Apart from psychopaths and eccentric individualists, virtually everyone wants to be thought of as being socially responsible. So it is not surprising that many large companies are embracing the notion of "corporate social responsibility", and hiring ethics consultants to develop impressive codes of conduct and teach them how to be "good corporate citizens".
At first glance, this seems good news. As the recent collapse of HIH Insurance and One.Tel has shown, the misdeeds of big corporations can have devastating consequences for innocent people. In the case of HIH, every taxpayer and insurance policy holder in Australia will be affected.
The bad news is that in many respects, HIH would have appeared as a model of social responsibility. The company was an extremely generous benefactor to a wide range of worthy causes. Most significantly -- and ironically -- HIH was a very substantial donor to the St James Ethics Centre, which specialises in providing advice on ethical behaviour to major corporations, encouraging them to take a maximalist view of their responsibilities to the broader society. Indeed, HIH was reported to have set the centre "on its financial feet" in 1999.
But companies genuinely concerned about their social responsibilities should concentrate first and foremost on meeting the interests of their legitimate stakeholders, those with whom they have explicit or implicit contractual agreements arising directly out of their economic activities. These include their shareholders, employees, customers and suppliers, as well as the neighbourhoods and jurisdictions within which the companies operate.
When the interests of these stakeholders are in conflict, they must be managed and prioritised in an equitable way; one which safeguards the company's future viability, while remaining fully within the law. Even under the most favourable conditions, this is no easy task. Unfortunately however, the current push for "social responsibility" involves considerably more than this.
Companies are being told that they must embrace a much wider range of "stakeholders" if they are to meet contemporary expectations. Various non-governmental organisations promote themselves as representing the social, environmental, and economic interests of "the wider community", and set out new requirements that companies should fulfil in order to meet their obligations.
A number of these supposed requirements would make it much harder, and even impossible, to achieve the primary objectives of the company. But sometimes that seems to be their actual intention -- such as when agricultural research companies are urged to abandon promising new technologies like genetic engineering; or when Western companies operating in Third World countries are told that they must adopt employment standards that are inappropriate to the social and economic conditions in these countries.
At times, some NGOs can provide useful advice and assistance to large corporations, as sensible executives have long realised. But other NGOs, including certain environmental and human rights groups, have a political agenda that is basically hostile to the interests of corporations and their legitimate stakeholders.
NGOs such as Greenpeace or those involved in radical anti-globalisation actions are variously committed to programs of social and economic change that go well beyond anything that is likely to gain majority support. Nevertheless, even though their ideologies are usually at odds with the aspirations of most people in the communities they claim to represent, they have been far more successful than their corporate adversaries in capturing the moral high ground.
This means that an attack -- even one that is unjustified -- by a conservation or human rights group on the environmental or social policies of a large resources company is likely to be much more effective than a fully justified attack by a corporation on the unaccountability or hidden political objectives of an NGO.
Indeed, as the "corporate social responsibility" push gathers strength, few companies are willing to engage in direct confrontation even with radical NGOs, lest this be taken as prima facie evidence of social irresponsibility. Companies are more likely to seek an accommodation with their antagonists, in the hope that they can moderate their demands by including them in the widening circle of "stakeholders".
Sometimes this may seem to work. A number of Australian mining companies have established effective relations with certain indigenous and environmental organisations which were once their opponents. The companies provide consultancy contracts and other positions for the NGOs or their constituencies, and the NGOs help to audit, and legitimise, the companies' environmental and community relations programs.
But accommodation can go too far. As the American political scientist Jarol Manheim observes in a couple of recent studies that all corporate CEO's should read, nervous companies hoping to enhance their ethical standing can be inveigled into adopting codes of conduct "so lofty, as to be unattainable in actual practice". This allows adversaries to pillory the company for its failure to live up to the social values it has publicly espoused, a task made easier if the company has given its opponents a significant role in monitoring compliance with the code.
Manheim's books, The Death of a Thousand Cuts, and Corporate Conduct Unbecoming, show just how sophisticated what he calls "anti-corporate campaigns" have become since their origins in the American New Left movement in the 1960s. Using tactics such as boycotts, litigation, community mobilisation and complaints to regulators, they have wrong-footed some of the world's largest and most successful corporations.
Under the seemingly noble banner of greater corporate social responsibility, these campaigns invariably cause serious damage to the wealth producing capacity of the companies they target. If they were socially responsible themselves, the "people before profits" crowd would realise that profits employ people.
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