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CSR as Good Corporate Governance

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3 Responses

  1. Frank Pasquale says:

    I broadly agree with you, but I think that firms at the vanguard of CSR must actively lobby government to set rules to make sure that they are not undercut by other firms with bad labor or environmental standards. Teles on Galbraith
    is great on this:

    “The old regime [Reagan to Bush fils] nurtured those parts of business most hostile to setting standards of decency in the workplace or with regard to environmental protection. In doing so, they created a growing business constituency dependent on the Republican Party to maintain those low standards. In the new liberal regime, regulatory standards will be raised without regard to their impact on the most marginal firms, who will be happily ushered into Chapter 11, their assets taken over by those most capable of working under the new, more stringent standards. Rather than shutting down international trade and immigration or adjusting our environmental and working conditions to line up with those of our most cutthroat competitors, we will respond by setting our own standards and letting the level of trade and immigration adjust to them.”

    from
    http://www.the-american-interest.com/article.cfm?piece=561

  2. A.J. Sutter says:

    Something seems backwards in selling CSR on the basis that acting in a socially responsible way is an indicator of good governance. Governance is about the relationships among shareholders, and between management and shareholders. CSR, in theory, is about the corporation’s relationships with the rest of the world, including its employees and the society within which it operates. (Unfortunately, in practice it’s too often simply spin doctoring, but I still have some faith in the theory.) So the view that “a strategy of ‘doing good’ will not only be its own reward, it will also enhance shareholder value” utterly misidentifies the intended beneficiaries of CSR, and is especially oblivious to the meaning of its ‘R’.

    Outside the Anglo-Saxon world, it’s not always taken for granted that a company’s sole or even primary obligations are to its shareholders. That even the lowest-ranked Fortune 500 companies have revenues bigger than the GDPs of most members of the United Nations should be sufficient to create a pretty hefty presumption that such companies have certain duties to society. How companies sort out their governance and profitability problems, while important, should be secondary. It would be refreshing to see American academics adopt this common-sense approach and focus on articulating corporations’ duties to society, instead of fashioning Gordian knots of governance discourse and treating “being good” as merely a path to profit-maximization and self-fulfillment. As Phillip Henry Wicksteed pointed out about 100 years ago, “It is idle to assume that ethically desirable results will necessarily be produced by an ethically indifferent instrument,” which is what he presumed, and neoclassical economics continues to presume, economic relationships to be. I hope your posts will break some new ground of this type, instead of staying within the worn and barren furrows suggested by the global director for conferences and events who so intrigued you.

  3. Judd Sneirson says:

    Nice point, Frank. I agree that CSR cannot be entirely left to the market and voluntary corporate behavior. In fact, the title of the NYT article is “Can Business Do the Job All by Itself?” and the suggestion, which I agree with, is that government regulation must play a role, too. Your quote puts it well, indeed.

    And A.J., thanks for your thoughtful comment. I don’t agree that corporate governance has only to do with management and shareholders, though; corporate managers govern with multiple constituencies in mind, and my point is that these constituencies’ interests overlap considerably. And yes, I’m selling CSR as value-enhancing because it frequently is and because the connection surprises some. I also believe it is good governance generally, even when it does not maximize shareholder returns, but I’ll leave that weighty discussion for a separate post. This one is meant to get us started and to highlight the “worn and barren furrows” for those that may be unfamiliar with them.