Advancing TEI's social responsibility: on April 6, 2008, the Board of Directors of Tax Executives Institute adopted the following Report on Social Responsibility. Future issues of the magazine will discuss the implementation of the nine-point action plan approved by the Board.

• Position: Tax Executives Institute

Introduction--The Growth of Corporate Social Responsibility

Corporate Social Responsibility (CSR) is a concept whereby a company or other enterprise considers the interests of society by taking responsibility for the effect of its activities on customers, suppliers, employees (members), shareholders, communities, and the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and envisions organizations' voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large.

The CSR movement gained popularity in the 1970s, and it continues to attract much attention, with the emphasis in recent years focused primarily on sustainability and other environmental issues. A core component of CSR is public relations, with companies and industries (and, increasingly, associations) seeking to expand and demonstrate their commitment to society to counteract the negative publicity generated by scandals or catastrophes. For example, there was a discernible uptick in the corporate community's emphasis on social responsibility following the Enron and WorldCom accounting scandals.

CSR is not a topic that is free of controversy. From the outset, it has been subject to discussion and debate. Proponents argue that there is a strong business case for CSR, in that corporations and other enterprises benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others insist that it is nothing more than superficial window-dressing or an attempt to homogenize the solutions to complex issues (by directing resources to "approved" solutions); and still others argue that CSR is an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

The core argument against CSR is perhaps best summarized by the title of a 1970 article by economist Milton Friedman: "The Social Responsibility of Business is to Increase its Profits." This seminal article decries CSR as "pure and unadulterated socialism," essentially arguing that business leaders have no responsibilities other than to maximize profits for the shareholders, who in turn could use their dividends in any way they saw fit, and governments and communities could use the taxes that a company paid on those profits for any goal they saw fit.

To date, Professor Friedman's view has not prevailed. Quite the opposite. The strong anti-CSR rhetoric notwithstanding, support for CSR continues to grow, not only among business leaders (a group called Business for Social Responsibility boasts a diverse membership of more than 240 of the Global 1000) but government as well (e.g., the United Kingdom has a Minister of Corporate Social Responsibility and the Organisation for Economic Co-Operation and Development has developed a set of voluntary guidelines for multinational enterprises relating to "the positive contributions [they] can make to economic, environmental, and social progress.") Referring to the Friedman article, the CEO of one Fortune 50 company put it this way:

[I]n my mind, what was most remarkable about that piece was how wrong it was. The idea that companies have no responsibility to the communities in which they operate; that in other words, we operate in a vacuum, or the idea that our actions have no consequences on the world around us is short-sighted at best, and it is certainly not sustainable for very long. Whether the reason for the growth in corporate social responsibility is altruism ("the right thing to do") or enlightened self-interest ("the smart thing to do"), the movement shows no signs of waning. Indeed, social responsibility has emerged as a topic of discussion and action by associations and other voluntary membership organizations. (1) The American Society of Association Executives has established a Social Responsibility Initiative, and its literature stresses that "Social responsibility isn't about charity--it's smart business. Benefits to associations include potential cost savings, more engaged members and motivated staff, increased visibility, easier employee recruitment, better risk management, and higher member retention and recruitment rates."

The Historical Importance of Corporate Social Responsibility for TEI

Tax Executives Institute was born of a sense of social responsibility. Long before the term "corporate social responsibility" gained currency, long before Milton Friedman's 1970 attack on the concept, TEI's founders and members embraced--and, indeed, continue to embrace--their responsibility to do more than look out after their own interests. TEI was founded in 1944 by a small group of tax professionals who thought it was their duty, as a profession, to train themselves and their confreres and to work for fair and administrable taxation. For six and a half decades, the Institute and its members have worked to improve the tax law and the tax system, not merely because it would benefit themselves and their employers, but because they had an affirmative, societal obligation to do so.

In a 2005 interview, the daughter of TEI's founder, Paul Smith, spoke of the ethical underpinnings of TEI. Sister Carol Ann Smith talked about the obligation that her father and other founders felt toward "upbuilding the profession." She also spoke about how her father and the other early leaders of the organization travelled the United States, using their own (or their company's) resources to promote the fledgling tax organization.

To be sure, individual members benefitted from the network of tax professionals that was being created; they benefitted, too, from the educational programs that the Institute hosted and from the rapport that TEI established with government officials. But the founders were possessed by more than self-interest: They were driven by a sense of responsibility--of doing the right thing because it was the right thing to do.

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