Google's resistance and corporate social responsibility

Cite this Article
Geoffrey Manne, Google's resistance and corporate social responsibility, Truth on the Market (January 21, 2006),

google/csrThe government subpoenas Google’s records, and also Yahoo!’s and Microsoft’s. MSFT and YHOO cave: Their stocks are down a little over and a little under 2%, respectively. Google resists. Its stock drops almost 9%. And yet a headline for an article by MSNBC’s chief economics correspondent–with the relevant stock prices immediately alongside–notes, “Google stand could be good for business.” Maybe he’s talking about Microsoft’s business?

The article quotes Dan Solove who has thoughts about the matter here, here and here. Solove and others view Google’s resistance as primarily a matter of principle, but I bet Google is quick to claim that it is (or at least “will be eventually. Really. We promise”) good for the bottom line. And perhaps here principle and profit coincide: That principle in this case seems to require resisting government interference in markets is a good indication that this might be true. But what if the two remain divergent?

Think about how Google’s actions square with one or more of these claims, Tyler Cowen’s attempted distillation of Milton Friedman’s thoughts on Corporate Social Responsibility:

1. Profit maximization is the best rule available, even though it fails society in particular instances (in that case, isn’t there some slightly more convoluted rule that can cover at least some of these situations and modify the outcomes? If only “very simple” rules are allowed, why?)

2. Businesses have no responsibility to behave in an act utilitarian fashion. Rules are rules, and we should follow them, come what may.

3. Following the doctrine of fiduciary responsibility — in this case to shareholders — is the greatest social good in these situations. It outweighs potential act utilitarian considerations pointing in other directions.

4. Force and fraud aside, profit maximization always coincides with the social good, at least in the absence of bad government interventions.

5. It is a public choice argument. The claim is a noble lie, for otherwise business will be regulated by government in a counterproductive manner.

6. So much anti-corporate nonsense has been written, so we need to shock people with an extreme claim in the opposite direction.

Defenders of Google’s actions on principle will point to the caveat in #4 and will deny especially #2 and #3.

I would like to rest my defense of profit maximization on #4, but as a descriptive matter, I think the exception is in serious danger of subsuming the rule. I suppose that leaves me with #3, which looks to me like a slightly weaker version of #4. (And Steve Bainbridge has mounted a compelling justification of #1 and #2).

Either way, I’ve said it before and I’ll say it again: Google does not have a duty here to saddle its shareholders with the cost of saving the world from itself. Although if I knew its leaders believed in any of the claims above, I’d give them the benefit of the doubt.