Watchdogs and Advocates
Civil society also plays a role in constraining corporate behavior that reduces social welfare, acting as a watchdog and advocate. Various nonprofit organizations and movements provide a voice for a wide variety of social, political, environmental, ethnic, cultural and community interests.
The Rainforest Action Network, for example, is an organization that agitates, often quite effectively, for environmental protection and sustainability. Its website states, “Our campaigns leverage public opinion and consumer pressure to turn the public stigma of environmental destruction into a business nightmare for any American company that refuses to adopt responsible environmental policies.” That’s quite a different approach from trying to convince executives that they should do what’s best for society because it’s the right thing to do and won’t hurt their bottom line.
Overall, though, such activism has a mixed track record, and it can’t be relied on as the primary mechanism for imposing constraints on corporate behavior—especially in most developing countries, where civil society lacks adequate resources to exert much influence and there is insufficient awareness of public issues among the population.
Self-Control
Self-regulation is another alternative, but it suffers from the same drawback as the concept of corporate social responsibility: Companies are unlikely to voluntarily act in the public interest at the expense of shareholder interests.
But self-regulation can be useful. It tends to promote good practices and target specific problems within industries, impose lower compliance costs on businesses than government regulation, and offer quick, low-cost dispute-resolution procedures. Self-regulation can also be more flexible than government regulation, allowing it to respond more effectively to changing circumstances.
The challenge is to design self-regulation in a manner that emphasizes transparency and accountability, consistent with what the public expects from government regulation. It is up to the government to ensure that any self-regulation meets that standard. And the government must be prepared to step in and impose its own regulations if the industry fails to police itself effectively.
In the end, social responsibility is a financial calculation for executives, just like any other aspect of their business. The only sure way to influence corporate decision making is to impose an unacceptable cost—regulatory mandates, taxes, punitive fines, pubic embarrassment—on socially unacceptable behavior.
Pleas for corporate social responsibility will be truly embraced only by those executives who are smart enough to see that doing the right thing is a byproduct of their pursuit of profit. And that renders such pleas pointless.
Aneel Karnani is an associate professor of strategy at the University of Michigan’s Stephen M. Ross School of Business. His recent research has focused on the roles of business, government and civil society in reducing poverty. He has published several articles on this topic in journals including the California Management Review and the Stanford Social Innovation Review. His book Fighting Poverty Together is expected to be published early next year. “I am particularly interested in how to strike the appropriate balance between private profits and public welfare as the world confronts major social problems,” Dr. Karnani says.
Kaynak
By Aneel Karnani
