Wednesday, April 20, 2011

CSR - Corporate Social (Ir)responsibility?

I have recenttly come across a number of publications/conference/seminars enthusing over the idea of CSR.

Now, I am in favor of any corporate actions that improve social welfare. But I have doubts at the same time whether by focusing on CSR we are not actually losing track of something else.

Specifically, can companies be considered "socially responsible" when they "optimize" taxes, thus reducing tax revenue, undermining productive public spending (roads etc) and--ceteris paribus--increasing tax rates for consumers, who need to pay more because of lower CIT revenue? Just read this shocking NYT's story on General Electric, which despite having earned almost $15 billion dollars in profits in 2010 have not only paid nothing to the US Treasury, but even claimed a $3.2 billion refund! Given the nominal 35% CIT rate in the US, GE should have paid some $5 billion of taxes on its worldwide income. This compares with $160 million that GE spends on CSR per year, that is 3% of the amount that it should have paid in taxes. How socially responsible is this?

And what about companies that may be spending on a lot on CSR but focus their business on selling overpriced products that consumers do not need, often on the basis of misleading information? Let's take Danone, a French food company and one of the global CSR leaders. It produces Actimel and Activia, dairy products with added bacteria, which cost a multiple of a price of regular milk and yoghurt and--against the claims of the company--have no proven impact on health whatsoever? The company recently lost a case in the US and had to pay $21 million in damages (read this and that). How socially responsible is this?

I leave it to you to decide.

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