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Passage 2

"There is one and only one social responsibility of business," wrote Milton Friedman, a Nobelprize-whining economist, "That is, to use its resources and engage in activities designed to increaseits profits." But even if you accept Friedman′s premise and regard corporate social responsibility(CSR) policies as a waste of shareholders′ money, things may not be absolutely clear-cut. Newresearch suggests that CSR may create monetary value for companies--at least when they areprosecuted for corruption.

The largest firms in America and Britain together spend more than $15 billion a year on CSR,according to an estimate by EPG, a consulting firm. This could add value to their businesses in threeways. First, consumers may take CSR spending as a "signal" that a company′s products are of highquality. Second, customers may be willing to buy a company′ s products as anindirect way to donateto the good causes it helps. And third, through a more diffuse "halo effect," whereby its good deedsearn it greater consideration from consumers and others.

Previous studies on CSR have had trouble differentiating these effects because consumers canbe affected by all three. A recent study attempts to separate them by looking at bribery prosecutionsunder America′s Foreign Corrupt Practices Act(FCPA). It argues that since prosecutors do notconsume a company′ s products as part of their investigations, they could be influenced only by thehalo effect.

The study found that, among prosecuted firms, those with the most comprehensive CSRprogrammes tended to get more lenient penalties. Their analysis ruled out the possibility that it wasfirms′ political influence, rather than their CSR stand, that accounted for the leniency: Companiesthat contributed more to political campaigns did not receive lower fines.

In all, the study concludes that whereas prosecutors should only evaluate a case based on itsmerits, they do seem to be influenced by a company′s record in C