A close friend, immersed in philanthropy through her job at a charitable foundation, sent me this editorial piece in the Wall Street Journal that resulted in some very interesting dialog about corporate social responsibility (CRS, or just CR, as I refer to it). The piece, entitled “Do Good — or Else” is a shallow look at where the responsibility falls in the corporate world where many companies have a powerful social impact. Initiating interest for the article is was a recent decision by the president of Indonesia “to sign a bill this month requiring companies to spend money on ‘corporate social responsibility’ programs. It would be the first instance we know of world-wide that CSR is mandated by law.”
I’m incredibly interested in this topic and for months have been trying to get through a rather dry book about CR, called The High-Purpose Company, by Christine Arena (although “dry” is not meant to deter you, by virtue of the subject, it’s simply not Harry Potter). Arena highlights companies blazing through all obstacles obstructing the way to the highest profit, crippling many bystanders and the environment along the way. The author spends just as much time, if not more, focusing on successful for-profit companies (holding their own alongside less socially conscientious peers) that have shifted directions by maintaining their fiduciary duty to shareholders while making that profit selling a product or service that alleviates a pain in the world, rather than creating one. Most aren’t this angelic, but many at least have a socially-neutral footstep, and give back in some other capacity as a result of their success.
The editorial in the WSJ specifically focuses on whether or not governments should mandate that corporations act morally. It makes my stomach turn when I think we even have to ask ourselves that. In reality, having the upper hand against your competitors means honoring your “legal” obligation (to first make money for your shareholders) trumps whatever socially negative impacts that upper hand creates. This discussion, between, let’s say, a corporate CFO and a nonprofit program director would just go in circles, as it has between myself and my business-finance other half.
Businesses operating “freely” in an open market have enormous potential to build thriving economies and healthy nations. They can be the lifeblood that stimulate and kick-start a peoples’ ability to participate in the growth of their own economy. Inclusion of a triple-bottom-line, foresight, personal ethics, and business incentives to encourage such behavior might thwart the need for intervention by the government. I feel that many corporations are pushing to the point that status quo has evolved into continuing with whatever unethical practices benefit the company, fully aware of the harm they create, stopping only when caught (unless they can use the power of money to change laws in their favor, making misconduct legal).
The WSJ writer said, “A corporation, after all, is just a legal designation; it’s individuals, not paper firms, who have moral responsibilities.” Agreed; so if those individuals are the executives of these corporations and it’s up to their personal determination whether or not they decide to act morally, then we’re all just left hoping they make the right choices, which is clearly not always the case. So someone, supposedly the government, has to regulate that. What other alternatives are there? Effective implementation of such regulations ideally would be on an international level so as not to put any one country at a disadvantage. Such a stupendous feat is, however, a heavier matter than my Sunday morning schedule will allow, although it certainly deserves a later look.