Gary Becker Vs. Corporate Responsibility

Reading Uncommon Sense, a book collecting some of the most interesting insights of Chicago economics professor Gary Becker and Jurist Richard Posner from the Becker-Posner Blog, I came up on Becker's discussion of corporate social responsibility. On this Becker is, as you would probably guess if you know his work, a shareholder rights absolutist. On his view, the corporations' responsibility is confined to following the law. Beyond that, corporations should act strictly in the shareholders' interest--for example, they should not endeavor to pay "fair" (that is, above market) wages in Third World countries.

It's possible to come up with plenty of objections to this; for instance, what happens in the case of a company that discovers that some of its practices--say, using radioactive materials to make day-glo gadgets--are dangerous before the government does. I suspect that in some of the more extreme cases Becker would resort to the stratagem of appealing to some notion of long-term corporate wellbeing. But even in less difficult cases Becker turns out to be less consistent in this than you might expect. On bribery and working conditions, Becker is willing to let corporations do the bare minimum.

Towards the end of the book, however, there is a chapter that takes on Yahoo and Google's dealings with the government of China, which has tried to use the records of internet companies to identify dissidents. On this issue, oddly, Becker takes a very different tack, and says that for Yahoo to turn over the names of its services users to an authoritarian state is clearly going too far. Says Becker:

"I do believe that it is reprehensible for Yahoo to disclose the names of Chinese citizens using its services, particularly when the information Yahoo ave about one of them led to his arrest and imprisonment. Whatever one's beliefs about other rules of corporate behavior in China, disclosure of names of 'dissidents' who face arrest and punishment is unacceptable."

It's hard to see what the bright line difference is here between this and "other rules of corporate behavior." Yahoo's justification for doing that was that it was merely following the local laws. And why shouldn't it? Surely, getting an edge in China is in the shareholders' interest. The most plausible explanation here is pretty simple. It's that Becker doesn't really think much of corporate efforts to raise foreign living standards or avoid bribery (possibly he doesn't care much, but more charitably it's clear that he doesn't think they do anyone any good) but does care about the speech rights of dissidents in a dictatorship. I think this last part is to his credit, but it is also devastating to his thesis, which just shows how quickly an absolute rule on the preeminence of shareholder rights, like many similar uniform principles, falls apart when it collides with an issue you really care about.