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August 04, 2011
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Home » Busting the Myth: Corporate Responsibility is NOT a New Phenomenon

Left to themselves companies -- particularly big businesses -- have always been and always will be nothing but profit-pursuing machines, blindly chasing their bottom lines without concern for society.  Thank God for the corporate responsibility movement and the new laws coming down.  These will finally force business to think about more than the bottom line and care about society.

False.  False, and... False.

Actually I will argue that companies -- particularly big companies -- have historically pursued societal goods, that the exclusive obsession with the bottom line is really a very recent phenomenon, and that the "rise" of corporate responsibility is really a return to traditional corporate values.  Moreover, what's changed and will continue to drive change isn't policy or legislation from on high, but greater individual social consciousness from below.

Consider the British East India Company, chartered by the British Crown in 1600 to explore and develop -- some would say exploit and plunder -- what became the British Raj in India.  With our modern eyes we can look back and deplore many of the things the Company did and stood for, but we cannot deny that it also pursued its own version of societal goods.  In his charge to Company Directors, Sir Thomas Munro, Governor of Madras, told them, "You are not here to turn India into England or Scotland.  Work through, not in spite of, native systems and native ways, with a prejudice in their favour rather than against them and when in the fullness of time your subjects can frame and maintain a worthy Government for themselves, get out and take the glory of the achievement and the sense of having done your duty as chief reward for your exertions."  (Source: The Ruling Caste by David Glmour, (c) 2005)

The Company sought to Christianize and modernize India.  Its directors and functionaries -- money grubbing racists that they were -- thought they were improving the lives and souls under their care, preparing them for self-government as a modern nation-state.  We can argue with why and how they went about it, but they were pursuing what by their standards were societal goods. 

Fast forward to America at the turn of the last century.  CW Post and John Harvey Kellogg founded what were to become huge food companies, the Post and Kellog cereal companies respectively.  But at their core they were founded as much to advocate a lifestyle of clean living and upright morals as sell cereal (to see what I mean, check out Anthony Hopkins' hysterical characteture of Dr. Kellogg and his obsession with colonic cleansing as the key to Christian living in The Road to Wellville).  Or think about GM and the large companies of that era.  They had a social compact with workers and communities under which they provided lifetime employment and benefits for their workers.  Stalwarts of their communities, they underwrote museums, built parks, and made possible generations of social mobility.  Even that robberest of robber barons, Andrew Carnegie, underwrote what became the modern American public library system.

Companies have throughout history embodied and pursued the social goods espoused or mandated by their founders or boards.  At times it was for King & Country.  At others the Good Lord and Good Living.  A lot of that changed in the last 30 years.  Perhaps with the rise of the "Me Generation" companies took on the selfishness and self-centeredness of the people running them.  Regardless, the perversion of pursuing "shareholder value" into the only societal good a company should produce drove some very funky behavior.  I don't think the original architects of shareholder value really intended it to become what it eventually became... and as a capitalist and business owner myself I certainly believe the first responsibility of a company remains producing a good return for owners.  But it's the first among many responsibilities.

Now that the shareholder value obsession has run its course we're returning to the more normal state where societal good is expected to be part of the corporate agenda. What is different today is the origin of that expectation.  Before, the societal responsibility or social conscience of companies was paternalistic.  The state or the board decided, which also meant that the social agenda could get sidelined or ditched altogether on the whims of a few.  Now, it's a groundswell. 

Shareholders, consumers, and communities have decided.  The Internet has connected people like never before.  As a result, people everywhere and at all levels have a much higher level of social conscience and feel they should have a voice in all kinds of things, including the social conscience of the companies they work at, invest in, or live near.  This groundswell has the power to permanently alter corporate behavior, not new laws or corporate policies. 
We can't mandate responsible and ethical decision-making.  Legislation, regulation, and policy-making depend on the good judgment of ethical people to implement them.  This groundswell is calling into service in companies all around the world employees and owners who feel a dedication to making corporations better citizens.  In fact, there is no shorter path to making the world better, than making business better.  Nothing has a greater impact on the daily lives of most people than the businesses they work at, invest in, or live near.


Companies will and should continue to pursue the bottom line... but increasingly they will once more do it in the context of their societal responsibilities.  And so long as we hold them and ourselves -- as employees, investors, and neighbors -- to account we stand to see a very good and very long-lived revival in corporate responsibility.

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