Should We Buy Into the Business Roundtable Statement on the Purpose of a Corporation?
CSR and Serving Society’s Interest in Question
This is an extension of a blog I wrote earlier this year based on the Business Roundtable Statement of the Purpose of a Corporation. The statement is really a mission statement, not a plan of action. As such, it is short on details about how corporations can achieve their purpose and, more important, what the moral responsibilities of a corporation are.
Delivering Value to Customers
The underlying theme of the statement is to deliver value to the stakeholders of a corporation without much consideration given to how this gets done or what it even entails. For example, “Delivering value to our customers” says that: “We will further the tradition of American companies leading the way in meeting or exceeding customer expectations.” What it fails to address is the ethical commitment to make products and provide services that ‘Do No Harm.’
This is a major oversight as defective products (e.g., Takata air bags, Toyota unexpected acceleration, VW defeat device, Johnson & Johnson baby powder, Monsanto asbestos and Wells Fargo unauthorized accounts) have littered the environment of corporate responsibility with dangerous products that were known to have dangers but were not disclosed to customers.
Social Responsibilities of Business
CSR relates to the objectives of a corporation. Milton Friedman wrote in his book. Capitalism and Freedom, that “there is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.”
The Business Roundtable statement does not address the moral responsibility of corporations at all or why operating without fraud is so important to the health of our economy. Instead, it is a public relations piece designed to mute criticism of corporate America in the era of crony capitalism. Today, people with power and influence in corporate America buy the favoritism of regulators, legislators, and governments ostensibly through decision-making that puts the interests of corporations ahead of the public good.
Buying influence is nothing new and political campaign contributions by corporations through political action committees (PAC) have become the instrument of much of the perversion of the original notion of corporate social responsibility. But, this is a topic of another blog.
Carroll’s CSR Pyramid
Archie Carroll’s CSR pyramid is a framework that explains how and why organizations should focus attention on corporate social responsibility. The pyramid highlights the four most important types of responsibility of organizations. These are:
CSR expert Dr. Wayne Visser has said that “Carroll’s CSR Pyramid is probably the most well-known model of CSR…”
The pyramid’s base is profit. This foundation is necessary for a company to meet all laws and regulations, as well as the demands of shareholders. The pyramid characterizes the nature of business responsibilities to society and the community of which it is a part. It suggests that before a company can and should take its philanthropic responsibility it must meet its economic and legal responsibilities and also meet its ethical obligations.
The Power and Influence of Big Business
The fact is that corporations have become too big to fail and that is why there were bailouts during the financial recession. We might include that the recent stimulus during the coronavirus pandemic also illustrates the perceived importance of large businesses on society. There is concern that big businesses in the hospitality industry, airlines, manufacturing, and others need financial help to get through the ordeal. There are some loan programs for public companies that are in the mix as well. One question is whether these large businesses should be funded in part through government aid while they have ample cash resources to cover their needs until we get to the other side of the pandemic.
We have become a society where a few corporations control much of the wealth and power of an industry and, therefore, our economy, such as technology – i.e., Google, Apple, Facebook, Microsoft – and, therefore, much of the health and welfare of customers that derives from corporate actions.
Big corporations affect our behaviors; influence our decisions; and create a barrier to serving the best interests of society. The pursuit of self-interest is embedded in their DNA and that raises serious questions about whether they are serving the best interests of society.
I am concerned that the growth of mega-technology companies means “free will” has been compromised and corporate social responsibility has morphed into irresponsible behavior designed to benefit the few at the risk of harming others while controlling our very actions.
What is the answer? It is not the Business Roundtable statement that ignores moral responsibilities. Instead, Congress needs to strengthen the House and Senate Oversight Committees of industries such as Technology and investigate whether companies within these industries are serving the public good.
Posted by Steven Mintz, aka Ethics Sage, on May 14, 2020. Dr. Mintz is an award-winning blogger. His Workplace Ethics Blog was recognized as one of the 30 best CSR blogs. You can sign up for his newsletter and learn more about his activities on his website: https://www.stevenmintzethics.com/. Follow him on Facebook at: https://www.facebook.com/StevenMintzEthics.