Corporate responsibility: a broken moral compass?

The business and finance world is facing up to its responsibilities. The term "Corporate Social Responsibility" (CSR) has by now become firmly established in the business lexicon and features in the MBA syllabus of most business schools. Large US and European companies have, in the main, adopted some kind of commitment to CSR, even if they prefer a different nuance - sustainability or corporate citizenship - and they publish lengthy reports just to prove it.

It would appear then, that the question of whether one can in fact talk meaningfully of collective responsibility has been answered and the argument that corporations are moral agents has been won. Naysayers still exist but they are in a shrinking minority and their arguments have not moved far from those of Levitt (1958) and Friedman (1962) who regarded a company's sole responsibility to be to its stockholders. Bakan (2004) has argued that a corporation's legal status prevents it from acting in anything other than its own self-interest and not for moral reasons. In reply, others (Crane & Matten 2004) argue that corporations have moral agency independent of their members, pointing to their internal decision structures as well as the beliefs and values embedded in organisational culture.

Responsibility: legal obligation or social duty?

If we accept that a company is a rational moral agent, how do we define its moral obligation in relation to other agents with moral standing? And for that matter, to whom or what do we extend moral standing (what about non-humans or the non-biotic environment, for example.)?

What does "responsibility" actually mean and to whom does it extend? With what ethical theory or framework can can make sense of it? Since "duty" is a close synonym, there is something distinctly Kantian about the principle of responsibility in terms of moral philosophy. Many CSR advocates would probably be quite comfortable with a deontological approach which judges acts as inherently good or bad regardless of their consequences derived perhaps from a utilitarian calculus. But we still need to ask: to whom does a business have a responsibility? Easy, the CSR advocate may claim, "to society".

Leaving aside the huge question of what we mean by "society" (a topic for a later post, perhaps), the cynic may reply that society does so by setting the "rules of the game" through the laws and legal frameworks that govern and constrain corporate actions, restrict the autonomy of its management, establish accountability (to its owners), and thereby define the responsibilities it expects of corporations.

As such, collective bodies such as corporations can be held legally responsible for their past actions, albeit subject to tricky issues such as intention, causation, limits of control, burden of  proof, negligence and when to impose strict liability. Moreover, laws codify the moral framework within which society detemines that companies should operate. In which case the quest for more responsible businesses should focus on public policy; fans of CSR should perform a monitoring role from the outside looking in, as quasi-regulators and whistleblowers who form part of civil society.

Beyond compliance....and into a moral muddle

This is not good enough for most CSR advocates. The scope of a company's responsibility is not adequately defined with reference to the law and extends beyond mere compliance with it. A company's legal responsibilities are most pertinent after-the-fact, in apportioning blame and seeking restitution. But CSR has come to mean some form of prospective responsibility: the behaviour and conduct of corporations in relation to wider society.

These obligations are typically expressed, for example, in stakeholder approaches, the concept of extended producer responsibility, or in some version of legitimation theory expressed in terms of an implicit contract or a social licence to operate. These now well enshrined management principles seem to be firmly rooted in deontological ethics. Is duty the ethical principle is at work in assigning corporate responsibility beyond legal compliance?

A Kantian approach might regard corporate responsibility towards a society viewed as a “kingdom of ends” in which its moral imperative lies in a universal respect for human dignity. But perhaps an emphasis on rationality and universal morality would attract other objections since moral agency in a pure Kantian approach means that corporations must exercise their own moral judgements in relation to its actions, rather than simply obeying universal rules (including those codified in laws, presumably). This would fly somewhat in the face of any desire to promote common or harmonised standards of behaviour of the form we typically see in codes of practice beloved by CSR advocates and practitioners.

For some the alternative is to appeal to enlightened self-interest or, in its more sophisticated form, shared value. In this formulation it is rational for a company to act responsibly towards "society" because, in so doing, it ultimately benefits itself (or more precisely, its stockholders). In its cruder form this rationale for CSR is therefore just a form of ethical egosim masquerading as duty. The company doesn't really have a moral duty to society at all. Friedman wins afterall.

Escaping responsibility

The theoretical ethical foundations for corporate responsibility are murkier than we might suppose. It feels right that companies should have obligations – or duties – to wider society but it is not entirely clear why - or what exactly they are. Instead, in the absence of a commonly accepted moral framework, the social norms of corporate behaviour emerge from a bustling bazaar of competing expectations birthed by the postmodernist ethical gut-feel.

The corporate commitment to the vague concept of sustainability offers little as a surrogate, hinting at a common ethical dimension to corporate goals (inter-generational justice) but leaving its application open to a wide range of interpretations. In the end, the trade-offs at the triple bottom line come down to a choice, subject to the preferences of management, over the relative weight (significance) and (possibly incommensurable) values they attach to the externalities (social or environmental impacts) associated with business activity. Whatever the ethical basis is for decision-making in a "sustainable business", it appears to be broadly consequentialist in nature. In the end the search for consensus results in loose agreement to codes of practice, guidelines and reporting frameworks detached from any firm ethical mooring.

The difficulties become even more apparent in the financial world. Here responsible investors are cast as moral agents with a fiduciary duty to a collective of principals. What exactly does responsibility mean in this context? Is it to act (i.e. invest) only in a manner which is in some sense morally right in relation to wider society, or to act in a certain way in relation to other agents (i.e. invest) only if those agents are themselves acting morally (i.e. “responsibly”) in relation to other objects of moral concern (“society” or “the environment”).

It turns out then that regarding corporate responsibility as an ethical duty may not be helpful after all. In the absence of firmly established ethical foundations and an appeal to a vaguer moral impulse, we we must perhaps accept as inevitable a relativism in business ethics, and welcome a healthy debate instead. In which case, there is no one-size-fits all standard of corporate behaviour and no universally accepted truth of corporate social responsibility.

Perhaps its time to look elsewhere for a guiding moral framework for corporate conduct. Those that use alternative terms like “corporate citizenship” may have consciously done so. Would it be better to appeal to a neo-Aristotelian ideal of morally virtuous character and a commitment to community expressed in a shared conception of the human good. Should we talk of Corporate Virtuosity, instead? Or what might feminist ethics have to say about the obligations of corporations to others in society with its focus on empathy, care and harmony in social relationships? Or further, perhaps the Judeo-Christian concept of “love” in one of its forms might do a better job of defining in more precise terms the nature of the obligation corporations have to others.

There is a clear and well established case for the economic and legal responsibilities society requires of corporations. The ethical responsibilities it expects from them are not so clear cut. We can't rely on the ethics of duty to establish universal norms of good behaviour. For the good of corporate social responsibility, perhaps its time to abandon it altogether and find a new moral compass?