Corporations as Citizens: Have We Come Full Circle?

Mar 28, 2018 9:00 AM ET
Blog

By Laura Gitman, Senior Vice President, BSR

From the business leadership that helped to deliver the Paris Climate agreement, through Larry Fink’s recent letter to CEOs about social purpose and long-term growth, to the even more recent examples of CitigroupWalmart, and Dick’s Sporting Goods changing their approaches to gun sales, business is leading on a wide range of sustainability and social issues.

What this fundamental shift really calls out is the idea of a corporation as a person coming full circle. Whatever one may think about the implications of the Citizens United decision on campaign finance in the U.S.—and the impact of corporate money and influence in our democratic system has been widely criticized—it clearly expanded the definition of corporate “personhood.” In the case, the majority ruled that corporations, as associations of individuals, have free speech rights under the First Amendment.

As Wikipedia states, “a person is a being that has certain capacities or attributes such as reason, morality, consciousness or self-consciousness, and being a part of a culturally established form of social relations, such as kinship, ownership of property, or legal responsibility.” This is very different from the institutional concept of a corporation defined by Milton Friedman: specifically that a company's sole responsibility is to increase profits for its shareholders.

If companies are like people, it follows that they should act more like people, or at least members of a community. You don’t take care of your family members because you are legally required to; you do it out of love. You don’t shovel your elderly neighbor’s sidewalk because you have to; you do it out of companionship. Thousands don’t donate money, supplies, time, and even their own blood to victims of natural disasters because of a legal obligation; they do so because they have empathy for other people.

Yet until the past few years, our society has not expected corporations to act in the same way. We might look to governments, religious institutions, or nonprofit organizations to “take care” of society, but not our corporations. Despite great work in the corporate sustainability field, we have not expected, or even wanted, corporations to truly act like citizens.

In fact, with Citizens United, there have been legitimate concerns that the power of corporations to capture government to serve narrowly defined short-term shareholder interest has grown too strong.  But does it have to be this way?  Could Citizens United actually be a path for companies to leverage their influence for the good of society? We are seeing hopeful signs that this could be changing, as more companies behave as institutions that have the rights—and the responsibilities—of good citizens.

In the U.S., with our devotion to capitalism and the spirit of entrepreneurship, we’ve long held up the ideal of a company. And while a lot of societal challenges depend on cross-sector collaboration and a fair regulatory environment, perhaps it makes sense that we go back to that ideal of a corporate citizen. This entails acting with integrity, contributing positively to one’s community, and putting society above one’s self interest when the two are in conflict.

As Fink wrote recently, “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate.”

Those of us who work in corporate sustainability are familiar with a long-standing debate about what we call it—corporate responsibility, sustainability, corporate citizenship, shared value, etc. Many of us who moved away from “responsibility” language did so because it seemed to set the bar too low: Shouldn’t we aim for more than being responsible? What about the value creation opportunities and the need to drive positive change? On the other hand, a focus on the value creation side implies that it’s always a win-win; sometimes, companies have to make hard decisions where it may cost more in the near term to do the right thing.

Whatever we choose to call it, we can and should expect businesses to stand up for what they believe is right, to treat their workers and communities well, to act with integrity and as role models for society—not because the government requires it, but because that’s what it means to be an upstanding corporation. If a company is bestowed certain privileges from society, then they have inherent obligations to that society.

In many ways the shift we’ve been experiencing over the past year comes back to the idea of a company as defined by the Citizens United decision. If we believe in the promise of capitalism, then we should be looking to business to lead and to “take care” of society. We should hold all companies to the expectation that they be these ideal corporations—and in doing so, that they be exemplary citizens.  

Originally appeared on BSR.