In the eyes of the law, a corporation is a 'person.' But not one you'd want to live with. 'Most people would find its 'personality' abhorrent, even psychopathic, in a human being,' writes attorney Joel Bakan in The Corporation (Free Press, 2004), 'yet curiously we accept it in society's most powerful institution.' When a corporation starts acting warm and fuzzy toward the environment, or employees, we should beware, he says. Underneath the mask of gentility lurks the same old psychopath ready to sell the rings off his grandma's fingers. Utne editor Joseph Hart interviewed Bakan about the corporate social responsibility (CSR) movement.
You've said that there's an inherent contradiction between the corporate agenda and social responsibility. What do you mean by that?
The notion of CSR is completely out of sync with the nature of the corporation as a legal institution. What I know as an attorney is that the corporation is set up by statute so that managers and directors must serve the best interests of the shareholder. The courts have interpreted those interests as creating wealth, bottom line. So it's actually illegal for a manager or director to do anything that subtracts, at least in the long term, from shareholder returns.
But in some cases, CSR initiatives actually improve the bottom line, for example, by reducing energy costs.
That's true, and it's not necessarily a bad thing, to the extent that managers can be imaginative enough to wed shareholder interests with social interests. Many smart directors can see that they can gain competitive advantage through an image of being socially responsible, and a few have actually adopted the reality. But that's the best we can hope for. CSR can only be a strategy,not an end.
It sounds like you're saying that just appearing to be socially responsible is enough to improve shareholder interests.
That's right. The corporation will gain some competitive advantage by appearing to serve public needs. But the audience for CSR public relations is not only the consumer, though it is often used, and effectively, as a marketing strategy. The other crucial audience is government. Corporations want to be able to lobby government to deregulate their activities and show that they're able to regulate themselves. Fundamentally, CSRis a strategy in the corporate fight for deregulation.
But government regulators don't exactly have a great track record in holding businesses accountable.
Then let's fix the problem and make government work in a more democratic way, not abandon democracy for an institution that nobody even claims is democratic. We're giving up our power as citizens for our supposed power as consumers, and that's very hit and miss if our aim is to reduce corporate harms to society and the environment. The idea that individual consumer behavior will add up to true governance of corporate behavior is naive.
Why not reform corporate law to make corporations more democratic? We could make shareholders liable for 'external' costs like pollution, for example, or expand the notion of shareholder value.
Those are all interesting ideas, but they are unrealistic, at least in the short and medium term, and would require more broad-ranging political and economic change. Making shareholders liable for the misdeeds of their companies would chase a lot of middle-class people out of the market and could precipitate an economic collapse. Embedding other forms of value besides profit into the corporate form would also be a radical change. They're good ideas, but perhaps a bit idealistic in the current context.
The pragmatist in me says that we've spent the last 50 years building up a regulation system that is driven by the ideal of corporate responsibility -- the notion that society and the environment are best protected by democratically created legal regulations of corporate behavior. President Franklin Delano Roose_velt began in earnest, with his New Deal, to build a workable system of laws and regulations based on the principle that we need to control wealth creation so it doesn't control us. Wealth creation isn't an end in itself; it needs to be justified on the principle of serving the public good, and that is what, at least ideally, a regulatory system should do.
It seems just as radical to call for more government regulation. 'The market' has become a kind of quasi deity.
That view is a kind of fundamentalism. The fact is that the market is a human institution, and it requires a massive intrusionof state power. You simply cannot have a free market without contract, property, and corporate laws to create and protectcorporations; a judiciary to interpret those laws; andpolice to enforce them.
The notion that the 'free-market approach' is a way of getting government off our backs is just plain wrong. When you deregulate, you're not reducing the state's involvement one iota. You're merely shifting whose interest government is acting for. Every time the state rolls back standards for environmental quality, worker safety, or consumer protection in the nameof deregulation, what's actually happening is that the state is creating more rights for corporations, and throwing more power behind the enforcement of those rights. In a deregulated economy, the state remains heavily involved in the economy, but now on the side of corporations rather thanon the side of citizens and the environment.