CSR (2)

The populist bastion from Kompas is on fire again. Now on CSR. Its today’s Fokus focuses on the all-good-thing about CSR. They invited businessmen from corporations that had successfully implemented CSR. They did not even bother to ask those who had not. Of course they got positive responses only. This is what we call selectivity bias.

They run five or six articles praising CSR. And they all miss the point. What is being objected by business majority is the coercion, not the merit of CSR. Yes, CSR is good. Yes, it has positive correlation with profit – you don’t need a Porter to tell you this. You don’t even need Perkins gossip book to make your case. Every company who runs CSR -- in the absence of coercion from government ran it for profit consideration. So it should have positive correlation with profit. Otherwise, it would not have been done in the first place. Of course those companies will tell you they are doing it purely out of social motive. That is a lie. They are doing it to attract more customers or to avoid being attacked by community members or to hide something bad they have done, e.g. tax evasion.

Imagine you just invested big chunk of your money in some stocks. Then you read in the newspaper that the company will give out a large amount of money for CSR. If you really love CSR, you should be glad and even encourage that company to use all the dividends for that, should you not? You will praise the CEO, will you not? I guess, if you are just honest, the answer would be no and no. If you are both honest and smart, you will agree to allocate a little amount of profit for CSR – only to the level where it is sufficient to impress the public so as to turn them into your loyal customers. You don’t want a CEO who spends all your money just to build little bridges out there.

Again, CSR is good. So is drinking more water and less coffee. But as you do not want the government to put you in jail if you do not drink more water, you do not want the government to put you in jail if you do not do a CSR. After all, drinking too much water makes you puke.

CSR

Corporate social responsibility (CSR) should not be made mandatory by the State. By its very definition, CSR is voluntary action. It is part of profit maximizing effort by corporation. Yes, a few countries have experimented regulating it. And they are all in error. The main responsibility of corporation is to maximize profit so it can pay good dividend to its shareholders. If CSR is to be imposed on companies, then to be balanced, why don't you also impose something like PSR (people social responsibility)?

We have seen many companies made successful CSR. And they did it without any mandatory regulation.

Smart Environmentalism

Says Ed Glaeser,

Smart environmentalism has three key elements. First, policies should be targeted toward the biggest environmental threat: global warming. Second, our resources and political capital are limited. This means we must weigh the benefits of each intervention against its costs. Third, we must anticipate unintended consequences, where being green in one place leads to decidedly non green outcomes someplace else.

Fixing a distortion with yet another distortion

As reported by The Jakarta Post today, Indonesia's biofuel producers are urging the government to make the use of biofuel mandatory for factories and vehicles.

How can you expect a progress if this kind of thinking persists? I hope the government doesn't approve this silly idea. There is a better way to become more eco-friendly : remove the subsidy on the competing, fossil-based fuels. Biofuel is a good idea. But protection like that asked by the Biofuel Producers Association is not.