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Corporate Social Responsibility Intro

The United States of America is a highly "corporatized" society -- and while large corporations with significant public ownership really only evolved over the past century, collective business behavior and pooled risk-taking has always been part of the nation's legacy, culture, structure and behavior.  Americans perfected the organization business enterprises in the corporate way. 

Only joint stock companies (investors pooling funds to risk) could have created the structures of the modern American society -- and quite often, only when acting in partnership or collaboration with government.  Government created the environment for American business success -- think of the franchises for early canals and toll roads, the westward trek of the transcontinental railroads in the 1860s, the digging of the Erie Canal and then the Panama Canal, the federal support for the massive airways and airports systems, the funding of health and science research.  Corporations have created the innovation, muscle and capital to bring society's visions to success.

Large corporations dominate our personal and business lives. Many of us work for large companies, for the most part publicly-owned. All of us depend on Corporate America and transnational pharma firms doing business in the US for healthcare; US industrial corporations have long financed our retirement; we enjoy the fruits of corporate-sponsored innovation (thinking of electricity, automobiles, jet aircraft, computers, the Internet, cable television, electronics, movies, and so on). 

And, at times we have an uneasy relationship with "the corporation" -- we want corporations to "behave better," to act in the social interest and to be, well, a good citizen.  Who defines good corporate citizenship?  (Answer: A variety of stakeholders, including corporate boards and managements.)

What do we expect of corporations?  And what should corporate boards and executives think as their corporate social responsibilities?

The Roots of American Corporatization

Corporate Economic Power is an integral part of the history of these United States. What is now the continental United States of America was explored by, and the first settlements were organized and financed by, "trading companies" founded in European nations. Remember the Dutch West Indies Company (creating trading posts in New Amsterdam), the Massachusetts Bay Colony (settling what is now Boston), the Hudson's Bay Company (setting up trading posts in eastern Canada)? Hudson's Bay is still in business almost four centuries later! These trading outfits were organized as what we know today as joint-stock companies...the forerunners to today's large, publicly-traded companies, many of which remain multinational or transnational. 

The tensions between corporate overseers -- the appointed director generals of the Holland or English collective owners -- and rank and file settlers were evident almost from the day when the would-be colonists stepped off their landing craft.  The irritations expressed by those perched on the perilous coastal frontiers in the New World and their continuing demands for self-expression, freedom to self-rule, freedom to worship, freedom to create their own wealth were presented to the financiers and trading company management back in the Old World.  It's a short leap from 1664 (when New York City becomes English) to the first shots fired in the American War of Independence against the Redcoats at Concord and Lexington in 1776.  (For a powerful read on these subjects that provide relevant guidance today see "The Island at the Center of the World," by Russell Shorto, by Random House 2004.)

Corporations and Society -- The Debate

The debate over the corporation's relationship to society is long and continuing, frequently with shifting outcomes.  We have experienced cycles with expressions of "good corporate citizenship" and "pretty poor corporate citizenship," depending on political, economic, financial, regulatory, and other societal cycles. 

In the 1930s President Franklin Roosevelt was able to impose sweeping regulatory frameworks on a variety of industrial, banking, financial and agricultural businesses during the days of the Great Depression. The prevailing public view was that big business was clearly not on the side of the American citizen, making the passage of statutes and imposition of regulations much easier than in the go-go happy days of the 1920s (pre-1929 stock market crash).

Big Federal Government was needed to counteract Big Corporate Business, liberals and progressives argued.  (President Roosevelt argued that his progressive reforms were necessary to save Capitalism - "I do this because I am a conservative," he told critics.)

Big Corporations Emerge

Big business emerged after the Civil War (starting with large railroad companies, oil companies such as Rockefeller's Standard Oil and investing combines lead by JP Morgan and others). Corporations were required to settle the West and build a continental nation. By the end of the 1800s, the "robber barons" of industry, railroads and banking largely dictated the rules to their workers, union organizers, state and federal legislators, judges, and whoever else had the temerity to raise issues unpopular with JP Morgan, Andrew Carnegie, Commodore Vanderbilt, et al.

President Theodore Roosevelt is considered to have created the modern presidency (1901-1909), using his Bully Pulpit to call for "progressive reforms" in all areas of the private and public sectors -- including measures to bring large corporations and combines into line.  He half-succeeded --  "TR" -- a wealthy Plutocrat of his day -- wanted to create a federal agency to directly supervise corporations, to "control them," and did create the US Department of Commerce (February 1903).  But further business reforms would be inspired by his cousin, the second President Roosevelt, in the 1930s, in the midst of the Great Depression -- which was often attributed to Big Business failures.  As a counterpoint, Big Government emerged, frequently dictating what "corporate responsibility" would entail.

We continue to debate Big Business vs. Big Government today -- we see the issues raised in Conservative-Liberal, Democrat-Republican, Red-Blue State, and Majority-Minority dialogues and debates.

Journalists a Major Factor

Journalists often are the major factor in creating societal perceptions and determining [the nature of] and outcomes of issues in society's relationships with Big Business. The muckrakers of Theodore Roosevelt's day (and long after) published story-upon-story about this industry or that, this company or that -- sometimes to TR's annoyance.  He dubbed the magazine and newspaper journalists "muckrakers" not in an entirely complimentary way. 

Reform movements for business and industry often follow exposures of corporate "wrongdoing," as shaped by journalists and then perceived by popular public opinion.  (Early example:  The book, "The Jungle," a shocking expose of the turn-of-the-century meatpacking industry in Chicago, quickly influenced the federal government to organize "pure food and drug" laws -- leading to today's FDA)

Muckraking and a period of corporate reform is in high gear in this first decade of the 21st Century. A legion of journalists are busily shaping and coloring the views of society viz: American corporations, Big Business, regulatory frameworks, prosecution of corporate leaders, and other activities that put corporations in the crosshairs.

This not always a comfortable place to be for the leaders of Corporate America -- so, corporations often respond by changing behavior, communicating their good deeds, initiating socially-minded programs, contributing generously (corporate philanthropy and charity), engaging their critics, and responding in other ways to society's needs (as in the response to Hurricane Katrina events in New Orleans).

This is usually referred to now as demonstrating Corporate Social Responsibility (CSR) or Corporate Stewardship, perhaps Good Corporate Citizenship.

CSR in the 21st Century

Fast forward to the 21st Century -- "corporate social responsibility," "corporate citizenship", "business and society" are today important topics for the American public and for Corporate America. 

Dilemma for corporate leaders:  What exactly are the obligations, responsibilities, expected accountabilities of the corporation to what advocates refer to as the greater good, the common good, to myriad "stakeholders"?  The answers may be readily available from NGOs (domestic and global), shareholders, stakeholders, public sector officials, regulators, journalists, civic advocates, labor unions, and others. Not all [of their] views are necessarily welcome in board rooms or corporate suites.

Forward-looking, enlightened corporate leaders are implementing a wide range of "CSR" programs to respond to stakeholder demands for improved "corporate citizenship."  Some are marketing and public relations oriented -- these often fail because it is about "talk" and not "action" -- and some are structural that create real change in a company's operations and finances. 

Examples are Starbucks, Green Mountain, Proctor & Gamble and other companies' programs to assure fair trading / dealing with coffee bean growers in Mexico, Colombia and other lands where small farmers grow the magical beans.  (Coffee has become an important litmus test for some segments of the American Society for CSR.)

Accountability Central

Trying to quantify and qualify "corporate social responsibility" is an ongoing exercise. We will present here in Accountability Central varying news, views, opinions, perspective, and corporate case histories for leaders who want to do the right things for the right reasons.

Other publishers are doing the same -- The Editors admire the crisp and insightful writing of CFO magazine Articles Editor Edward Teach.  He recently wrote about CSR in an essay for his widely-read publication and began by telling his professional and management audience that they should be paying attention to CSR -- his Google search for "CSR" turned up 4.6 million "hits" while a "shareholder value" search yielded 2.3 million hits!  Guess where public attention (at least some of us) has shifted. (www.cfo.com)

The CSR Issues Agenda

In recent years much of the discussion over CSR focused on environmental issues, including legacy pollution by large industrial firms -- think of General Electric's issues with PCB contamination of the Hudson River Valley.  But CSR is much broader than single issues that may be in focus for some stakeholders.  Today, the CSR issues include:

  • Diversity of workforce; Glass Ceilings and wages disparities for Females.
     
  • Marketing of harmful products (such as tobacco, weapons); marketing programs targeting vulnerable audiences (children, youth, minorities, seniors, etc.).
     
  • Marketing practices (such as selling violent video games to minors at retail).
     
  • Environmental issues, segueing into "sustainability" issues (for the long-term).
     
  • Global warming -- and company response to threats posed (if nothing else, in planning for the seas to rise or hurricane winds to hit 200 mph).
     
  • Vehicle safety -- gasoline mileage "CAFE" government's fleet fuel standards; building of gigantic, fuel-thirsty SUVs.
     
  • Healthcare for employees and retirees -- clearly in jeopardy as healthcare costs escalate.  (Consider that GM automobiles are $1,600 or more price dis-advantaged compared to foreign makers based on US healthcare costs.)
     
  • Pensions (especially the future of corporate defined benefit pensions).
     
  • Militarism (corporate support of, or manufacture of weapons).
     
  • Campaign contributions -- Campaign Finance Reform.
     
  • Transparency -- for Financial and other reporting.
     
  • Contracting, Global Sourcing, Supplier policies, Human Rights related to the activities / operations of large US corporations in other nations.
     
  • Child labor -- use of enforced labor, slave labor.
     
  • Support of military rulers, despots (such as in Myanmar/Burma).
     
  • Marketing practices affecting children (a growing concern in the USA).
     
  • Availability of life-saving drugs (a pharmaceutical industry issue, including cost of drugs, especially for poor nations with serious HIV/AIDS issues).
     
  • Cost of drugs in the United States (especially for seniors or families at/below the poverty line).
     
  • And many more, depending on the company, industry, sector, geography, advocate, cycles of concern in the American Society.

Some activists note that the above issues must be dealt with by corporations to protect the least, the last and the lost.  (A long-term counterargument is that the primary responsibility of management is to generate the highest return to shareholders. We'll provide views on all sides of the "responsibility" issues.) (See also the Sections on Socially Responsible Investing and Shareholder Activism -- these are top-of-the-mind concerns for many shareholders, institutional and individual.)

Social Investing Intersects with Corporate Responsibility

Societal issues (including the above and more) are of concern to a growing number of individual and institutional investors, and as author Steven Lydenberg (of Domini Social Funds) points out, corporate social responsibility and social investing / socially responsible investing are [now] two major social forces that have moved closer together with significant complementary and overlapping consequences. (His comprehensive book on CSR and SRI is: "Corporations and the Public Interest: Guiding the Invisible Hand," published 2005; Berrett-Koehler Publishers, San Francisco.  See: www.bkconnection.com)

Says author and 30-year SRI and CSR watcher Lydenberg:  "My formulation of long-term wealth creation includes three expectations that proponents of [both] corporate social responsibility and socially responsible investing consider as part of the corporation's obligations to society " corporations,

  • Do not externalize costs onto society.
     
  • Do not deplete natural resources irretrievably.
     
  • Do not impoverish stakeholders.."

In other words:  Corporations, do no harm!  (As we would expect of any good citizen.)

Professor Sandra Waddock of Boston College's School of Management notes (as quoted in Lydenberg's book):

"Good corporate citizens...treat well the entire range of stakeholders who risk capital in, have an interest in, or are linked to the firm through primary or secondary impacts by developing respectful, mutually-beneficial operating practices and by working to maximize sustainability of the natural environment..."

We close this introduction by observing that editor Edward Teach, mutual fund / money management professional Steve Lydenberg and academician / activist Sandra Waddock have clearly captured for us the essence of the dialogue -- and action steps taken by advocates and corporate management --  surrounding what is "good corporate citizenship" or real "corporate social responsibility."

The editors will be presenting many more views and perspectives on all sides of the CSR question in this Web resource.  We invite your news and views!

# # #

-- From the Editors at AccountabilityCentral.

You are invited to send news, reports, editorial contributions and personal opinion items for consideration for publication on Accountability Central by email to:  news@accountability-central.com

For other information, please email:  info@accountability-central.com

Contents Copyright © 2006-2007-2008 by Governance & Accountability Advisors, Inc. unless otherwise attributed to third parties with Copyright protection.  Quotations from other authors / publications are prominently attributed and are intended as "Fair Use" information by the user. 

Authors / Editors / Researchers:  Please attribute your Fair Use to Accountability-Central.  We appreciate the use of the Web link this Web site's URL:  www.accountability-central.com.  Thank you

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