Stakeholders and Corporate Social Responsibility

Stakeholders and Corporate Social Responsibility

02/08/2018Peter G. Klein

Nicolai Foss and I have written a paper criticizing currently fashionable "stakeholder" approaches to the firm and the idea that managers should pursue "corporate social responsibility." BlackRock CEO Larry Fink, who manages $6 trillion in corporate assets, made a splash last month by insisting that corporate executives focus not on shareholders, but on a broader segment of society: "Companies must ask themselves: What role do we play in the community? How are we managing our impact on the environment? Are we working to create a diverse workforce? Are we adapting to technological change? Are we providing the retraining and opportunities that our employees and our business will need to adjust to an increasingly automated world? Are we using behavioral finance and other tools to prepare workers for retirement, so that they invest in a way that that will help them achieve their goals?"

Foss and I argue that this view ignores the basic function of ownership, which is to exercise responsibility for productive resources. Building on Mises's judgment-based view of entrepreneurship, we argue that corporations should be run in the interests of owners -- and that not everyone affected by a company's actions, let alone society at large, is an owner. Here is the abstract:

We argue that the stakeholder and CSR literatures can benefit from more systematic thinking about ownership. We discuss general notions of ownership in economics and law and the entrepreneurial notion of ownership we have developed in prior work. On this basis, we argue that stakeholder theory needs to deal more systematically with ownership as an economic function that can be exercised with greater or lesser ability, may be complementary to other economic functions, and works better when assigned to homogeneous groups. Some stakeholder groups are likely to lack what we call “ownership competence,” even if they have made relationship-specific investments, in part because of diverse interests. We also discuss CSR from the perspective of ownership and support Friedman’s original position, but with a twist. The point of Fried-man’s paper is not that firms “should” maximize profits, but that managerial pursuit of “socially responsible” activities in a discretionary way imposes costs on owners. We suggest this problem is exacerbated with entrepreneurial managers who can devise new ways to disguise self-interested actions as CSR initiatives.

The paper is titled "Stakeholders and Corporate Social Responsibility: An Ownership Perspective" and is forthcoming in Advances in Strategic Management. A manuscript copy can be downloaded at SSRN.

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Shawn Ritenour Named a Mises Institute Senior Fellow

03/13/2018Mises Institute

The Mises Institiute is excited to announce that Dr. Shawn Ritenour is our newest Senior Fellow. Dr. Ritenour is a professor of economics at the historic Grove City College, where he assists with the annual Austrian Student Scholars Conference. 

Dr. Joseph Salerno, academic vice president of the Mises Institute, had this to say about the announcement: 

We are thrilled to have Shawn Ritenour accept our invitation to become a Senior Fellow.  Shawn is a renowned scholar in the Misesian tradition.  He is the editor of the Mises Reader, the most important compilation of selections from Mises's works yet published.  His own treatise, Foundations of Economics: A Christian View, is much more than a mere economics  textbook and can be read with great benefit by anyone wishing to achieve a foundational  understanding of modern Austrian economics in the tradition of Mises and Rothbard.

Dr.  Ritenour will be giving the Lou Church Memorial Lecture at this years Austrian Economics Research Conference. Read more from Shawn Ritenour here

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Another Reminder that Elizabeth Warren is a Fraud

03/13/2018Tho Bishop

Elizabeth Warren's entire career has been based on a lie. I speak, of course, of the notion that she's some sort of expert on the financial sector. Not only is the Senator from Massachusetts bad on basic economics — advocating policies that would grossly punish the poor, ignore the consequences of central banking, and being a general embodiment for everything bad about modern progressivism — but she is ignorant of basic facts that played out during the financial crisis. 

For example, today Warren unleashed a barrage of tweets targeting legislation designed to reverse some of the Dodd-Frank regulation that has helped further consolidate the banking industry and increase the size of Too Big to Fail banks. I have not yet gone through the legislation, and it's quite possible that there are objectionable parts to the legislation, but one tweet from Warren just doesn't hold up reality.

This is simply wrong. BB&T never took a bailout, because they had no need for one. In fact, the bank's CEO at the time, John Allison, was the loudest industry voice criticizing the entire scheme. While BB&T did receive TARP funds, it was only because they were forced to do so by the Obama Administration that once employed Warren. In fact, the North Carolina-based bank is perhaps the one of the large financial institutions who can honestly contend to be a victim in the Washington bailout, as they were forced to pay high rates on lending due the government forcing them to accept TARP funds

In short, Senator Warren's opinions on financial services matters should be treated with the same seriousness as her contributions to the Pow Wow Chow Native American cookbook. 

(Allison's book on the financial crisis is a personal favorite. If you purchase it — or any book — on Amazon using this link, the Mises Institute benefits thanks to Amazon Smile.)

Warren Tweet BBT.png
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Trump at His Worst Is the Status Quo

03/09/2018Tho Bishop

The presidency of Donald Trump continues to be an unpredictable one, with the latest twist being his announced plans to meet with North Korean despot Kim Jong-Un. Naturally the reaction from the beltway and the media was to condemn this diplomatic outreach.  Rachel Maddow perhaps did the best job as establishment media mouth piece, pointing out that Trump's decision goes against a policy that has long enjoyed bipartisan support - a label which in DC is used to demonstrate clear intellectual superiority: 

It has been through Republican and Democratic administrations, the whole strategy not only for the United States but for the United States as leader of the free world, to the extent that we are, has been to treat North Korea as a pariah state and thereby try to change their behavior.

Of course this same strategy has clearly failed to achieve its desired objective.

Trump's willingness to completely ignore what has been deemed acceptable by the leaders of both parties is, of course, an example of the Trump Administration at its best. 

On the flip side, we have been given many examples recently of Trump at his worst, where he adopts the policies and rhetoric that have often enjoyed bipartisan support in the past.

For example, though it is great to see the mainstream media come to condemn the intellectual fallacies inherent with protectionist trade policies, there is nothing particularly novel about a president imposing tariffs. We saw the Obama Administration impose tariffs of foreign solar panels, while the Bush Administration did their own version of steel tariffs. Similarly, Trump's concessions on gun rights make him sound more like Reagan, Bush, and Obama, than the populist "drain the swamp" candidate on the trail. 

So hopefully Trump's diplomatic outreach to North Korea will pay off. First and foremost to help de-escalate a truly dangerous threat to civilians in South Asia, but also to help illustrate the virtues of ignoring beltway group think here at home. The index card of allowable opinion has been a disaster for both the country and the world for far to long. 

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"The Mises Institute and the Impact it has had on my Life"

03/08/2018Mises Institute

Thanks to Luis Areizaga for his recent comments on the Mises Institute: 

Today I was at LibertyCon watching the panel discuss the value of university in the modern era. One of the speakers was Jeff Deist, President of the Mises Institute, an organization that has provided great value to me in my life. After a very active and interesting debate between employers and academics, I got the chance to go up and introduce myself. This conversation, among others that I had with a few members of the Institute that day, led me to want to write about the Mises Institute’s mission and the positive impact it has had on my life.

The Mises Institute was founded in 1982 with the mission of promoting and seeking a society based upon the principles of free-market capitalism, private property, and voluntaryism. It rejects the coercive use of force and the monopoly of violence the state holds. To achieve this, it employs the use of one of the most powerful tools there is, education and dissemination of information. Through its posts, free library, research, and educational programs it has helped spread the message of liberty to an untold number of individuals. The institute stands firmly and proudly as a bulwark against the forces who seek to rid us of our hard-earned liberties and freedoms.

I discovered the institute through a friend who I frequently had discussions of political and economic nature with. He had recommended me the articles as counterpoints to my arguments and as a tool which I could use to learn the arguments of the Austrian School. After a period of reflection, I recognized the logical arguments presented and conceded to their superiority. I have personal experience growing up in a socialist country where, among many other problems caused by state intervention, power outages and water shortages have become increasingly common due to the state monopoly on utilities, so it was not difficult to recognize the truth once I saw it.

The Institute gave me hope and taught me that there were solutions to these problems and that if we empower the individual to pursue innovation and competition in the marketplace we can solve the ills of society and create a better future. Today I seek to take these beliefs and act upon them in order to build a freer world. I have embarked upon a more entrepreneurial path by joining Praxis, an apprenticeship program, where I will be honing my skills and working with like-minded folk in the startup sector. I hope in the future to take these skills to build and develop ideas that innovate and empower the market forces which provide for so many of our needs.

Looking back, I realize that if not for the Mises Institute I might have never learned of these ideas, questioned that which so many take for granted, and taken the steps to reorganize my life in a way where I can contribute towards the cause of liberty. For that, I thank the Institute and implore them to continue their mission in which they have had such outstanding success. I would like to share a quote that I believe carries a greatly important and hard truth but which we must recognize nevertheless “Eternal vigilance is the price of liberty”. Never waver, the Mises Institute and the greater libertarian movement pays that price every day.

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Auburn Legend Pat Dye at the Mises Institute!

03/08/2018Tho Bishop

The Mises Institute has been doing some grounds work the past few weeks, and we had a special visitor today as we planted a new tree: Auburn football legend Pat Dye. 

A player at the University of Georgia, Dye served as both head football coach and athletic director from 1981-1992. He was inducted in the College Football Hall of Fame in 2005,  and the playing field in the football stadium is named "Pat Dye Field" in his honor.

It was great to have Coach Dye with us today, and to show-off the Mises Institute campus to an Auburn legend. 


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Audio: Andy Duncan and Ryan McMaken on Trump's Tariffs

03/08/2018Mises Institute

Andy Duncan of Mises UK interviews Ryan McMaken on tariffs, income taxes, and the importance of free trade [20 minutes]:

Trade Wars and Trump's Trade Tariffs, with Ryan McMaken

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Gun Crackdowns Have Already Led to Too Many Federal Abuses

03/08/2018James Bovard

President Trump declared last week that the law enforcement should “take the guns first, go through due process second.” But the history of federal firearms enforcement shows that due process is often a mirage when federal bureaucrats drop their hammer. Before enacting sweeping new gun prohibitions, we should remember the collateral damage and constitutional absurdities from previous federal crackdowns.

Gun control advocates have called for prohibiting possession of AR-15 rifles — a ban that could create five million new felons overnight, since most owners would not meekly surrender their firearms at the nearest federal office. Others advocate outlawing all semi-automatic firearms — an edict first floated by the Clinton administration that would create tens of millions of new offenders.

But before vesting vast new power in federal enforcers, the record of the Alcohol, Tobacco and Firearms (ATF) agency must be considered. A 1982 Senate Subcommittee on the Constitution report on ATF concluded, "Enforcement tactics made possible by current firearms laws are constitutionally, legally, and practically reprehensible.” Outrageous abuses have continued to the present day. An analysis conducted for the University of Chicago found that ATF heavily targeted racial minorities in its entrapment operations. And across the nation, ATF has been caught using mentally handicapped individuals in sting operations.

Sweeping new firearms prohibitions would enable the feds to selectively target unpopular offenders. The biggest debacle resulting from prior such targeting occurred 25 years ago last week outside of Waco, Texas. The federal Alcohol Tobacco and Firearms (ATF) agency saw the Branch Davidians — a fringe Protestant group that quickly became maligned as a cult — as the perfect patsies for a high-profile raid that would make G-men look like heroes.

Read more at The Hill
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Parents to Sue Broward Sheriff's Office for Failing to Provide Protection

03/07/2018Ryan McMaken

As we've already discussed in detail, here and here, police agencies are not under any general legal obligation to protect the taxpaying public from criminal behavior. The motto "to protect and serve" is an advertising slogan. 

Moreover, police agencies are also protected by immunity laws from lawsuits in regards to police abuse or lack of action. 

However, in the case of last month's shooting at a school in Parkland, Florida, a Sheriff's deputy had specifically been assigned to provide security services at the school. This, apparently open up the Sheriff's office to legal action. Reuters reports on how at least one student who survives the massacre has announced a plan to sue to partially offset medical costs: 

Law enforcement officers are generally immune to legal claims over inaction, as courts have held they need to be able to make decisions without fear of liability.

However, the Sheriff’s Office and Deputy Sheriff Scot Peterson could fall under a “special relationship” exception because Peterson was specifically assigned to protect Marjory Stoneman Douglas High School in Parkland, Florida, said Timothy Lytton, a law professor at Georgia State University who has written a book on gun litigation.

“The children and teachers justifiably relied on him and his unique level of knowledge to protect them,” Lytton said.

The deputy’s failure to enter the school during the shooting has added to criticism of law enforcement officials over warnings that accused shooter Nikolas Cruz posed a threat.

This may be the only legal option for the students and parents seeking legal reparations from either the school of law enforcement agencies. 

Government schools are generally immune from lawsuits claiming insufficient security, as well. 

Overall, though, there is little reason to expect schools to start taking security seriously until they are held legally accountable for providing meaningful security on their premises. 

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The Sec. of Education's Campaign Stop at Florida-Shooting School

03/07/2018Ryan McMaken

The US Department of Education should have been abolished years ago. Once upon a time, GOP candidates pledged to do just that. But now the Party is happy to use the Department to provide photo ops for the politicians appointed as the Sec. of Education. 

Earlier today, US Sec. of Education Betsy DeVos visited Marjory Stoneman Douglas High School, the site of last month's shooting. 

What is accomplished by visits such as this? 

They offer an easy way for administration personnel to get some media coverage and push the administration's positions. They offer a way to stroke the egos of the cabinet members involved who can use these trips to get more attention for themselves. The trips allow federal officials to feel like they're doing something useful. All of this is done at taxpayer expense, of course — the transportation, the security, and the staff involved don't work for free. 

RELATED: "Will Republicans End the Department of Education? Not Likely." by Ryan McMaken

But, as with education in general, the federal government should have no role in the issues surrounding school shootings in general, or security at Florida schools in particular. There are no insights that DeVos can offer. She has no special knowledge of the relevant events, or any training at all in security matters. And, even if she did have some especially useful knowledge in this matter, she could just as easily share it over the phone.  

DeVos's visit only helps to perpetuate the idea that the federal government should be involved in every matter under the sun, and that state and local officials should look to the federal government to solve their problems. 

Given that the Federal government is deeply in debt, and has no constitutional authorization to meddle in local education matters, it's hard to see what "solutions" can be offered from Washington, DC. After all, Florida has an economy larger than both the Netherlands and Switzerland, and thus should look to itself to address any issues related to schooling and security. 

DeVos's visit should be seen as what it is: a political campaign stop which only further sends the message that there is nothing that's beyond the reach of federal policy. 

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A Note on Campus Totalitarians

03/07/2018Jeffrey Harding

A movement is taking over America’s colleges and universities that rejects classical norms of reason, logic, and scholarship. This anti-intellectual trend is a road to totalitarianism.

What now passes for erudition in many liberal arts departments would not qualify as good scholarship using the proven tests of critical thinking. Worse, dissent is being shouted down, not debated. And many administrators support this trend making it, in effect, de facto campus policy.

This trend has all the hallmarks of societies that have gone totalitarian.

The first wave is always an assault on intellectuals and reason. Whether their shirts were black, brown, or red, academic dissent was shouted down, dissenters were persecuted, and reason was discarded. Many historians have chronicled the similarities of these movements: Friedrich von Hayek’s  Road To Serfdom; William Shirer’s Rise And Fall of the Third Reich; Sean McMeekin’s The Russian Revolution; Ayn Rand’s semi-autobiographical novel about the rise of the Bolsheviks in We The Living.

These totalitarian regimes were almost all collectivist whereby the government dictated the economy and eventually society in order to achieve goals they believed were just and noble. You can call them socialists, or communists, or fascists, but really, they all operated similarly. Today in America it is “social justice” which is just another word for coercive state control over the individual. But, as Friedrich von Hayek said, their desires outstrip their understanding: history has shown that this path will end in tragedy, not utopia.

What set me off on this critique of contemporary ideology was Professor Nancy MacLean whose book, Democracy in Chains: The Deep History of the Radical Right’s Stealth Plan for America has been praised in Progressive circles. In it she claims that James Buchanan, a distinguished Nobel prize winner in economics, was at the intellectual forefront of a dark libertarian movement to support segregation and to protect the rights, position, and capital of rich white folks. The National Endowment for the Humanities awarded her $50,400 to write the book.

As an expert on the philosophy and history of the libertarian movement, I can assure you that her premise is absurd. James Buchanan was a fine scholar with a long record of excellent scholarship. Her scholarship on the other hand has been eviscerated by many academics as consisting of lies, innuendo, exaggeration, misquotes, unsubstantiated citations, and taking things out of context. They have challenged her to refute their very specific criticisms, but she doesn’t respond other than to make personal attacks on her critics. The fact that she doesn’t understand economics (her admission) would lead one to question her ability to criticize a Nobel-awarded economist.

Yet her book was praised by Progressive media such as the New York Times, The New Republic, The Atlantic, Oprah Magazine, NPR, and Slate. Many enthusiastic reviewers cited her extensive list of citations as evidence of her scholarship. The point about MacLean, an outspoken Progressive, is that she formed a conclusion and then tried to fit facts to support it. That is not scholarship. One prominent critic called the book “speculative historical fiction.” Her premise is that libertarians wish to impose a draconian regime on America to preserve “capital” and position of the wealthy. Anyone with a smattering of knowledge about libertarianism would know that control over others is a very unlibertarian thing to do. Yet Progressives love her. MacLean is emblematic of the trend in academia where political ends trump scholarship.

Her latest response to critics is to accuse libertarians of being autistic. “It’s striking to me how many of the architects of this [libertarian] cause seem to be on the autism spectrum. You know, people who don’t feel solidarity or empathy with others and who have difficult human relationships sometimes.”

This quote should give you some idea about her shallow scholarship. That she would be lionized by the Left reveals their anti-intellectualism and groupthink mind set, which has been characterized as symptomatic of authoritarian personalities.

Which leads me to my next point about the anti-intellectual response on campuses to critics of various theories that are now the rage in academia (Multiculturalism/Critical Theory (Neo-Marxism)/Postmodernism/Post-structuralism). If you disagree with and dissent from these epistemologically-challenged theories, you will be punished. You will be publicly condemned, threatened, and ostracized. But, while you will be shouted down, you won’t be challenged on the merit of your ideas. There is no debate because they know their ideas won’t stand up to rational analysis and criticism.

Law professor Amy Wax of the University of Pennsylvania was on the receiving end of this because she wrote an op-ed piece supporting bourgeois ideals. The reaction among faculty and students was overwhelming. She was accused of hate speech and being a racist. One of her deans asked her to cease teaching and take a leave of absence. 33 colleagues signed an open letter condemning her. Yet none of them addressed her ideas to explain the error of her ways. As she said: “Hurling such labels doesn’t enlighten, inform, edify or educate. Indeed, it undermines these goals by discouraging or stifling dissent.”

Multiculturalism and Critical Theory are now the driving forces behind rising campus intolerance to dissenting ideas and thus, free speech. Words, meanings, reason, and motives are ignored. Speech is to be used as a weapon to further Progressive political goals and to subvert classical liberal concepts such as tolerance, free speech, individualism, reason, and equality under the law. Dissent from Progressive orthodoxy is now “racist hate speech”, a vestige of (white) privilege, and is an act of violence against protected (“oppressed”) groups. The meanings of words are to be manipulated to serve Progressive political goals. Protected groups, all advocates of social justice, are thus “liberated” from the bonds of tolerance and free speech. Intolerance to the speech of dissenters (often violent) is justified to achieve political goals. Any means to an end.

The result is the rise of intolerance and groupthink in academia, which, of all places is supposed to be a bastion of free speech where ideas can be debated and students can learn to think. But, that is not so. Campus free speech is dying.

This is all calculated. These social justice warriors are using these philosophies to achieve Progressive goals. It’s all about politics and their quest for power. Truth, justice, reason, tolerance, and scholarship be damned.

We need to shine light on these trends. We need to expose them for what they are: a proto-totalitarian vanguard. By rejecting free speech and the rigors of scholarship, they chip away at the ideas and ideals that have delivered the greatest advances in health, wealth, and well-being in human history. History has shown that these movements do not end well.

This article originally appeared at An Independent Mind.

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