your simple understanding of the social benefits of mutual exchange put you head and shoulders above large swaths of otherwise very intelligent and knowledgeable people.

I’m glad you raised that point, and I probably should have addressed the matter of exceptions and gray areas more broadly and explicitly in my diary. Thanks for raising a worthwhile point and expressing it well.

In your hypothetical, not only would I NOT call Option 1 immoral, I would call Option 2 immoral. In my diary I stated that “Management has a moral obligation to abide by the law and by ethical business practices (e.g., not deliberately misrepresenting their products/services, operations, etc. in ways that cause harm, even if doing so is not illegal).” Your hypothetical takes the circumstances a bit further, to one of knowing that the customer is making a mistake that will have the gravest of consequences and choosing not to inform him. It is arguably unethical/immoral for a manager to choose not to correct a customer on ANY misconception he obviously has about the product/service that will likely lead to negative consequences, but the moral obligation becomes clearer when those negative consequences are very severe, as in your hypothetical.

And there are other exceptions to the rule – the rule being that it is generally unethical/immoral for a manager to essentially be charitable with the owners’ money at their financial expense and against their wishes (or at least without reason to believe they wish it). Here’s one, which is a hypothetical based on a real event: I'll never forget seeing on TV a video from 9/11 in which, as a mountain of thick smoke was barreling down the street following the first tower collapse, an employee of a convenience store on that street opened the door and urged a pedestrian to get inside to avoid the oncoming smoke. That act may have saved the life of that pedestrian. Now, would I say that that employee was acting unethically or immorally because, by opening the door, she risked smoke getting in the store and damaging some of the produce? Of course not. Quite the contrary, if she had kept the door closed, let’s say not even allowing the pedestrian in if the latter pleaded to be let in, and did so solely out of concern for the fruits and vegetables and the profit they represented, that would have been immoral. Even if the owner had been there, known the circumstances, and ordered the employee not to open the door due to concern about the fruits & vegetables, the employee would still have the moral obligation to open that door. Now, in that last case, sacrificing the owner’s property against the owner’s wishes would constitute theft (broadly defined), but there are extreme conditions under which theft can be a moral obligation. (I realize that that last line opens up a philisophical/moral can of worms and pours them down a slippery slope, but it’s true – any type of act can be the right thing to do under some circumstances. A deontological view of morality does not make sense. A consequentialist view does.)

Another example: GE's dumping of 500,000 pounds of PCBs into New York's Hudson River from the 1950s through the 1970s may have been legal (I don't recall), but I would consider it unethical and immoral, regardless of whether or not it served the short or long-term interests of the shareholders. (It has also been an ongoing P.R. problem and GE may end up spending a lot to clean it up, but that's irrelevant to the morality/ethics issue.)

So there are indeed exceptions to the rule, but they shouldn’t be taken as support for the principle that CSR advocates wish to establish/maintain, which is that (1) a business has a moral obligation to “give back” via philanthropy, and (2) that managers have a moral obligation to do so, even if it is not in the financial interest of the shareholders/owners and even if they have no reason to believe that the latter wish to make that sacrifice.

Now as for as a known corporate policy making it ethically ok to sacrifice the financial interests of the shareholders for “bad investment” philanthropy (i.e., they knew the policy before investing), I addressed that to some extent in one of my comments on this thread: “if the strong majority of shareholders (or arguably, even a simple majority, although that's less clear and depends largely on what reasonable prior expectations had been regarding this policy) want to make the financial sacrifice of some "bad investment" philanthropy, I would not call it immoral for a manager to act accordingly, even if a small minority wished otherwise.” An underlying assumption of your argument seems to be that the shareholders have all given implicit approval for this philanthropy, because the policy was known (via the corporate mission statement or whatever) and they chose to invest, so even if they did not prefer this company policy, they at least accepted it (as part of the whole package represented by the company as an investment), and therefore such philanthropy is not stealing and is not immoral, and you say that that is “the crux of CSR”. Well, while such a condition is indeed more possibly not immoral and indeed at least less immoral than the alternative condition you presented (a company having the opposite mission statement, against philanthropy, suddenly switching gears and giving out the shareholders’ money), I disagree on a number of points.

First, again, the “crux of CSR” is advocacy of the two points I stated above (#1 and #2), and using this advocacy to either change the financial calculus, making philanthropy a better investment for shareholders by imposing on companies and unfair demand -- getting consumers/customers/communities/etc. to see a company as a “bad corporate citizen” if they don’t engage in philanthropy (as if the exchange of goods & services for customers’ money weren’t a fair enough transaction, inherently benefiting both parties), or to pressure managers to steal from the owners to engage in philanthropy by creating the public perception that doing so is somehow MORE ethical rather than less, and offering managers praise and recognition for doing so and scorn for not. In other words, CSR, at its philisophical core and as practiced, is a form of extortion with regard to the owners – like if you owned and ran a hot dog stand on the street and I bought a hot dog, you gave it to me, I ate it, it was exactly what you said it would be, and then I turn around and tell you that you now have a moral obligation to give a dollar to my favorite charity, and if you do I’ll tell people you are a responsible citizen and if you don’t I’ll tell everyone you are selfish, heartless, and evil. And it is a form of incitement to theft with regard to managers – like if you hired Joe to run your hot dog stand and I pressured Joe in a similar way, telling him to give away your money even if Joe does not think it’s in your financial interests (even net of whatever I might do to harm the image of your business) to do so and even if Joe has no reason to think that you want him to make that financial sacrifice. Now, if Joe knows that the hot dogs contain some ingredient to which little Tommy Smith is so allergic that it will kill Tommy, he should not sell a hot dog to Tommy, even if it’s legal, even if it would benefit the owner financially, and even if the owner tells him to. But that’s an exceptional condition.

Secondly, as for investors knowing what they were getting, since the policy re: philanthropy was essentially known prior to their investing, I view that as only partly valid. Yes, in the case of, say, a mutual fund that presents itself to investors as having an investment profile focused deliberately and exclusively on companies that engage in a great amount of philanthropy – even to the extent that such philanthropy works AGAINST the financial interests of the shareholders – then it is clear that investors wanted the invest in companies that sacrificed some degree of ROI for the sake of philanthropy through those companies rather than through the individual shareholders. But in the case of most companies, let me present a roughly analogous hypothetical: Let’s say in Country X all (or almost all) the politicians are corrupt (they all deliberately misuse public funds for personal gain of one form or another) and you have to vote for some candidates if you want to vote at all (and choose the lesser of the evils, or candidates you may even like, on balance, despite their corruption). Does your vote for candidate Z mean that his corruption is NOT stealing from you as a taxpayer? Does it make it no longer immoral?