The idea of corporate social responsibility has failed to help create the good society. Long seen by academics and managers alike as the missing link in capitalism, the concept of corporate social responsibility has not delivered on its promise. Furthermore, it has become a barrier to meaningful conversations about corporations and the good life. Corporate social responsibility, in all of its many masks, has outlived its rather limited useful life, and we call for its immediate demise.
The purpose of this article is to suggest some reasons as to why the concept of corporate social responsibility should be abandoned. And, we offer an alternative: an ongoing conversation about corporations and the good life.
Such an alternative conversation needs to be centrally connected to other conversations about how we human beings can live. In particular, we suggest that reconceptualizing the corporation as a network of relationships makes possible a social world in which "caring" has primary significance. In addition, we suggest a whole host of different metaphors that can be developed once we drop the search for corporate social responsibility.
Understanding our "responsibilities" does not enable us to create new forms of economic and social life. In fact, we suggest that it gets in the way. We believe that managers and business school professors need to return to some more basic questions about the nature of the human self and the communities we are capable of creating.
CORPORATE SOCIAL RESPONSIBILITY
IS NOT A USEFUL IDEA
The purpose of this section is to give seven reasons (summarized in Figure 1) why we should give up the idea of corporate social responsibility. We draw on our experience of some years in helping managers think about these ideas, as well as our reading of the management literature on this and other subjects. We have to confess that after years of trying to make sense of this idea we have come full circle to agree with Milton Friedman that the concept of corporate social responsibility is a dangerous idea. We have slightly different reasons for our conclusions.
The History of Corporate Social
Responsibility Is a History of Economics(1)
The idea of corporate social responsibility has its roots in the writings of Andrew Carnegie and others. Carnegie, founder of U.S. Steel, articulated two principles he believed were necessary for capitalism to work. First, the charity principle required more fortunate members of society to assist its less fortunate members, including the unemployed, the disabled, the sick, and the elderly. These "have nots" could be assisted either directly or indirectly, through such institutions as churches, settlement houses, and other community groups. Second, the stewardship principle required businesses and wealthy individuals to see themselves as the stewards, or caretakers, of their property. Carnegie's view was that the rich hold their money "in trust" for the rest of society. Holding it in trust for society as a whole, they can use it for any purpose society deems legitimate. However, it is also a function of business to multiply society's wealth by increasing its own through prudent investments of the resources that it is caretaking.
These ideas gained wide acceptance over the years. Coupled with the threat of government intervention and regulation, they helped form the expectation that corporations add social needs and concerns to their economic purpose. But fulfilling the economic purpose was seen as the primary task of the corporation, and was so recognized by the law of corporations for many years.
Milton Friedman's Argument Led to More
Theories About the Essentially Economic
Role of the Corporation
Milton Friedman's now-famous argument is that corporations should pursue their economic self interest, and that any attempt to promote corporate social responsibility, however it might be defined, amounts to moral wrong. Friedman questioned the logic of corporate social responsibility as it had developed. He insisted that in a democratic society, government was the only legitimate vehicle for addressing social concerns. (He also argued that government was the best vehicle for meeting such concerns, but it is difficult to believe, given Friedman's libertarianism, that such an argument was in good faith.)
The response of management thinkers was to develop more sophisticated models of corporate social responsibility, variously called corporate social responsiveness, the social policy process, social issues in management, business and public policy, corporate social performance, and so forth. While there are real and relevant differences among these models, they share an important common ground. They seem to accept the terms of the debate on Friedman's ground: that business can (or cannot) or should (or should not) address social issues in addition to economic ones. We want to suggest that the very question of corporate social responsibility, the very terms of the debate itself, should be put to one side and forgotten.
Our Business Rhetoric: "Capitalism
Love It or Leave It"
Friedman's rhetoric runs strong throughout business, public policy, and academic circles. The fall of socialist regimes in Eastern Europe, the opening of the Soviet Union, and even unrelated events such as the Allied victory in the Persian Gulf War are all taken as evidence of the triumph of democracy and capitalism. One pundit has even called for "the end of history," claiming that the battle between the West and other systems is over: intellectually, there are no real competing ideas.
Underneath this rhetoric is a belief that capitalism can be seen as an immutable system with socialism positioned as its alternative (see Selden 1990). Because socialism appears so clearly to have failed in its ability to produce any semblance of a "good society" no matter how defined, capitalism - in all its unfettered glory - is seen as our best hope, to be accepted with all its warts as clearly the lesser of two evils. Adam Smith is seen as having the last laugh after all.
However, after examining the "good society" that capitalism has created - the damage to the environment, the hunger and homelessness that exist even in wealthy areas of the world - can anyone today (even Milton Friedman) really believe that the pursuit of self interest has culminated in the common good? The alternative to capitalism as we know it is not socialism, but a better form of capitalism - one that recognizes the existence of the commons and acts to prevent the single-minded individualism capable of destroying it.
At the heart of capitalism is the problem of the commons, so aptly described by Garrett Hardin in his article "The Tragedy of the Commons" (1968). Hardin suggests that if there is a common grazing area to the community, and if everyone pursues self interest and grazes cattle, then the commons will be destroyed. This argument is a specific form of the "prisoner's dilemma," which can be found in another form in Plato's Republic. This problem, in whatever guise, points out a fundamental tension in our notions of "self vs. community," "public vs. private," and other cherished, usually unquestioned, third-level assumptions about human beings. A willingness to enter into the conversation about what a |commons-sensitive" vision of capitalism might look like is a pre-condition for linking corporations and the good society - that is, if we believe that a good society is concerned with more than the accumulation of wealth by a privileged group.
Corporate Social Responsibility Is
Corporate social responsibility starts with the standard received idea of the corporation as essentially and primarily an engine of economic production and distribution. Models of corporate social responsibility, from arcane academic ones to real programs like those at Dayton Hudson, Control Data, and Chemical Bank, try to fix this idea by adding social responsibility and stirring. For instance, if our economic system, based on seeing the corporation as essentially economic, leads to a neglect of communities, then we need corporate social responsibility programs to address community needs. If we see the corporation as an economic system based on hierarchy and command and control, we will develop a view of human beings as being obedient (for the most part) and willing participants in the resulting social milieu. Since the human consequences of living in command and control systems are unsavory, say corporate social responsibility theorists, we need to treat employees as capable of going beyond command and control, so they are not exploited. Further, we need to do so because we have a social responsibility to our employees - or a moral responsibility, as current jargon would have it.
Why not just abandon the idea of the corporation as a command and control system, and therefore abandon its social responsibility to treat employees as more human? We could start with the idea that employees are complex human beings who have hopes and dreams they want to realize. And corporations can be used by employees to realize those dreams in a number of dimensions. A special "social responsibility" to treat employees better would simply not be relevant, and we would have many more possibilities open in terms of creating organizational forms that help us realize complex human purposes.(2)
Corporate Social Responsibility
The idea of corporate social responsibility leads managers to make decisions about issues beyond their expertise; further, it reinforces what managers and business school professors take to be the real and legitimate competence of business executives to deal with social ills.
Philanthropy represents acts of charity, of benevolence taken on by choice. Ethical conduct, on the other hand, is obligatory and expected for maintenance of the relationships between the organization and its constituents. Adding social goals directly to the corporation's obligations brings with it an obvious right to involvement in the process of achieving those goals. Not surprisingly, the perspective brought by direct business involvement is often one that focuses on efficiency and short-term outcomes.
Because managers have little training in understanding the complexity of human beings and their communities, and because they are encouraged to believe that humans are economic and economical beings, approaches to social problems are at best well meaning and simplistic. We are constantly bombarded with the notion that welfare recipients need better "incentives," or that teachers need to be held "accountable" in the same way division presidents are accountable. Business managers, and their politicians, constantly try to privatize the public sector, if not by assigning actual property rights, then by assigning "management expertise" understood as "economic logic."
Well-meaning managers turn social programs into corporate strategies, subordinating the needs of external constituencies to the needs of corporations. Corporate social responsibility programs are often the province of a special committee, an executive assistant, a foundation, or public relations/affairs. Several foundations with which we are familiar routinely wrestle with their mission as furthering the economic ends of the corporation or doing something else. Giving to particular community groups either furthers the ends of the corporation or it doesn't. Separating these ends into economic ones and social ones, and letting the latter serve a legitimating function for the former, leads us astray. It causes us to not question the impacts of economic ends on the very groups to whom we claim to owe social responsibilities.
Business and Society Are Not Separable
We need to closely examine the idea that the ethics of business, couched in the language of the "social responsibility of business," can usefully be thought of as separable from the ethics of all of society. American business values are inevitably the product of American culture. (We take this point to be true of business set in any culture, not just American business.) For the most part business values have represented a small subset, rather than a wide spectrum, of these values. The relationship between business and the larger cultural context has been one of mutual influence, yet with few exceptions managers and management thinkers have not carefully explored these linkages.(3) In reviewing the legacy of the 1980s, what we find most troubling is not the extent to which respect for business has sunk to new depths - it is the extent to which it has risen to new heights. Sociologist Robert Bellah and his colleagues argue (1985) that the archetypal American Character is no longer the religious or civic leader, it is the businessman. Why the recent concern with business ethics - is it because the ethics of American business are deteriorating alarmingly.? More likely, we believe, is the hypothesis that it is the ethics of the community at large that are changing - and the values of business are increasingly becoming the values of America. If business values have historically been, for society, its moral floor, what are the implications of them becoming the norm? If, in fact, business values now drive the American consciousness, they take on a new importance - an importance that can only be recognized if we drop the charade that privileges business with a discrete set of ethics, immune from the standards applied in the rest of our lives.
Arguments within the business community for the self-interested pursuit of profit maximization gain as much support from Americans' traditional focus on individualism as they do from Adam Smith. An emerging group of communitarians such as Amitai Etzioni have begun to question the implications of this for the quality of life that we lead. The strain of individualism runs deep in American ideology - it was one of what de Tocqueville called our "habits of the heart." But, at the time de Tocqueville was writing, in the 1830s, he saw other habits of the heart as well - the concept of the ethical community as represented by Massachusetts' John Winthrop, a leader of the Puritans. Winthrop's focus was on "moral freedom," which consisted not of individuals free to pursue self interest at will (which reflects more closely our current notions of freedom) but rather the liberty to pursue only that which is good, just, and honest. De Tocqueville also noted America's republican tradition of commitment to civic responsibility, as exemplified by individuals like Thomas Jefferson.
Robert Bellah and his colleagues argue that our problems as a country today relate, in part, to the loss of the tempering forces of civic responsibility and religion on the individualism so much a part of our heritage. They argue that our focus on the liberation and fulfillment of the individual has become a cancer, because it has allowed us "to think of commitments - from marriage and work to political and religious involvement - as enbancements of the sense of individual well-being rather than as moral imperatives." Creating the good society will require that the business community accept a new set of moral imperatives. This is not to suggest that business take on the traditional role of government - quite the contrary. Instead, it suggests that business acknowledge its complicity in the creation of our current society - and abandon the defense of "business as usual," shielded and decoupled from the larger questions raised by the good society. The business community must, indeed, have its separate conversation, but the fundamental values that determine the nature of that conversation are irrevocably shared with the society in which business functions.
Rights and Responsibilities
Are Only Part of the Issue.
Although the language of rights and responsibilities is a central portion of our moral discourse, we want to join the group of thinkers like Carol Gilligan, Alasdair Maclntyre, Nell Noddings, John Rawls, Richard Rorty, Sara Ruddick, and Michael Sandel who suggest, each differently, that rights and responsibilities are not the whole story. The language of rights and responsibilities dooms our discussion to remain an essentially intellectual exercise with little relevance to the practicing manager. A focus on the allocation of rights and responsibilities as an end point in the discussion is helpful only in a world where we can reach some level of consensus around that allocation.
Such a view envisions rights as fixed and knowable and responsibility as a pie, to be sliced into discrete pieces - some of which are laid upon the plate of government, others to producers, retailers, consumers, and so on. The curbside appeal of such an approach is undeniable, provided, of course, agreement can be reached on how big a slice each party receives. The complexities evoked by the differing natures of the situations faced spawns a series of debates, some of which occur at the abstract level of stockholders versus stakeholders, others of which filter down into a seemingly endless array of topic discussions (bribery, product misuse, and so on). Throughout, the knife remains poised but unable to cut through the verbiage to affix responsibility in a way that would let us actually deal with the issue at hand.
The difficulties inherent in this framework do not end with the problem of consensus, however. In fact, even if we assume that such an elusive consensus about who owns particular rights and responsibilities can be achieved, our search for a useful framework remains unsatisfied - for we must also believe that the recipients of the responsibilities actually five up to them. Thus, we may ascribe to agricultural chemical firms the responsibility to produce a "good" product in a safe manner, and to government the role of educating the populace to ensure safe use of pesticides. When, as is often the case, one party fails to meet its responsibilities, the question of interest becomes, "How much of the responsibilities ceded to others am 1, the other party, willing to shoulder to meet legitimate needs?" If government, in the above case, is irresponsible and fails to educate its people, the chemical firm has not solved the dilemma at hand - preventing misuse of its product; it has merely traded in one perplexing question for another.
TOWARD A NEW CONVERSATION
We need a new conversation that brings with it new possibilities for corporate life. We suggest that there are at least three avenues we can pursue to replace the worn - out language of corporate social responsibility with some new, rich, and more useful conversations. We shall put these proposals into the form of three propositions summarized in Figure 2 to crystallize the metaphors. They are:
* The Stakeholder Proposition - corporations are connected networks of stakeholder interests;
* The Caring Proposition - Corporations are places where both individual human beings and human communities engage in caring activities that are aimed at mutual support and unparalleled human achievement; and
* The Pragmatist Proposition - Corporations are mere means through which human beings are able to create and recreate, describe and redescribe, their visions for self and community.
The Stakeholder Proposition
Because stakeholders are broadly defined to include suppliers, community, employees, customers, and financiers, if the stakeholder proposition is accepted into the normal way we talk about corporations, the question of social responsibility just doesn't come up. Once we come to see each of these groups, and the individuals within them, as legitimate partners in the dialogue about "what is this corporation going to be," the social responsibility of the resulting entity is moot. Social responsibility to whom? All of the affected parties are a part of the conversation. Since social responsibility depends on the external effects on those not a party to the corporation, we have simply made the issue disappear.
Such a move is not just intellectual trickery. Language is important; in fact, it is the only tool we have to deal with a rather difficult real world. If we come to see corporations as connected sets of stakeholders, all of whom are "in it together," then we are able to live in a way that doesn't carve up the world into "economic, social, political, and technological" parts.
The Caring Proposition
The caring proposition offers a nice link to a body of work that has gone unnoticed by most management thinkers: feminist theory. Of course, there are many "feminisms," and many conflicts and tensions within each, but we want to illustrate the kinds of conversations we can have if we take this work seriously. Scholars working in what has become known as "liberal feminism" or "feminist standpoint theory" or "different voice feminism" have suggested that we need to explore an ethics of caring and connection. Caring that is personal and supportive is juxtaposed against an ethics of rights that is deliberately and logically impersonal. Rights are abstract, formal, immutable. They reflect the reality of those who define them, independent of the perspective of those who own them. The language of the ethic of care sees humans as enmeshed in communal institutions as well as striving for individuality. It recognizes human needs as concrete, personal, changing, defined from within by those who possess them. The ethic of care would acknowledge the differing perspectives of the many voices that exist in the corporate context, and makes such an acknowledgement primary.
Where does this talk of employee rights lead us? Does the employee, acting as agent for the institution, have a "right" to voice - and, beyond that, to autonomy, to freedom of choice? Does the organization have the "right" to demand such abdication of individual rights in exchange for the daily wage? Is this the place to begin? What is clear is that humans have the need to be heard, to be respected, the need to live in accordance with the values they hold. Organizations, as well, have needs: needs that must be met today to keep the organization a viable vehicle for meeting both its own and its constituents' needs in the future. To focus exclusively on rights is a zero-sum game. And in business, which has inherently to do with relationships among individuals and groups, zero-sum games are self-defeating, as Chester Barnard recognized over 50 years ago.
The language of care begins with the premise that we do care, not that we have a responsibility to care. It builds on a view of human nature as connected with others, concerned with maintaining and nurturing relationships. Drawing on our years of interaction with practicing managers, and with management students, we find this view of human nature both more accurate than views of humans as calculated, self-interested economic beings, as well as more compelling in the possibilities it offers. Rather than distancing managers from their altruistic selves, as the focus on rights does, the ethic of care reaffirms the self and its link with others. Rather than creating a false dualism that asks individuals to be managers from 9 to 5 and humans for the duration of their day, it leaves us whole.
The Pragmatist Proposition
The ethics of caring is only one of many metaphors we can use to describe and redescribe corporate life. Embodied in the pragmatist proposition is the suggestion that if we come to see the projects of "self creation" and "community creation" as two sides of the same coin, we will stop juxtaposing "self interest" with "altruism," "public self with private self," even "rights and responsibilities with caring and connection." If we come to see our institutions, like the corporation, as just one more way we can live together, we can easily accept the pragmatist advice to "be experimental." There are lots of ways to reconfigure corporations, many methods of governance, many ways that humans can thrive and flourish in the joint pursuit of their individual and collective good. What holds us back is our language, our view of ourselves, and our worn out metaphors for corporate life.
The pragmatist project for self-creation and community creation is less a matter of economics and politics (the fundamental grist for the business and society mill) and more a matter of history, culture, poetry, and literature. Roland Barthes (1975) suggests that we learn to read without restraint" or come to find "jouissance" in reading. We must see corporations in the same way, as places in which we can be fully unrestrained human beings, places of "jouissance" rather than grey flannel, places of liberation and achievement rather than oppression and denial, and finally, places where we can have real and relevant conversations about our differing visions of the good life.
(1.) This section is based on Freeman 1991). For a complete discussion of the history of the concept of corporate social responsibility, see Frederick (1987) and Preston (1988). Our understanding of the history of these ideas is due to Professors Frederick and Preston, as well as James Post and Ed Epstein.
(2.) We take this point to be a large part of the substance of Tom Peters' call for chaos in organizations as well as the current movement toward "employee empowerment, "flat organizations," and the decentralization of command and control organizations.
(3.) Notable among these exceptions are Cavanagh (1976) and Scott and Hart (1990). More commonly, management thinkers are often heard to decry the Japanese success in business with explanations of the homogeneous nature of Japanese society and the reliance on communal versus individual values. if our management thinkers are to be believed, Japanese business is closely connected with the underlying cultural values, but American business is not - a strange theory indeed.
Roland Barthes, The Pleasure of tbe Text, trans. Richard Miller (New York: Hill and Wang, 1975)
Robert Bellah et al., Habits of the Heary (New York: Harper & Row, 1985).
Gerald Cavanagh, American Business Values in Transition (Englewood Cliffs, N.J., Prentice-Hall, 1976).
William C. Frederick, "Corporate Social Responsibility and Business Ethics," in S. Prakash Sethi and Cecilia M. Falbe, eds., Business and Society (Lexington, Mass.: Lexington Books, 1987), pp. 142-161.
R. Edward Freeman, "A Note on Ethics and Business," UVA-E-071, The Darden School, University of Virginia, 1991.
Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962).
Milton Friedman, "The Social Responsibility of Business is to Increase Its Profits," New York Times Magazine, September 13, 1970, pp. 122-126.
Garrett Hardin, "The Tragedy of the Commons," Science, December 13, 1968, pp. 1243-1248.
Lee E. Preston, Social Issues and Public Policy in Business and Management.- Retrospect and Prospect College Park, Md.: University of Maryland, 1988).
William Scott and David Hart, Organizational Values in Amedca (New Brunswick, Nj.: Transaction Publishers, 1990).
Arthur Selden, Capitalism (Oxford: Basil Blackwell, 1990).
R. Edward Freeman is Elis and Signe Olsson Professor of Business Administration, The Darden School, University of Virginia, Charlottesville. Jeanne Liedtka is an associate professor of business administration, The Darden School, University of Virginia, and an associate professor of management, Simmons College, Boston. The authors are grateful to the Darden Foundation and the Olsson Center for Ethics for support in developing these ideas, and would also like to express their appreciation to Professor Andrea Larson and Professor Mark Haskins for support and many conversations about corporate social responsibility.