CSR: Milton Friedman Would OK Both Jobs & Gates

There's a much-read article taken from Harvard Business Review by Maxwell Vessel circulating on the Businessweek website. He argues that while the late, great Apple chief Steve Jobs and his Microsoft counterpart were both admirable business leaders, Bill Gates deserves to be idolized more for his subsequent philanthropic work after leaving day-to-day operations at MS:

As much as I love Apple, Inc, I would happily give up my iPhone to put food on the plates of starving children. Steve Jobs turned his company into a decade long leader in the truly new space of mobile computing. Bill Gates decided to eliminate malaria. Who do you think we should be putting up on a pedestal for our children to emulate?

To those familiar with the CSR literature, there is a false argument in place here that is exacerbated by the quotation above. Let me explain. Even the arch-critic of CSR Milton Friedman did not disapprove of do-gooding. Rather, he thought that devoting time and effort to worthwhile causes should be separate from the regular business of doing business:

[H]ow much cost is he justi­fied in imposing on his stockholders, customers and employees for this social purpose? What is his appropriate share and what is the appropri­ate share of others?

And, whether he wants to or not, can he get away with spending his stockholders', cus­tomers' or employees' money? Will not the stockholders fire him? (Either the present ones or those who take over when his actions in the name of social responsibility have re­duced the corporation's profits and the price of its stock.) His customers and his employees can desert him for other producers and em­ployers less scrupulous in exercising their so­cial responsibilities.

The important thing to remember, dear readers, is that neither Steve Jobs' Apple nor Bill Gates' Microsoft for that matter have devoted the bulk of their companies' activities to social causes per se. activity. While both Apple and Microsoft do conduct CSR-related activities--supplier audits for labour and environmental standards, for instance--that is pretty much par for the course among their peers. The purpose is primarily defensive in avoiding Nike-and-sweatshops-like entanglements.

Rather, what does set Bill Gates apart is that he devoted his post-Microsoft work to funding socially beneficial initiatives alike coming to terms with HIV/AIDS, tuberculosis and malaria. In a Friedman-friendly way, he did not plow Microsoft's retained earnings into philanthropic ventures. They instead conducted using his own funds (along with those of other fellow billionaires, it should be added) and on his own time. Here's Friedman again:

Of course, the corporate executive is also a person in his own right. As a person, he may have many other responsibilities that he rec­ognizes or assumes voluntarily–to his family, his conscience, his feelings of charity, his church, his clubs, his city, his country. He may feel impelled by these responsibilities to de­vote part of his income to causes he regards as worthy, to refuse to work for particular corporations, even to leave his job, for example, to join his country's armed forces.

If we wish, we may refer to some of these responsibilities as "social responsibilities." But in these respects he is acting as a principal, not an agent; he is spending his own money or time or energy, not the money of his employers or the time or energy he has contracted to devote to their purposes. If these are "social responsibili­ties," they are the social responsibilities of in­dividuals, not of business.

In essence, Milton Friedman would have approved of both Steve Jobs and Bill Gates. Yes, Microsoft's stock has not done as spectacularly well as Apple's in recent years, but hey, it's not as if Gates still runs the show there. Returning to the first quote above from the article's author, it is thus far-fetched to assume that buying Microsoft products instead of iDevices will better serve the cause of saving the world. Again, separate MS (the company) from Bill Gates (the philanthropist). In Friedman's terms, investing in Apple stock should even prove to be the more humanitarian action insofar as it would provide a socially responsible citizen with more capital to do good deeds--hopefully as a principal and not just as an agent.