Bill George, former chair and CEO of Medtronic and current Harvard Professor, is one of the nation’s most outspoken leaders when it comes to the role corporations play in society.  I discovered his recent opinion piece in the Star Tribune when I read a rebuttal by Howard Root to it in today’s newspaper. 

Bill George:

A short-term focus on shareholder gains has substantially increased the velocity of stock market trading. In the past 25 years, holding periods for stocks have fallen from eight years to six months. CEOs focusing on meeting the demands of short-term investors have led to the destruction of many once-great companies, including General Motors, Sears and Enron. This culminated in the 2008 global financial meltdown, when over-leveraged financial institutions collapsed as they tried to maximize short-term value.

Howard Root:

 But George conveniently inserts the words “short-term” into Friedman’s philosophy. Contrary to George’s assertion, to maximize profits does not mean to focus only on today and ignore long-term growth. To maximize profits also does not mean to make poorly designed products (as GM did) or to fail to adapt to the popularity of the big-box retail concept (as Sears did). Friedman did not advocate short-term thinking, but rather that a corporation’s only constituency, both on a short-term and a long-term basis, is the shareholder, and that management’s favorite societal causes are irrelevant to its business goals.

I think both authors make excellent points througout their pieces and I think in an odd way (for writing and having seemingly opposite viewpoints) they can both be considered “right” when it comes to this argument.  Root conveniently uses extreme examples just as George conveniently leaves out pieces of what MIlton Friedman believed. 

Read both and draw your own conclusions.  Regardless of how any of us feel, I think this idea of corporate social responsibility is one that will grow in the coming years.  I’m not sure whether it is important if it grows because business are pursuing profits (i.e. giving customers what they want) or if it grows because they feel a responsibility to society.  Drawing from Kant and Machiavelli, the ends may justify the means. 

Bill George:

Howard Root