Corporate Social Responsibility

January 6, 2012

"Normal Dan" Dan Liechty

Somewhere along the line, we seem to have swallowed the idea that the sole purpose of corporations is to maximize profits for their shareholders. Recently, I even heard Robert Reich, being interviewed by Bob McChesney, make that very statement as if it were completely self-evident. http://will.illinois.edu/mediamatters/show/september-4th-2011 Apparently, McChesney thought the same; at least he didn’t challenge the statement at all.

I am really concerned about this. This is certainly NOT the view of corporations we have always held in the American social dialogue. It is, I fact, a relatively recent view, and I would like to see it challenged more often than it is.

Corporations are not entities sui generis. Corporations are granted the right to exist by the public, and the public has every right, therefore, to expect that corporations will contribute to the PUBLIC GOOD in exchange for the right to exist. The current view is only defensible, therefore, if we assume that the public good is exhaustively defined by maximization of profits for corporation shareholders. This is abjectly absurd and absolutely false on the face of it.

We can imagine circumstances in which this might be less absurd and false – for example, when corporation shareholders comprise most, if not all, of the local community in which the corporation functions and does its business. By its very nature, the capitalist system is one in which, through its myriad market processes, value is extracted from one area and bestowed upon another (even the so-called expanding economic pie does not expand in a vacuum.) There is always a tradeoff between what is created and what is destroyed in the process of that creation. When the extractions (what is destroyed) come from largely the same people as those on whom the benefits are bestowed, as with locally functioning and marketing businesses and corporations, the system is defensible.

But this is not the case at all for large national and multinational corporations. The corporations are geared toward extracting value from anywhere, anyone, anyway, anyhow, and bestowing it on shareholders (who, of course, richly reward corporation executives for the favor.)

Would we tolerate among us a group of people who make it very clear that they are constantly scheming to take your valuables from you? Would we gratefully work for such people, thankful that through them we have a paycheck, right up to that day when we come home and find our own home plundered and empty? I don’t think so. I think we would very quickly turn to the law for protection!

Which brings us to a final point. As long as we could expect that corporations had “being good citizens” as at least part of their mandate (which, believe it or not, was once the case) it made some sense to give them leeway on the legal regulatory front. But these corporations now have completely shed even lip service about citizenship responsibilities. They have made it very clear, and we have bought the line, apparently, that their sole purpose is to maximize profits for their shareholders.  It has come to the point that their willingness even to obey existing laws have become subject to the executives’ cost/benefit analysis, weighing longer term chances of being prosecuted and prospective fines against  the value to be extracted and grabbed up in the immediate.

In such circumstances, we citizens have nowhere else to turn for protection than to the regulatory function of the State, a function that must be strengthened and seriously pursued. Allowing corporations to claim that maximizing profits for their shareholders is their sole purpose (justifying even law transgression if the cost/benefit analysis indicates this as the most likely path for maximizing profits) and at the same time weaken and undermine the regulatory regime of the State is a certain recipe for disaster. We need to challenge this assumption at its root.




  2. I think the premise that free markets require “the taking away” from some person(s) in order to bestow enhanced wealth on another person or persons is fundamentally incorrect. Of course, often free market transactions affect participants negatively. But the thrust behind free markets, their reason for existence, is that participants in any exchange expect to have their circumstances enhanced by the exchange. E.G. you buy a lollipop for $1. You believe the lollipop is more valuable (barely) than $1. The seller believes the $1 is more valuable than the lollipop. Both are correct because both participants are experiencing different opportunities. Maybe the buyer has millions of dollars that he’ll not be able to use as effectively as he can by spending one of them for a treat. Perhaps the seller has many unsold lollipops and really needs some cash to buy food. Supply and demand curves reflect these realities graphically.

    Your premise is quite incorrect.

    • Martin … and how does the person whose preference is to spare the environment of the degradation of lollipop production in the first place fit into this exchange. Where is that person’s voice heard? You can only claim that “free market exchanges” are strictly mutual, are not a taking from some and giving to others, by maintaining the most myopic of vision, narrowing the scope of the transaction in the extreme (almost to the point where the relationship between prisoner and executioner comes through as a mutually beneficial free exchange transaction!) Free market economists are notoriously good at establishing and maintaining this extremely myopic frame, dismissing as illegitimate and extraneous anything and all that does not fit the frame. The rest of us are learning to deeply question this myopia in favor of a much more complex, lush, spiritual understanding wealth, poverty, ecology and human mutuality.

      • Dan, I still disagree with your premise. You suggest that it is unlikely that corporations can contribute to happiness of both the stockholders and the customers.

        Humans may not have sharp teeth, claws, super fast running legs, etc. Instead, they have among many valuable survival mechanisms the ability to interact with one another for mutual advantiage through communication and expression. No other animals can speak to one another as we humans can. This leads to all sorts of interactions.

        It’s true that the ecologist you mentioned will not be treated well in a free market. That’s not because the markets are so terrible. It’s because the costs of environmental destruction have not been folded into the calculus of the markets. I hope that soon coal plant exhaust is costed appropriately to account for the poisoning of the atmosphere.

        Without exchange, we humans would suffer horribly. We’d live in the stone age. Our duty is to fine tune exchange so that it minimizes unaccounted costs.

  3. Martin, your very first sentence underlines my point about the studied myopia of free market economists – thank you! You comment on my view that “…it is unlikely that corporations can contribute to happiness of both the stockholders and the customers.” You have immediately limited the parties who have interest in the transactions of corporations to 1) stockholders, and 2) customers. But my point is that there are many many many other parties with varying degrees of interest – from casual to vital – in the transactions of corporations, and the free market systematically silences and erases the concerns of these parties. This is why the free market system and its ideology must be broken open and exposed, so that we can make better choices as to what we really want in the economic side of our democracy.

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