Corporate Social Responsibility vs. Government Responsibility?

southsiderosie

This issue came up in an unrelated thread, so I thought it would be interesting to start a thread specifically to discuss this topic.

A political values survey asked people to agree or disagree with the following statement: "The only social responsibility of a company should be to deliver a profit to its shareholders."

I agree with this statement. As I said before, a company as an entity does not have "corporate responsibility", and I think most corporate social responsibility (CSR) programs - particularly those which focus on "sweatshop" issues - are a crock.

Looking after social welfare is not the core mission of a corporation - making money for shareholders is. I think that community-based "social business" models are interesting, and of course NGOs are by their very definition non-profit and can therefore pursue any social agenda they like, but a corporation is a very specific business and legal entity that has nothing to do with making social change and everything to do with making money.

Now corporations, like citizens, should have to follow the law. But it is the role of government to make and enforce laws that reflect the norms of society, not for companies to self-regulate where governments fear to tread.

Ultimately, I think the premise of most CSR programs is false. Corporations exist to make money and governments exist to make and enforce the law. If activists really care about working and environmental conditions, especially in developing countries, they not only need to focus on the behavior of the government in those places, but they also need to be more careful to take the needs and wishes of the local people into account. Unfortunately, more often than not, they do neither.

sparkling sea

southsiderosie wrote: »

This issue came up in an unrelated thread, so I thought it would be interesting to start a thread specifically to discuss this topic.

A political values survey asked people to agree or disagree with the following statement: "The only social responsibility of a company should be to deliver a profit to its shareholders."

I agree with this statement. As I said before, a company as an entity does not have "corporate responsibility", and I think most corporate social responsibility (CSR) programs - particularly those which focus on "sweatshop" issues - are a crock.

Looking after social welfare is not the core mission of a corporation - making money for shareholders is. I think that community-based "social business" models are interesting, and of course NGOs are by their very definition non-profit and can therefore pursue any social agenda they like, but a corporation is a very specific business and legal entity that has nothing to do with making social change and everything to do with making money.

Now corporations, like citizens, should have to follow the law. But it is the role of government to make and enforce laws that reflect the norms of society, not for companies to self-regulate where governments fear to tread.

Ultimately, I think the premise of most CSR programs is false. Corporations exist to make money and governments exist to make and enforce the law. If activists really care about working and environmental conditions, especially in developing countries, they not only need to focus on the behavior of the government in those places, but they also need to be more careful to take the needs and wishes of the local people into account. Unfortunately, more often than not, they do neither.

Aren't the most profitable MNC's the ones that focus on stakeholders as oppossed to shareholders?

Cookie_Monster

Shareholder attitudes are changing though as they become more socially and environmentally aware, as are customers. A businees that focus on profit only in the short term will lose out in the longer term if it neglects it enviromental impact, for example, as people are less likely to be happy support a company with such little ethics. Customers may find the same and move away.

Companies should have a responsibility to their potential future shareholders and customers as well as current ones or else they will simply fail in the long term due to short term gains.

droidus

southsiderosie wrote: »

"The only social responsibility of a company should be to deliver a profit to its shareholders."

This is the reason why companies and corporations are often, and rightly referred to as psychopathic.

http://en.wikipedia.org/wiki/The_Corporation

later12

droidus wrote: »

This is the reason why companies and corporations are often, and rightly referred to as psychopathic.

http://en.wikipedia.org/wiki/The_Corporation

Yes, because government ownership of business has always been of such a just paeceful and/ or responsible nature?

A company is little more than a stamp, a premises and an account book. It is not an individual but a vehicle that employees, managers and directors use to return a profit to their shareholders. How they do that, within the law, is between them and their shareholders.

A company in itself has no social obligations outside of those determined by law, nor ought it.

droidus

later10 wrote: »

Yes, because government ownership of business has always been of such a just paeceful and/ or responsible nature?

Irrelevant. Governments are (in theory) accountable to those who elect them.

A company is little more than a stamp, a premises and an account book. It is not an individual but a vehicle that employees, managers and directors use to return a profit to their shareholders. How they do that, within the law, is between them and their shareholders.

A company in itself has no social obligations outside of those determined by law, nor ought it.

So you agree that companies are essentially psychopathic in nature?

BTW - In the US at least corporations are treated as individuals by law.

later12

droidus wrote: »

So you agree that companies are essentially psychopathic in nature?

No. Human traits cannot be ascribed to corporations, it is the commercial equivalent of anthropomorphism.

A corporation is nothing more than a vehicle for profit. If Starbuck's shareholders (as an example) want that profit to arise from fair trade coffee or from ripping off some South American grower with barely a shirt on his back that's entirely up to them. What the public get to decide is where they get their coffee, they do not get to decide how the place they get their coffee is run.

droidus

later10 wrote: »

No. Human traits cannot be ascribed to corporations, it is the commercial equivalent of anthropomorphism.

A corporation is nothing more than a vehicle for profit. If Starbuck's shareholders (as an example) want that profit to arise from fair trade coffee or from ripping off some South American grower with barely a shirt on his back that's entirely up to them. What the public get to decide is where they get their coffee, they do not get to decide how the place they get their coffee is run.

The documentary shows the development of the contemporary business corporation, from a legal entity that originated as a government-chartered institution meant to effect specific public functions, to the rise of the modern commercial institution entitled to most of the legal rights of a person. One theme is its assessment as a "personality", as a result of an 1886 case in the United States Supreme Court in which a statement by Chief Justice Morrison R. Waite[nb 1] led to corporations as "persons" having the same rights as human beings, based on the Fourteenth Amendment to the United States Constitution.

http://en.wikipedia.org/wiki/The_Corporation

"A business that makes nothing but money is a poor business." - Henry Ford

Lockstep

later10 wrote: »

A company in itself has no social obligations outside of those determined by law, nor ought it.

In Irish law, companies also have some duties towards others. Such as employees, or recieivers/creditors when the company goes into liquidation.

southsiderosie

droidus wrote: »

Irrelevant. Governments are (in theory) accountable to those who elect them.

And corporations are accountable to shareholders.

droidus wrote: »

So you agree that companies are essentially psychopathic in nature?

BTW - In the US at least corporations are treated as individuals by law.

No. Corporations focus on making money for shareholders, which is different from, say, a partnership, whose main legal function is to make money for the partners while limiting individual liability. To say that their single-mindedness is psychopathic is silly, given that they have a legal mandate to behave the way that they do.

These organizations may behave differently today than they did, say 50 years ago, and certainly we can have a discussion about that, but that doesn't change the fact that they are specific entities with a specific mandate.

Now just because a corporation makes money, doesn't mean that it is wise or beneficial for them to cut corners or burn bridges in the pursuit of making money. If a company is recklessly breaking environmental laws and end up getting hit with a massive lawsuit, this is not only bad for the community, it is bad for shareholders because money that could have been re-invested in R&D or distributed in the form of dividends has to be spent on legal fees and payouts. It is also bad considering that, at the end of the day, a government can curtail the behavior of a corporation because it has the power to enact and enforce laws, so corporations, like citizens, have some incentive to not run afoul of the law.

I should add that I don't think the behavior of corporations is generally self-correcting, and that government has a regulatory and enforcement role to play in all of this. But again, that is their organizational mandate. By solely focusing on corporations, most CSR campaigns seem to be confused about the underlying motivations behind all of the actors - corporations, workers, local and national govt officials - involved.

P. Breathnach

later10 wrote: »

... A corporation is nothing more than a vehicle for profit.

Not necessarily. A corporation is a vehicle for whatever its owners want to achieve, subject to various legal constraints.

One area where legal constraints are quite strong in most European countries is the treatment of employees.

If Starbuck's shareholders (as an example) want that profit to arise from fair trade coffee or from ripping off some South American grower with barely a shirt on his back that's entirely up to them.

Again, subject to law. I recognise that the law in some countries does not offer a great deal of protection to people like impoverished coffee growers, but I hope that some day it will.

What the public get to decide is where they get their coffee, they do not get to decide how the place they get their coffee is run.

There is a problem with that. I dislike the idea of oppressive exploitation of producers, and would wish to support businesses that support proper standards along the supply chain. For that to be possible, I need information, and I believe that I should have a right to such information.

Anonymous1987

I don't see an issue with a profit maximising corporation. To dismiss profits as unethical is to ignore that profits are earned from the efficient allocation of resources. It is the role of government and the courts to ensure corporate activities and profits are ethical.

Anonymous1987

droidus wrote: »

So you agree that companies are essentially psychopathic in nature?

BTW - In the US at least corporations are treated as individuals by law.

The law does treat corporations as legal entities, however it does not follow that they are individuals. They are not, they are institutions consisting of individuals. Profits and corporations are amoral not immoral and it is largely down to the law to punish the corporations for any wrong doing.

southsiderosie

droidus wrote: »

"A business that makes nothing but money is a poor business." - Henry Ford

Henry Ford believed strongly in social engineering. The Ford corporation, which relied heavily on immigrant labor in the late 19th and early 20 century, had a team of sociologists who would visit the homes of immigrant workers to inspect what they were eating, what they wore, and how clean they kept their house. Drinking and gambling were frowned upon. This level of social engineering by a private company would be considered quite controversial today; even extensive regulations on how to dress caused an uproar at UBS recently.

Ford also believed in a kind of paternalistic capitalism, but let's not pretend that this wasn't heavily tied to his desire to have a stable, hard-working, consumerist workforce. In the long run, when you have to invest in worker training, it is cheaper to pay them more in order to reduce turnover and increase productivity. And at the end of the day, that's what most of Ford's programs ($5 workday, the Sociology department, etc) did - thus earning shareholders more money.

Now again, this is not to say that corporate leaders could not or should not be civic-minded. Certainly most industrial cities have benefited from the foundations and donations from business leaders of large companies. And companies themselves aren't stupid; they know that sponsorship of local events is good for their image, and many genuinely believe in giving back to the communities that they are based in. But this is a separate issue from CSR, and is also why legally most spin off foundations as a distinct entity, as the mandate of a foundation is to give money away, not make money.

HivemindXX

If this is the case, and it's generally assumed so, then the only thing that has any effect on a company is money.

This means that the "ah sure that's just business" attitude is very dangerous. If companies think that lying, cheating and stealing will end up with a large profit at the end of the day then that's what they will do.

Consumer boycotts and government imposed fines must be meaningful to change company behaviour. If a company can make a €100M saving by pumping toxic sludge in to a river and (if caught at all) they know they'll face a €10M fine they have no incentive to follow the rules. In fact, it seems they have a duty to break them.

Often consumer boycotts are treated with derision. Regulatory action against companies is demanded to be lenient otherwise jobs will suffer. How do we expect companies to behave decently if their only motive is profit and we refuse to do anything to harm the bottom line?

droidus

southsiderosie wrote: »

Henry Ford believed strongly in social engineering. The Ford corporation, which relied heavily on immigrant labor in the late 19th and early 20 century, had a team of sociologists who would visit the homes of immigrant workers to inspect what they were eating, what they wore, and how clean they kept their house. Drinking and gambling were frowned upon. This level of social engineering by a private company would be considered quite controversial today; even extensive regulations on how to dress caused an uproar at UBS recently.

Ford also believed in a kind of paternalistic capitalism, but let's not pretend that this wasn't heavily tied to his desire to have a stable, hard-working, consumerist workforce. In the long run, when you have to invest in worker training, it is cheaper to pay them more in order to reduce turnover and increase productivity. And at the end of the day, that's what most of Ford's programs ($5 workday, the Sociology department, etc) did - thus earning shareholders more money.

Now again, this is not to say that corporate leaders could not or should not be civic-minded. Certainly most industrial cities have benefited from the foundations and donations from business leaders of large companies. And companies themselves aren't stupid; they know that sponsorship of local events is good for their image, and many genuinely believe in giving back to the communities that they are based in. But this is a separate issue from CSR, and is also why legally most spin off foundations as a distinct entity, as the mandate of a foundation is to give money away, not make money.

Im not making a value judgement on Fords various foibles and bizarre policies, but afaik, his 'monitoring' procedure was a requirement for entry into his profit sharing schemes, employees who behaved in a 'moral' fashion were eligible - they were not requirements for employment. I dont approve, but it is striking that at a time when labour conditions were very poor, that one of the most prominent capitalists in history had more of a social conscience then most corporations today.

Ford, also, famously doubled pay rates to $5 a day in his factories to allow his employes to buy his products and to decrease staff turnover.

Corporations benefit hugely from social investment by the state, they are part of society, and as such, should have a responsibility to act in a socially responsible manner, in how they pay their taxes, how their treat their employees, how they dispose of waste etc...

droidus

Anonymous1987 wrote: »

The law does treat corporations as legal entities, however it does not follow that they are individuals. They are not, they are institutions consisting of individuals. Profits and corporations are amoral not immoral and it is largely down to the law to punish the corporations for any wrong doing.

I didn't say they were individuals, I said that they are treated as individuals by law - ie; they are given many of the rights of individuals. They can buy and sell property, they have the right to free expression, they can sue for defamation and libel, and they have many other rights that individuals have.

So the suggestion is, that since corporations have most of the rights of individuals, that we can also asses their institutional personalities as that of a 'legal person'.

This 'legal person' is inherently amoral, callous and deceitful, often ignores many social and legal standards to get its way, and does not suffer from guilt while mimicking the human qualities of empathy, caring and altruism.

A person with those character traits would be categorized as a psychopath, based on diagnostic criteria from the World Health Organization.

southsiderosie

HivemindXX wrote: »

Consumer boycotts and government imposed fines must be meaningful to change company behaviour. If a company can make a €100M saving by pumping toxic sludge in to a river and (if caught at all) they know they'll face a €10M fine they have no incentive to follow the rules. In fact, it seems they have a duty to break them.

Often consumer boycotts are treated with derision. Regulatory action against companies is demanded to be lenient otherwise jobs will suffer. How do we expect companies to behave decently if their only motive is profit and we refuse to do anything to harm the bottom line?

I agree that government action needs to be meaningful, which is why I think so many CSR programs are barking up the wrong tree: most countries have strong laws on the books, but they aren't enforced, or companies simply get a slap on the wrist. Technically, Mexico has stronger labor protections than the US, but so many people in the Mexican economy work off of the books, and so little money is put into enforcement, it becomes moot. Now is this mass tax evasion and lack of enforcement the fault of Wal-Mart, or the Mexican government?

I also think that consumer boycotts can work. However, I think there is a bit of information overload these days; I am on a lot of lefty mailing lists, and every day I get emails about boycotting or taking action against one company or another. At some point, it turns into white noise, and activists need to be more strategic.

Finally, I think there is a strong class bias when it comes to what companies get targeted by CSR activists. Does anyone really think that people who make clothes and bookshelves for Target are treated any better than those who make clothes and bookshelves for Wal-Mart? Yet Wal-Mart is Public Enemy #1 for a lot of unions and CSR activists. Or look at Apple: people who work for their Chinese subcontractors are apparently killing themselves at an alarming rate, yet due to their cache with upper middle class hipsters and yuppies, they don't get nearly the stick that other less "socially desirable" companies do for the business practices of their foreign subcontractors. To me, this reeks of the "do as I say, not as I do" hypocrisy that is pervasive among large swathes of the political left, and is part of the reason why many CSR (and environmental) campaigns fail to gain traction with the public.

southsiderosie

droidus wrote: »

Im not making a value judgement on Fords various foibles and bizarre policies, but afaik, his 'monitoring' procedure was a requirement for entry into his profit sharing schemes, employees who behaved in a 'moral' fashion were eligible - they were not requirements for employment. I dont approve, but it is striking that at a time when labour conditions were very poor, that one of the most prominent capitalists in history had more of a social conscience then most corporations today.

I'm always amused by the "social conscience" argument, because it always assumes a certain model of social consciousness. If a CEO's social conscience said that 10% of the company profits should go to renewable energy schemes, I wages that the response from the CSR world (and the activist left) would be quite different than if they said that 10% of company profits would go to abstinence-only education, or evangelical missionary work.

droidus wrote: »

Ford, also, famously doubled pay rates to $5 a day in his factories to allow his employes to buy his products and to decrease staff turnover.

Yes, I said that in my post. Again, there is a profit motive there.

droidus wrote: »

Corporations benefit hugely from social investment by the state, they are part of society, and as such, should have a responsibility to act in a socially responsible manner, in how they pay their taxes, how their treat their employees, how they dispose of waste etc...

Nobody is saying that corporations should not pay tax and should not follow labor and environmental regulations. These are the basics, and is not what CSR campaigns are about. And many corporations do take a strong interest in social infrastructure, particularly education, because at the end of the day they have an interest in a well-educated, well-trained workforce.

However, the problem as I see it is that "socially responsible" behavior, outside of basic legal compliance is highly subjective. If a corporation has a mission statement that says that 10% of profits will go towards environmental causes, then ostensibly the people who will buy shares in that company agree with this philosophy, and don't mind missing out on their share of the profits. However, I do not think a corporation should be obligated to do this kind of thing, as long as they are fulfilling their legal obligations. What corporations do with their profits is at the discretion of the management leadership and the board, subject to the acquiescence of the shareholders, who will vote with their feet if they do not like what the board and management are doing.

droidus

southsiderosie wrote: »

I'm always amused by the "social conscience" argument, because it always assumes a certain model of social consciousness. If a CEO's social conscience said that 10% of the company profits should go to renewable energy schemes, I wages that the response from the CSR world (and the activist left) would be quite different than if they said that 10% of company profits would go to abstinence-only education, or evangelical missionary work.

I'm glad that you're so amused.

The 'activist left' strawman that you're so gratuitously generalising about, would, I presume be opposed to these things because your first example has been proven time and again not to work, and your second example would not benefit the society in which the corporation is based.

It is clear that under the current system, corporations evade tax, pollute, kill, main, employ workers in appalling conditions tantamount to slavery and commit countless other morally and ethically indefensible (though legal) acts. The legal requirement to maximise profits is a major factor in these policies and acts.

It always amuses me when people say that corporations should act within the law, and that it is governments job to control corporations and enact these laws, when it is patently obvious that corporations and business often has a huge influence in drafting these laws in the first place and are constantly lobbying for lighter enforcement and regulation. And of course, lets not forget that the 20th century is littered with more than a few coups and conflicts instigated with the interests of business and corporations in mind... United Fruit anyone?

southsiderosie

droidus wrote: »

I'm glad that your so amused.

The 'activist left' strawman that you're so gratuitously generalising about, would, I presume be opposed to these things because your first example has been proven time and again not to work, and your second example would not benefit the society in which the corporation is based.

Please point out where my critique of the activist left in Western democracies is wrong. Having worked in that world, I'm pretty comfortable with my interpretation of modern CSR campaigns.

droidus wrote: »

It is clear that under the current system, corporations evade tax, pollute, kill, main, employ workers in appalling conditions tantamount to slavery and commit countless other morally and ethically indefensible (though legal) acts. The legal requirement to maximise profits is a major factor in these policies and acts.

It always amuses me when people say that corporations should act within the law, and that it is governments job to control corporations and enact these laws, when it is patently obvious that corporations and business often has a huge influence in drafting these laws in the first place and are constantly lobbying for lighter enforcement and regulation. And of course, lets not forget that the 20th century is littered with more than a few coups and conflicts instigated with the interests of business and corporations in mind... United Fruit anyone?

UFC is a perfect example of governments - both in the US and Central America - completely abdicating their responsibilities. The behavior of the US in Central America has historically been a disgrace, I will not disagree. But sadly, the American public has not seen fit to hold its government responsible for its misadventures around the world.

However, going back to modern CSR campaigns, Central America is a good case in point. People in countries like Nicaragua and Honduras are desperate for jobs, especially since China joined the WTO and the region has lost much of its competitive advantage. Having met with workers and unions in Nicaragua, while everyone agrees that working in a textile factory is ****ty work, it is still miles ahead of picking coffee or domestic work. These jobs have a particular impact on women, who have the opportunity to earn a steady income in these places where there are few to no social safety nets; if a mother of two with an average education has a partner who does a runner, her general options are to 1) leave her kids with her mother and emigrate, 2) domestic work, or 3) a combination of off the books casual work, which often includes prostitution. Textiles are a welcome step up for a lot of women in the labor market, and even though they don't make a great living, it is enough to ensure that their kids will be able to finish school and perhaps get a chance at a better life. CSR campaigns would have more credibility if they 1) took the on-the-ground realities in much of the developing world into account, and 2) applied their principles consistently.

droidus

southsiderosie wrote: »

Please point out where my critique of the activist left in Western democracies is wrong. Having worked in that world, I'm pretty comfortable with my interpretation of modern CSR campaigns.

Im sorry, the term your using is so nebulous, and the examples you've cited so vague and facile that Im not really sure what it is Id be critiquing... as far as Im aware Walmart are criticised for far more than their use of sweatshop labour.

UFC is a perfect example of governments - both in the US and Central America - completely abdicating their responsibilities. The behavior of the US in Central America has historically been a disgrace, I will not disagree. But sadly, the American public has not seen fit to hold its government responsible for its misadventures around the world.

And you could argue that a primary reason for this is the behavior of large media corporations and their reporting from that part of the world.

However, going back to modern CSR campaigns, Central America is a good case in point. People in countries like Nicaragua and Honduras are desperate for jobs, especially since China joined the WTO and the region has lost much of its competitive advantage. Having met with workers and unions in Nicaragua, while everyone agrees that working in a textile factory is ****ty work, it is still miles ahead of picking coffee or domestic work. These jobs have a particular impact on women, who have the opportunity to earn a steady income in these places where there are few to no social safety nets; if a mother of two with an average education has a partner who does a runner, her general options are to 1) leave her kids with her mother and emigrate, 2) domestic work, or 3) a combination of off the books casual work, which often includes prostitution. Textiles are a welcome step up for a lot of women in the labor market, and even though they don't make a great living, it is enough to ensure that their kids will be able to finish school and perhaps get a chance at a better life. CSR campaigns would have more credibility if they 1) took the on-the-ground realities in much of the developing world into account, and 2) applied their principles consistently.

This is more of a 'does fair trade work' argument - which I have some sympathy for btw.

IMO, the removal of the legal obligation to maximise profits would be a first step to forcing corporations to act as responsible entities. AFAICT, the historical reality is that, globally, corporations will do whatever they deem necessary to maximise profit, regardless of the social, economic or political costs and that whatever laws are there to control them can be circumvented, perverted or simply ignored depending on the size and influence of the corporation in question. The behaviour of corporations in the developing world is the rule not the exception.

Personally I think that a world where immensely powerful and wealthy organisations aren't legally mandated to behave like psychopaths would be a nicer place to live... but hey, thats just me.

southsiderosie

droidus wrote: »

Im sorry, the term your using is so nebulous, and the examples you've cited so vague and facile that Im not really sure what it is Id be critiquing... as far as Im aware Walmart are criticised for far more than their use of sweatshop labour.

No more nebulous that the meaning of "corporate social responsibility", which none of the proponents seem to be able to actually define clearly.

droidus wrote: »

And you could argue that a primary reason for this is the behavior of large media corporations and their reporting from that part of the world.

So now it is the media's fault that Americans care more about getting cheap goods than the plight of those who produce them? Interesting.

droidus wrote: »

AFAICT, the historical reality is that, globally, corporations will do whatever they deem necessary to maximise profit, regardless of the social, economic or political costs and that whatever laws are there to control them can be circumvented, perverted or simply ignored depending on the size and influence of the corporation in question. The behaviour of corporations in the developing world is the rule not the exception.

You could very easily replace "corporations" with "governments" in this paragraph, and you will have perfectly described why working conditions and income levels in so many developing countries are absolutely dire.

droidus wrote: »

Personally I think that a world where immensely powerful and wealthy organisations aren't legally mandated to behave like psychopaths would be a nicer place to live... but hey, thats just me.

There are very few large, wealthy organizations that would not get drunk off of and occasionally abuse their power if there were not some checks on their behavior. Corporations are no different than political parties or the Catholic Church in that regard. But most CSR campaigns are built on a fundamentally incorrect premise about the role of corporations versus the role of government in society and where checks on organizational behavior ought to stem from.