even the term “contract to hire” to describe the process where contractors who perform well are later taken on as staff while others don’t have their contracts renewed. Not trying to teach my old grandmother how to suck eggs here — just sharing some information about how other organizations have dealt with the problem you face.

  • neonsnake

    Gavin, I’m convinced that you possess a good helping youthful of vigour tempered by a wise head on your shoulders.

    I was actually largely agreeing with you, and showing a supporting example of why Affirmative Action can be a problem for those who it was designed to protect.

    My understanding of the US (and you’re quite correct, all my working life has been for UK-based companies) was that hiring to quotas is still illegal – has that changed?

    In the UK, it is illegal, and recently someone was able to sue for being positively discriminated against.

    Niall:

    The interviewer struggles with the fear that, the chance being honestly given, it will later not be their decision, let alone their safe decision, to be indeed convinced or else honestly unconvinced.

    Completely agree, especially with the practical difficulties of actually getting rid of someone after a year.

  • neonsnake

    I’ve realised that wasn’t very clear – in the UK, it’s legal to have quotas or internal targets, but it’s illegal to hire someone purely to fill that quota, if doing so means that you’ve discriminated against someone who was better able to do the job.

    I understood the US position to be the same for companies, although I believe (to bobby b’s point) that it’s different for university applicants?

  • I’ve realised that wasn’t very clear – in the UK, it’s legal to have quotas or internal targets, but it’s illegal to hire someone purely to fill that quota, if doing so means that you’ve discriminated against someone who was better able to do the job. (neonsnake (April 21, 2019 at 7:50 am)

    One is tempted to remark that the legal situation remains unclear. 🙂

    Many years ago (after the cocklepickers-drowned-by-tide news story), I received a leaflet from UK gov. on the hiring laws I was to follow (all companies were sent it). Section 6 warned me of the penalties awaiting me if I employed people from abroad not allowed to work here (the cocklepickers were Chinese illegal immigrants IIRC). Section 7 explained the penalties awaiting me if my procedures for assessing applicants seemed at all aware of the ethnic origin of candidates. Section 8 told me which government department to consult for advice if I had any difficulty reconciling sections 6 and 7. 🙂

  • neonsnake

    One is tempted to remark that the legal situation remains unclear. 🙂

    Brother Niall, on this day, holy of holies, I commend your efforts to not be led into temptation.

    I would think, though, that if you were to give in to that temptation, and make the remark that you intimated you might wish to make, that the Lord Our God would offer you forgiveness, under the well known biblical concept of “actually, he’s bloody well got a point, hasn’t he?”

    Given that I wrote one comment, which is (I think) technically correct, reflected on it over coffee and a ciggie, qualified it with an explainer, and I’m still not sure it makes total sense (even while being an accurate reflection of the law, to the best of my professional knowledge), I would say that “unclear” is an understatement.

  • Gavin Longmuir

    Nial K: “Section 8 told me which government department to consult for advice if I had any difficulty reconciling sections 6 and 7.”

    Brilliant example of the bureaucratic legalistic nonsense which has stymied Western economic vitality while ensuring full employment for lawyers!

    Another example from my local US County. The County Commissioners at great expense prepared a Master Plan for future development of the County. One provision stated that development on ridgelines would be prohibited, to preserve viewscapes in the interests of supporting the tourist industry. Another provision stated that wind-power was to be encouraged and facilitated, because … well, Anthropogenic Global Warming, etc. At the public meeting to review the proposed Master Plan before the County Commission voted on it, I pointed out that wind turbines are built on ridgelines, and definitely impact viewscapes. Under the proposed Master Plan, plaintiffs would have valid grounds to sue the County for violating its own Master Plan whether it either approved or disapproved a windfarm on a ridgeline. The Commissioners smiled, and moved on.

    After the Revolution, one of the new rules will be that any elected representative or bureaucrat who approves a law or regulation which is inconsistent with any other law or regulation will be publicly whipped and stripped of his citizenship.

  • Gavin Longmuir

    Neonsnake: “… Affirmative Action can be a problem for those who it was designed to protect.”

    Indeed! A strong argument for Limited Government is that laws & regulations often have Unintended Consequences which can undermine the original good intentions.

    One example in my relatively technical field is the hiring of Nigerian immigrants. These individuals are competent (in many cases, brilliant) at the necessary mathematics — and they also help companies tick the right box on the “diversity” quota. The Nigerian educational system seems to stretch & develop the natural mathematical talents of their students, whereas American kids of African heritage are stuck in abysmal schools which waste time teaching them how to put condoms on bananas instead of teaching math.

    The irony is that these excellent Nigerian immigrants are probably the descendants of the very people who centuries ago captured & enslaved their fellow Africans, sold them to Arab traders, who in turn sold them to the European shippers who transported the slaves to the Americas. And now the descendants of the slavers are benefitting from Affirmative Action employment policies which were intended to benefit the descendants of the enslaved.

  • neonsnake

    regulations often have Unintended Consequences

    Another example – most of my recent hires have been at entry level (we had something of a post-referendum crisis, made redundant an enormous proportion of our workforce in the head office, swiftly followed by voluntary leaving of the entry level who had just seen their mates lose their jobs, and then had to re-recruit. All good fun.)

    All of the people I hired were women, 21-25 years old, entry level and consequently low-paid; no political agenda on my part, they were just best fit for the roles I was involved in.

    By doing so, I screwed our “gender pay gap” reporting.

    Do I recall correctly that Affirmative Action in the US was specifically designed to address the injustices of slavery, as opposed to a more general sense of racism (and other bigotries, of course)?

  • Gavin Longmuir

    “Do I recall correctly that Affirmative Action in the US was specifically designed to address the injustices of slavery …”

    I cannot claim any special expertise on that era, but there were probably about as many points of view at the time on the justification for Affirmative Action as there were people voting for it. It seems a major issue was not so much the long-ago injustices of slavery as the then-current continuing injustices which had followed emancipation, where ruling Democrats had imposed Jim Crow laws intended to keep Americans of African heritage down. The “Separate But Equal” doctrine imposed by the Supreme Court had some mixed effects — excellent Negro League baseball, and now-forgotten creative Black Cinema — but that did not make up for effectively confining Americans of African heritage to a small pond. Affirmative Action was mainly sold on the basis of allowing all Americans to swim in the big ocean.

    As with many laws, something which probably had good justification to deal with a particular injustice half a century (two generations) ago has since transmogrified into creating a different kind of injustice. After the Revolution, we will have Sunset Provisions in most laws.

  • neonsnake

    As with many laws, something which probably had good justification to deal with a particular injustice half a century (two generations) ago has since transmogrified into creating a different kind of injustice. After the Revolution, we will have Sunset Provisions in most laws.

    Agreed. As much as it goes against my principles, I have wondered if sometimes that in order to address a gross injustice, you need to push harder on the scales and tip them just past equality, in order to ram the point home. The enormous problem being that no-one appears to know when “enough is enough”, and let the scales tip back to equal.

    Indeed, the situation suggests that the reverse is happening and people push ever harder and harder (which is my main objection)

    Then we’re led to the current state of play, where the law is so confusing in some areas that we can’t say for certain whether companies are taking action of their volition (a good thing), or being coerced (a bad thing)!

  • Gavin Longmuir

    “… in order to address a gross injustice, you need to push harder on the scales …”

    The painless way to correct an injustice is, in the famous words of that philosopher Homer Simpson, ‘Can’t someone else do it?’

    Back in the days when feminists first hijacked Affirmative Action intended to help People of Color, the (all male) executives of the company I worked for at the time held an all-hands meeting to announce that there were not enough women in senior positions, and they intended to correct that issue. Although it was not stated bluntly, the clear implication was that those of us who were breast-deficient henceforth would have very poor prospects for promotion.

    At the time, I wondered … if these male executives really believe that (white upper middle class) women have been denied promotions in the past, why would they not do the honorable thing and resign or demote themselves so that their senior positions could immediately be filled by women? Instead, they were effectively saying — we older males have benefitted (and continue to benefit) from an injustice, and now you younger males will pay for our sins.

    We can’t change the past. Discriminating against one group today cannot make up for past discrimination against another group. The best we can do is create a level playing field from now on.

  • neonsnake

    We can’t change the past. Discriminating against one group today cannot make up for past discrimination against another group. The best we can do is create a level playing field from now on.

    Indeed; although I’m not clear how to get there from here.

    I’m going to bow out now, as I fear I’ll take the thread off topic, but thank you very much for the discussion, much appreciated.

  • Paul Marks

    A lot of comments – but no real answer as to how much (most?) of Big Business became dominated by serving Marxist (yes – Marxist) ideas, and no real answer to how this can be STOPPED.

    Make no mistake – if “Big Business” (from the television networks to Mastercard, to many of the banks) continue to push Frankfurt School of Marxism ideas and groups (under the name of “Social Responsibility”) the West is doomed.

    It must be stopped – but to stop it we must understand how this came to pass in the first place. How did Marxist “P.C.” (or “Critical Theory”) gain such a stranglehold over so much of Big Business?

    Can it be explained by the leftist domination of the education system?

  • […] Pearce, “Corporate social responsibility – is it socialism by the back door?”, Samizdata, […]

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