Who should determine the content of Corporate Social Responsibility?
There is an opportunity and a need to inject more democracy into corporate decisions that go fundamentally to the public interest, starting with "shared value creation"
This is the first of a series of posts that will address the potential to use democratic decision-making tools in relation to corporations.
TL;DR: Taking Corporate Social Responsibility (CSR) seriously means taking seriously the question of how the content of this responsibility is determined
Could corporations pilot using more democratic decision-making tools to determine the content of their responsibility to address social issues that present opportunities for “shared value creation”?
Now more than ever, corporations are profoundly shaping how we live our lives and interact with each other. We can argue about the extent to which corporations owe a responsibility to society as a matter of principle, but in many cases, the point is moot: many large corporations operating in Australia, from Woolworths, to Telstra and Atlassian, have now voluntarily and very explicitly assumed responsibility.
But is it appropriate for corporations to decide what’s in the collective social interest? Right now, corporations often make decisions about what’s in the public interest without particularly meaningful public consultation.
While governmental regulation is of course one of the central ways in which we can more democratically define the content of corporations’ responsibility, there’s ample room (and need) for complementary approaches. One approach would see corporations lead deliberation on social issues that present opportunities for “shared value creation”; one example issue might be ageism in the workplace. That’s the subject of this post. Other approaches rely on third parties to initiate deliberation as an activist tool, and I’ll say more about this in a future post.
Now more than ever, corporations are profoundly shaping how we live our lives and interact with each other
For decades, corporations have dictated the kinds of products and services we use each day. Indeed, they drive our fundamental sense of need for products and services of all kinds.
Big tech has deepened this impact in many ways. Digital products and services have become a “constant presence in all of our lives twenty-four hours a day, seven days a week. Combined, [big tech firms] literally know everything we’ve purchased, everywhere we’ve been and everything we want.”
Some corporations are taking on some of the powers and responsibilities previously held by institutions like news media and government, “replacing previous systems and norms with centralized control based on mass data collection and algorithmic curation.”
Many corporations are also profoundly shaping social norms and power dynamics through their effect on workforce and their increasing commentary on social issues.
Corporations also owe a responsibility to society
Corporations not only have a profound impact on society but, many would argue, carry significant social responsibility.
This isn’t an essay on the philosophical basis for CSR or corporate taxation, but it’s worth jotting down a few of the reasons why you might argue that corporations are obliged to the broader public (if you’re otherwise inclined to dip out at this point and agree with Friedman 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”).
External sources of obligation
Corporations enjoy special social benefits. As Roosevelt said, “great corporations exist only because they are created and safeguarded by our institutions; and it is therefore our right and our duty to see that they work in harmony with these institutions.” Corporations enjoy legal personhood and are sustained by government grants of limited liability to individual shareholders. They benefit enormously from a stable and productive business environment in which to operate: to name a few features of the environment in Australia: a robust legal system to protect contracts, a highly educated and skilled workforce, physical infrastructure from office space to industrial land and transport infrastructure. While corporations of course generate much of their profit from hard work and innovation, many corporations also earn what economists call rents, which are earnings that arise not from hard work and real innovation but from accidents of nature or good fortune.
While it’s true that corporations are “extraordinary engines for innovation, growth and job creation” they have also generated major social harms or externalities, including to the environment and people’s health, and fueled inequality.
Self-assumed obligation
But perhaps the most compelling basis for the obligation of corporations to Australian society is their own assumption of responsibility. Here are some of the claims made by major Australian corporations about their social responsibility.
Woolworths: “At Woolworths, corporate responsibility has always been about doing the right thing. With our presence across Australia and New Zealand’s cities, regions and remote areas, the sustainability priorities Woolworths sets impact our nations’ economies, communities and environments…as Australia’s largest employer, we listen and we learn: we care deeply and do the right thing”
Telstra: “At Telstra, we believe that corporate social responsibility is a value-based approach to how we do business, leading us beyond legal compliance to make a positive contribution to the industries and communities in which we participate”
Atlassian: “Atlassian is built to be open, inclusive, fair, and just. When we face tough questions about ethics, people, or the planet, we let those principles guide us. Whether you call it corporate social responsibility, corporate citizenship, or sustainability, this is just about being human”
Direct governmental regulation isn’t and shouldn’t be the only way we push for corporations to act in the public interest; we should promote corporate action over and above regulation
If corporations can be fairly said to owe a social responsibility, shouldn’t we just enforce this with harder governmental regulation? In India, for example, the Government passed a law in 2014 requiring all companies to spend at least two percent of their average net profits over three years on CSR-related activities. The UK, Europe and the US have adopted more comprehensive D&I laws with more explicit and tangible requirements (e.g., requiring that at least 40% of non-executive director posts within large companies listed in the EU are women). Disclosure requirements in relation to a range of social targets and activities are increasingly common.
There is certainly room for Australia to explore more direct governmental regulation, but there is great value in exploring alternative approaches in parallel; at this time, it would seem that relying solely on regulation is neither the most realistic nor the most effective strategy.
Direct governmental regulation is politically challenging in Australia
The first basic point to make here is that whether or not you as a reader like the idea of introducing harder governmental regulation, it would likely be politically tough in Australia. Martin Brueckner writes that “in Australia, with its strong neoliberal leanings since the 1980s, successive governments have championed industry self-regulation, a policy position unlikely to shift in the near future” and that indirect forms of regulation and a range of internal CSR instruments in the form of voluntary corporate codes of conduct and strategic stakeholder partnerships are widely considered substitutes for hard regulatory approaches.
Relying solely on governmental regulation is dangerous
The second point is that relying solely on governmental regulation without investing in softer forms of cultural pressure is dangerous. For a few reasons, laws alone will not be effective to yield the kinds of corporate social action we might hope for:
Technologies are moving faster than governments can keep up with
Ultimately, CSR is a highly incomplete concept and possible CSR actions are hard to standardise; it is a “residual concept that can include factual situations that no one has foreseen and categorized”
For a huge chunk of corporate activity, social costs are complex and single actors such as corporations, civil societies or governments cannot deal with these challenges in isolation
Even if some CSR activities could be mandated, in many cases, corporations might be more likely to take more extensive action voluntarily, where it becomes “embedded within corporations’ mindsets”
But how should corporations determine what’s in the public interest?
From the research I’ve been able to do (of course open to be challenged!), it’s rare that corporate decisions about CSR involve highly transparent and inclusive public engagement.
Typically, CSR efforts reside with a few individuals, at different levels of management. They may be managers with titles like VP of corporate or community affairs, reporting to the HR chief. They may be heads of a corporate foundation, who engage with operations managers for particular philanthropic programs. CEOs, sometimes in concert with one or two senior managers, may become directly involved with certain shared-value initiatives. A Chief Sustainability Officer may direct environmental sustainability efforts.
In more limited cases, broader employee committees may have oversight of social and environmental activities.
External stakeholders may be consulted or play an advisory role. For example, Woolworths has recently appointed a Woolworths Group First Nations Advisory Board, and conducted listening forums to develop its disability strategy and action plan. At least as a member of the public observing from the outside, the ways in which their advice is sought and implemented seem to be relatively non-transparent (although these are clearly serious and proactive steps toward inclusion). Perhaps more significantly, this kind of consultation seems very rare.
Ultimately, the result is that “Australia’s dominant development narrative has produced narrowly construed CSR discourses and practices.” Corporations are accused of greenwashing, pink-washing and woke capitalism; the central criterion for social investment is impact on the bottom line.
If corporations are really committed to serving the public interest, they should be more meaningfully consulting the public
The argument here is pretty simple; only the public, through some mechanism that can be said to legitimately represent them, can legitimately determine what’s in the public interest. Many of the best democratic theorists agree that deliberation can’t be limited to state institutions only.
One mechanism is our elected representatives. We might imagine formal, public consultation between elected representatives and leaders of major corporations on their CSR plans and priorities in some kind of large, open forum. But this kind of engagement between corporations and government is typically based on quid pro quo. Further, government’s role is to set fair, across-the-board rules, not to opine on the voluntary activity of firms outside of these rules. Both of these arguments also recognise the danger of corruption in such a setting.
A deliberative mini-public could be used as a democratically legitimate mechanism for ascertaining the views of the public in this circumstances. The features of random selection and lengthy, balanced deliberation promote meaningful, fair, legitimately representative and impartial citizen engagement.
Two use cases for deliberation on questions about corporate social responsibility
As always, deliberation has its limits and the real challenge is in identifying these limits for any given potential use case. For what specific issues might deliberation be appropriate and effective?
I want to suggest two very distinct use cases for deliberation on questions about CSR.
Shared value creation: corporations initiate and partially sponsor deliberation on issues that are likely, at least over the long-term, to improve their bottom line, but which corporations still haven’t taken a lot of action on. If there is genuinely shared value at stake, engaging the public should deliver the most impactful CSR strategies for the corporation’s bottom line, drawing in the lived experience and value judgments of affected citizens, and generate broader public trust and buy-in from its customer base. I’ll give an example on this below.
Accountability: activists initiate and fund deliberation on issues that won’t necessarily deliver a positive result for corporations’ bottom line. In this case, running a citizen deliberation is essentially a novel advocacy tool. More on this in my second post on corporations and deliberative democracy.
Shared value creation use case: ageism in the workplace
What could this look like?
A citizens’ jury, composed of 40-60 randomly selected citizens from across Australia, would deliberate over 2-3 days on the question of what corporations should do to reduce ageism in their workplaces (perhaps with a focus on recruitment)
As is standard in citizens’ juries, the jury would seek out evidence from a range of sources with different perspectives and interests (academics, older Australians with lived experiences, corporate executives and managers from relevant functions) and on a range of key considerations (for example, potential cost of various strategies and impact on the bottom line, impact on employee productivity and wellbeing across all age ranges, impact on the broader economy, effectiveness of various strategies to make older Australians feel more included)
The selection could be stratified to over-represent older Australians, although I’d argue that since the central purpose here to legitimately decide a matter of public interest that affects all Australians, stratification isn’t necessary; older Australians could also share their lived experience as witnesses
A group of major Australian corporations would jointly fund the jury and agree to consider its recommendations
The jury would be designed by an independent committee of citizens and experts in deliberation and facilitated by experts in deliberation
Why might it work?
First, running this deliberation would be in the interest of companies.
Addressing ageism in the workplace can ultimately be good for companies’ bottom line (or to put it another way, it can promote shared value creation)
It’s also an issue that Australians are becoming increasingly aware of
Second, for at least two reasons, like arguably many issues of CSR, the issue of ageism in the workplace is appropriate for democratic deliberation (vs determination by a commissioner or other non-democratic body) from the perspective of democratic theory.
It involves difficult normative judgments and trade-offs; random selection gives us the best chance at a meaningfully representative answer to these questions. To cite a couple of examples of these questions:
Is there a trade-off between advancing recruitment and retention for older Australians and giving younger generations a go? If so, how should we resolve this trade-off?
Is there a trade-off between these actions and corporations’ bottom line? How should it be resolved?
These difficult normative questions require time, evidence and discussion to answer. A few examples:
What are the barriers to recruitment and retention of older Australians, based on their lived experience?
How have they been addressed effectively in other jurisdictions?
What is the potential cost of various strategies and impact on the bottom line?
What is their impact on employee productivity and wellbeing across all age ranges?
…to be continued in the next post!