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The social responsibility of profits

- The Washington Times - Friday, August 17, 2007

"The social responsibility of business," Milton Friedman famously said, "is to increase its profits."

Some extol this view. Others condemn it. More simply misunderstand Dr. Friedman or quote him out of context. A more accurate interpretation reflects basic principles behind free enterprise, profits and returns on investments.

Companies earn consistent profits and stellar reputations by providing goods, services and technologies that society needs and values — and do so legally, ethically, and by offering superior quality, lower cost, greater reliability, outstanding customer care and other benefits, while protecting the environment. They thereby stay in business and reward investors who made their innovations and products possible.

This is the most fundamental way companies are socially responsible — to employees, customers, families and communities that have been improved by the company's actions. It also ensures that businesses, officers, shareholders and employees have the financial wherewithal to engage in other activities that we recognize and applaud as "good deeds" on behalf of their communities.

BB&T Corporation of Winston-Salem, N.C., operates 1,500 branches, insurance agencies and financial services companies, with combined assets of over $125 billion. Its fundamental strategy, CEO John Allison told me, is to emphasize quality over price via personal relationships with clients, employee education, and banking operations organized as groups of community banks, to make employees "more responsive, reliable and empathetic.

The company's goal is to "help clients make sound business, banking and investment decisions, improve their lives and gain financial security," Mr. Allison said. If the community doesn't do well, neither does the company. That's the best reason he knows for supporting civic projects like BB&T's reduced-rate loans and other support to low- and moderate-income housing projects, and small businesses and farms.

A basic BB&T ethical principle is defending free enterprise and property rights. In the wake of Kelo v. New London, it gained respect, media coverage and probably new customers by refusing to lend to projects that use government eminent domain powers to acquire private property by redefining "public purpose" to include private enterprises that might increase tax revenues. "We just don't do it," Mr. Allison said flatly.

Skier's Choice of Maryville, Tenn. manufactures inboard ski boats that make the joy of getting out on the water affordable to more families. Its focus on innovation, quality and dependability have made this privately held company an industry leader that strives for steady improvements in performance, fuel efficiency and lower emissions in boats, and reduced energy use and waste streams in production processes. Its 2007 boats feature the best emissions rating ever in a marine engine.

The company's low-profile civic programs include support for local sports teams, therapeutic horse riding for handicapped children and adults, Boy Scout boating and boat safety programs, and preservation of Appalachian arts and crafts. It commitment to reliability and service is likewise quiet, but unwavering.

When our used Moomba ski boat developed serious engine problems, Skier's Choice simply helped get them fixed, even though the warranty had long since expired. "We just want to keep our customers happy, and get them back in the water," said customer service director Rob Loucks.

CVS Caremark employed expansions, mergers, acquisitions and commitment to affordable health-care service to become the nation's largest retail pharmacy chain, with over 6,000 stores in 38 states. CVS now fills more than 1 of every 7 prescriptions in the United States, for individuals, corporations, unions, government employee groups, insurance companies and managed care organizations.

The company's community involvement programs include helping pediatricians and families improve access to health care for lower income children and people with Down syndrome, and improving early literacy skills among homeless children. When my daughter sought help for a school project — getting toiletries and other personal items to wounded warriors in the Walter Reed Army Medical Center — our local CVS store's response put the company's commitment into practice.

We had barely outlined the project when the manager began filling a shopping cart with hundreds of travel-sized containers of shampoo, toothpaste, mouthwash, shaving cream, skin lotion and other items — to augment the $200 worth of watches, hair brushes, deodorants and other products we were purchasing. He also gave us a discount on our items, saying simply that "helping our wounded service men and women is one of the most important things we can do. They have given us so much. We need to give a little something back."

All these actions speak more loudly than the philosophies behind them. They represent the best that free enterprise and corporate America can offer, in pursuit of profits and a commitment to improving lives through products, services and community involvement.

Paul Driessen is senior policy adviser for the Congress of Racial Equality and Center for the Defense of Free Enterprise, and author of "Eco-Imperialism: Green power, Black death" (www.Eco-Imperialism.com)