In This Review

A Corporate Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate Their Own Legitimacy
A Corporate Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate Their Own Legitimacy
By George Lodge and Craig Wilson
Princeton University Press, 2007, 208 pp

The late Milton Friedman once wrote that the corporation's sole responsibility is to maximize profits for its shareholders. The authors of this extended essay take sharp exception. On the contrary, they argue, firms that neglect public sentiment lose legitimacy and invite hostility and blame for all the alleged evils of globalization. Among a range of social objectives that firms should recognize, the authors focus on global poverty. Reducing poverty is an important international aim, but multinational corporations (MNCs), which in fact provide many new jobs in developing countries, typically do not include the reduction of poverty in their cost-benefit analyses for new overseas investments, nor does any international mechanism exist for evaluating and monitoring claims of poverty reduction or for giving credit where it is due. The authors make some dubious assertions in arguing that the social impact of MNCs is overwhelmingly positive, and they underestimate the practical difficulties of convincingly measuring the total social impact of any new activity. But they make a persuasive case that MNCs should broaden the range of issues they take into account in making decisions on their increasingly conspicuous activities, if for no other reason than to restore and maintain their legitimacy in the eyes of the public. The authors also advocate the formation of a new global institution, made up of governments, corporations, and nonprofit advocacy groups, to facilitate this broadening of objectives -- and to award kudos when it is merited.