In a piece in the New York Times on December 8, Andrew Ross Sorkin wrote that we are supporting gun manufacturers unwittingly whether or not we want to because indexed mutual funds and target-date retirement funds from most companies, including Fidelity, Vanguard, and Blackrock, own shares in them.
Anti-gun activists are trying to mount a campaign against Cerberus Capital Management, a private equity firm, because one of the guns made by a company it owns, Remington Outdoor, was used in the San Bernardino shootings. They cannot attack the firm itself because it is private, but it also owns Shaw’s, Star Market, Safeway, Osco Drug and Steward Health Care, brands to which a boycott could do serious damage.
Sorkin includes a quote from a Cerberus spokesman in 2013 after the Sandy Hook Elementary School killings: “As a firm, we are investors, not statesmen or policy makers. Our role is to make investments on behalf of our clients. It is not our role to take positions or attempt to shape or influence the gun policy debate.”
That quote caught my attention because it makes an argument that used to be accepted orthodoxy but has gone out of favor. That is, a company’s social responsibility is to make its shareholders money, nothing else. As long as it operates within the law, it should be safe from criticism.
Regardless of anyone’s stance on gun control, it struck me how much times have changed. As I set out on my academic career in the early 1980s, I taught a course called Business and Society and posed a reading by Milton Friedman that advanced the “make money for shareholders” argument. At the time, that was the prevailing view in business. With the exception of Wall Street, it has lost steam in the intervening years.
The Business and Society course was extremely rare because it was a required course, not an elective. Beyond us, very, very few business schools required it, if any. The reason I was teaching it was that no one else wanted to. The topic was not considered important enough to deserve the attention of any self-respecting business school professor.
A lot has happened in between to change the landscape. If I were to guess when the flip switched, I’d say the late ‘80s. Younger people may not believe it, but prior to large layoffs in that period, many companies had implicit or explicit no-layoff policies, including Delta Air Lines, Digital Equipment Corporation, Hewlett-Packard, and IBM. After that time, few no-layoff companies remained. The change caused great turmoil because employees who had thought they were promised lifetime employment were “downsized” in droves. A much more cynical attitude toward large companies came to predominate – one much less sympathetic to their plight.
We also had Michael Milken developing junk bonds, corporate raiders engaged in hostile takeovers, and towns that had relied on a single company for a hundred years being abandoned when the company moved to a lower cost location. Milken’s prosecution for insider trading set off a wave of disgust with unethical corporate behavior. It seemed to be capped off by the environmental catastrophe created by the Exxon Valdez oil spill. It was serious. Business school enrollments that had reached close to 25 percent of undergraduate students fell rapidly to 14 percent.
Since then, a gradual shift has occurred to the point where most young people now don’t wonder whether businesses have a social responsibility, they assume it. It has become such a part of the discussion in business courses that schools are tripping over each other to demonstrate that they are more heavily committed to sustainability than their competitors.
The Cerberus spokesman could have gotten away unscathed with his position years ago, but it does not resonate now.