Article 43


Monday, October 10, 2005

Is Corporate Social Responsibility an Oxymoron?

By Lois A. Levin and Robert C. Hinkley
July 26, 2004

The voices calling for corporate reform are getting louder. “Corporate social responsibility is an oxymoron”, according to a recent book and documentary film “the Corporation” by law professor Joel Bakan. He says corporations are like amoral “psychopaths” - manipulative, incapable of being empathic or remorseful, and, while causing tremendous damage to the environment and other elements of the public interest, they refuse to take responsibility for their behavior. Harsh words, but they resonate with those uttered by critics of corporate power throughout history.

Corporations are powerful institutions. They do not serve humanity well when their pursuit of profits leads to strategies that degrade the environment, violate human rights and the dignity of employees, endanger public health and safety and otherwise undermine the welfare of communities.

People who run corporations are mostly decent human beings; many are pillars of their communities. They care about the environment and other people; they want to be recognized as good citizens. Corporate abuse of the public interest does not stem from flaws in the characters of corporate personnel; it stems from a flaw in the rules under which corporations operate.

State laws that create corporations promote behavior which managers and shareholders do not condone in their personal lives. Those laws encourage managers to act as if shareholders are psychopaths—concerned only that their company makes more and more money without regard for the human or environmental costs. They allow managers to excuse the damage they do by claiming they are only doing what the law requires - promoting the interests of shareholders.

There are 80 million shareholders in the US. It is absurd to presume that what they have in common is a desire to make money without regard for the public interest. Nonetheless, by conforming to laws that enshrine that faulty premise, good people in corporations (managers) make decisions on behalf of other good people (shareholders) that cause their institutions to engage in antisocial behavior.

Legislatures pass laws to control that behavior, but they are merely treating the symptoms of a problem while ignoring its underlying cause. A better solution, to prevent the problem from occurring in the first place, is to change the laws that create it.

People understand that doing well and doing good are not mutually exclusive. Shareholders are increasingly supporting stockholder resolutions that address issues of corporate responsibility, even when those resolutions support action that may not be in their short-term financial interest. More and more corporations are taking steps to protect the environment and to adopt policies that enrich the communities in which they operate. But these changes are slow, piecemeal and vulnerable to backsliding. We cannot afford to wait decades to deal with climate change and other serious threats while corporations come around voluntarily.

Corporations have the potential to embrace human values if we, the citizens in whose name the corporate laws were enacted, demand it. To deal effectively with institutions that exhibit psychopathic behavior, as with psychopathic individuals, it is essential to provide structure, embodied in a code of conduct that articulates expectations and standards clearly, sets limits on such behavior and proscribes appropriate sanctions when the code is breached.

We can begin by asking state legislators to enact the Model Code for Corporate Citizenship, which would add the following sentence to the corporate law: “The pursuit of profits must not come at the expense of the environment, human rights, public health and safety, the dignity of employees or the welfare of communities”.

Those 28 words will create a new set of incentives and eliminate the excuse corporate managers now use to justify antisocial corporate behavior. By making it clear to everyone in the corporation that protection of the public interest comes before making money, corporations will evolve and operate in healthier and more holistic ways which truly reflect the values of those who own them and those who work for them.

Hopefully, removing the excuse for behaving irresponsibly is all that will be needed for corporations to start behaving responsibly. If not, the Code may be amended to make its provisions legally enforceable. Either way, the Code will have a salutary effect on corporate decision-making. The sooner we make this change, the better.

Lois A. Levin is a clinical psychologist (Instructor in Psychiatry, Harvard Medical School). Robert C. Hinkley, originator of the Code for Corporate Citizenship, is a corporate attorney and former partner of the NY law firm Skadden, Arps, Slate, Meagher & Flom, LLP.



Posted by Elvis on 10/10/05 •
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