In the wake of the biggest financial apocalypse of our times, the media has loudly voiced concerns about corporate behaviour. Despite widespread condemnation, corporate incentives and bonuses are already returning with a vengeance now that there are strong signs of a recovery. Should they be rewarded already? And as generously as the media would have us believe? Some say it is a return to normalcy but the cynics call it the perpetuation of the conspiracy of a few. And the more discerning believe it is okay as long as the troubles are sorted out — and who better to solve them than the same people who caused them in the first place?
This backdrop leads me to re-examine the age-old question of whether or not corporates have a broader responsibility toward society — a responsibility beyond commerce? The inherent contradictions of a capitalist world are performance versus pay and responsibility versus delivery.
If executives are just tools who should not be burdened with any custodial responsibilities towards the larger community, then some of society’s most educated, most enlightened and best resourced have no duty toward the greater issues of poverty, inequality, ecology and compassion. At a humane level, perhaps this lack of responsibility should exist. Corporate executives are nothing but harassed professionals, probably with families and bills to pay, running from pillar to post pleasing an increasing number of stakeholders and making sure their family’s needs are met. Should they really be expected to do more for society?
The dogma that pervades about this was brought home strongly by Milton Friedman who dared to say that the doctrine of social responsibility is “fundamentally subversive”. He said, in his own words way back in 1961, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility OTHER than to make as much money for their shareholders”.
Freidman continued with a flourish and said: “There is one, and only one, social responsibility of business, to use resources and engage in acts to increase profits so long as it stays within the Rules of the Game and engages in open and free competition without deception and fraud.” To him, the concept of a socially responsible company was an oxymoron.
Critics might say that in that case, one is being forced to accept that a corporation is no more than an ingenious way of making individual profit without personal responsibility. But World Business Council for Sustainable Development in its publication Making Good Business Sense defines corporate social responsibility as: “Continuing commitment by business to behave ethically and contribute to economic development while improving quality of life of the workforce, their families, local community and then society at large.” It is about a manner which exceeds the legal, ethical, commercial and public expectations so that capacity is built for sustainable livelihoods.
But it is equally true that various research (Jules Blackman, Henry Maine) on this subject points to the fact that social investment is about “addition” to the primary role of economic performance and thus should be voluntary and needs-based.
What then should be the boundaries? A befuddling problem since there are always going to be vested interests and unclear definitions that can have unintended consequences through the raising of artificial barriers. When it comes to responsibility, corporate executives will argue that there are enough rules for them without having to worry about the ones that don’t exist. But their detractors will say that conscience and evolution have started working at cross purposes and cannot be condoned.
Some argue that the “do good” moralists are ultimately altruistic and distract rather than direct. The core responsibility of a corporate is bottom line and thereby the end should justify the means. Distracting them from that core serves as an interruption, a diversion and thus will breed confusion and bewilderment and the world will only at best see commotion and a disruption to progress and development. A company can only sell if it produces something people need — it can only produce something that people need if it meets standards — to meet standards surely it has to meet social expectations in any case, so what else?
After all, good citizenry, good manners and philanthropy are not under threat here. These are values that corporate executives have exhibited and will exhibit — simply because it makes business sense. To burden them with guilt, activism, witchhunts and rabble-rousing can only be wrong therefore.
One of the biggest challenges we have in modern times is the challenge of ambiguity. Scholars and businessmen alike have pointed out regularly that companies are ill-equipped to pursue broader goals as they either lack democratic legitimacy or have to wade through an ocean of random or populist expectations. It is about the dividing lines between government, regulators, development agencies (UN), lobby group, NGOs, religious movements, corporates, and corporate officers.
Business, by its very definition, is anticipatory and adjusts as it seeks to find a balance between economic objectives, legal laws, ethical expectations and finally discretionary responsibility where there is no clear-cut message from society. A man in business is good at seeing opportunities, he is trained to marshal resources, he is under obligation to break no laws and he is responsible to make money for all including himself.
The world is quick to latch onto new fads and this trend of putting the long rope of some obscure set of responsibilities around the corporate neck is yet another of those. It is a pseudo attempt by the forces of capitalism to fight for relevance at the expense of its own spearhead which is greed. Greed is the bedrock of ancient civilisations and the cornerstone of modern development. Greed is the single biggest reason for progress — for innovation — for progress. Control it by all means but don’t strangle it. Otherwise we run a real risk of fuzzy frontiers and anarchy and a return to complacency and mediocrity.
The solution to this dilemma lies in responsible policy-making and the guts to make it effective. It depends on avoiding policy expediencies to achieve shorter-term gains thereby creating credibility and trust in the mind of the principal protagonists. An aimless vilification of incentives and performance-based pay is an affront to the essence of the greatest model of our times — capitalism and is therefore not only fraught with danger but laced with the curse of medieval times where people were burnt on stakes at the expense of progress and development.