Socially Responsible Corporations
To survive over time, every organization needs to take in more money than it
spends. (The only possible exception may be the U.S. government.) This means
that even nonprofit organizations must, in a sense, make a profit. But making
a profit isn’t the same as maximizing profit. In the first instance,
profit is a means to an end; in the latter, it’s the purpose that trumps
all others. Millions of organizations earn enough money to stay alive, yet
pursue goals other than profit. Is it possible for publicly traded corporations
to be like that? Can they have multiple bottom lines? Can they, in
other words, rise above their profit-maximizing algorithm?
There are several ways this might be possible: enlightened managers might
choose a higher goal than profit, shareholders might insist on it, and government
might require it. Let’s consider each possibility.
There are several ways this might be possible: enlightened managers might
choose a higher goal than profit, shareholders might insist on it, and
government might require it. Let’s consider each possibility. ...
MANDATORY RESPONSIBILITY
I don’t think it will ever happen, but consider this scenario. Imagine
Congress passes a law requiring every corporation — in exchange for
limited liability — to have a triple bottom line. The law also says
that at least a third of corporate directors should represent workers, nature,
and communities in which the company operates. And it protects directors
from lawsuits if they favor nature over profit. You’re the CEO of Acme
Corporation. What changes do you make after the law takes effect?
Well, you might start by increasing your accounting budget. You’ll
need, henceforth, to keep track not only of money but also of your nonmonetary
impacts on society and nature. This isn’t easy, though presumably shortcuts
will be developed. Next, you assign people to find ways to reduce Acme’s
negative impacts on nature and society, ranking the proposals by years to
payback. You budget a modest sum for the most cost-effective projects, giving
preference to those with public relations value. You publish ads and reports,
patting yourself on the back for doing what the law requires. And you remind
your board of directors that, if they choose, they can snub offers from the
likes of Charles Hurwitz and forgo large capital gains for shareholders.
All this would be well and good. But given the algorithms that still rule,
how much difference would it make? And even if it did have some effect, would
it make enough difference in the right ways? After all, you might spend your
small green budget on one thing, while nature most needs something else.
Now, as an alternative, imagine that the price of nature is no longer
zero. All of a sudden, it costs big bucks to pollute or degrade ecosystems. Overnight,
your managers scramble to cut pollution and waste. The higher the price,
the faster their behavior changes. And it changes in response to specific
natural scarcities, as indicated by specific prices.
The question is, which of these approaches would work better — mandatory
social responsibility, or increases in the price of nature? The answer, without
doubt, is the latter ... read
the whole chapter