SOCIETAL
PROBLEMS AND CORPORATIONS: Should Business Do More?
Ajit
Chaudhuri – April 2019
I.
Background
The world is in deep trouble, according to many analyses.
People are frustrated for various reasons; stagnant wages, increasing
inequality, the effect of technology on jobs, uncertainty regarding the future,
inter alia – in turn leading to anger, nationalism and xenophobia. Leading
democracies have descended into dysfunction, exacerbating public frustration.
Society is unnerved by fundamental economic changes and with the failure of the
state to provide lasting solutions, and trust in multilateralism and official
institutions is crumbling. These make for a fragile global landscape that is
susceptible to short-term behavior by corporations and governments, in turn
leading to market uncertainty, decreasing confidence, and an increased risk of
a cyclical downturn.
II.
Should the Corporate Sector Do Something?
Some suggest that it should! The UN system, for example,
has designed the Sustainable Development Goals with the participation and
involvement of the corporate sector in mind (their precursor, the Millennium
Development Goals, required only the state, the UN system and NGOs to be on
board), recognizing that business brings in critical elements – systems and
processes, innovation, technology, capital, focus on results – for targets to have
a realistic chance of being met. Most multilateral institutions and NGOs now
have departments that seek partnership with the corporate sector to further
their agendas, though in many cases the terms ‘partnership’ and ‘cheque
signing’ are synonyms in these times of decimated budgets. Countries too expect
businesses operating within to do so keeping social responsibilities in mind,
with India going to the extent of mandating a minimum expenditure for companies
on Corporate Social Responsibility (CSR) related activities. Academia is in a
race to identify a new type of capitalism that does not bring to mind
connections with robber barons, unrestrained markets and inequitable growth,
with terms such as ‘compassionate capitalism’ (which does not externalize
environmental and ecological damages, lessens the gap between executive and
rank-and-file pay, and is transparent in its dealings with regulators and other
stakeholders) and ‘progressive capitalism’ (which seeks a new social contract
between voters and elected officials, workers and corporations, rich and poor,
and those with jobs and those un or under employed[1]) vying for prominence.
Others are not so certain! Public trust in the corporate
sector is low, and to many the thought of its involvement in addressing
societal problems, or in fact in anything more than providing goods and
services of adequate quality and employing people on fair terms, would be tantamount
to the state abdicating its responsibilities, to backdoor privatization of
public service provision, and generally to ‘a fox repairing a henhouse’.
Corporate leaders’ own views on whether the sector should
address societal issues differ according to the type of business they are in (also
including its profitability, size, type of ownership, and the globality of its operations)
and the personal predilections of the leaders.
The views themselves usually
fall within four broad categories[2].
The first are adherents to the traditional viewpoint that
‘the business of business is business’ and that ‘corporate social
responsibility is to maximize profit’. They recognize that producing the goods
and services that people demand, employing them on fair terms, observing the
law and paying taxes is difficult enough (and requires all one’s energies), and
anything more transgresses into the realm of the state.
The second are a variant of the first in that they subscribe
to the traditional viewpoint but, for different reasons, do not want to be seen
as such and therefore direct their corporate communications and PR departments
to project a progressive image with liberal usage of terms such as ‘triple
bottom line’ and ‘social license to operate’.
The third are those who recognize that, to prosper over
time, companies need to deliver financial performance and show that they make a
positive contribution to society. They look within the companies they lead to
enable this by creating a sense of purpose without which the company would
sacrifice investments in capital, innovation and employee development and
provide sub-par returns to investors[3]. Such companies are close to
the communities they serve and have a strong CSR culture.
The fourth are those who believe that ‘there is a special
place in hell for those who possess power without compassion, might without
morality, and strength without sight’[4] and want to advocate for
change towards addressing pressing socio-economic issues. They look to set
their own companies right (as above) and to engage with external stakeholders
(the state, the political space, other corporates, and NGOs) for this. They may
also run businesses with products/services that directly address societal
problems.
III.
Conclusion
There are varying opinions on the corporate sector doing more
about the societal problems described in section I. At one extreme, there is a
view that business should stick to what it knows, which is producing goods and
services while simultaneously employing people, observing laws and paying
taxes. Others suggest to differing degrees that business is a force for good,
it has advantages in the form of bright people, strong systems and processes,
capital, and the ability to innovate and use technology, and these should be
harnessed to address intractable societal problems. Whether the corporate
sector can do so and, if so, what it should do is entirely another matter.
[1] Stiglitz, Joseph E, ‘Progressive
Capital is not an Oxymoron’, Opinion piece in NY Times issue of 19 April 2019
[2] There is a zero-eth category of leaders
who see opportunities in lax regulation, poor enforcement and vague
accountability to maximize profits at the cost of societal wellbeing, and they
are not included in the analysis.
[3] Larry Fink’s (of Blackrock) annual
letters since 2012 provide a perspective on the need for responsible business.
[4] Paraphrased from the Martin Luther
King Jr. speech ‘Beyond Vietnam – A Time to Break Silence’, Riverside Church,
NY City, 4th April 1967.
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