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.
