Corporate social responsibility and the politicization of the corporation

Corporate social responsibility and the politicization of the corporation:
democracy, citizenship, human rights, and global justice
Emilio D’Orazio (director, Politeia-Milano)
Introduction: CSR as a field of scholarship
Corporate social responsibility (CSR) has been defined in countless and often
conflicting ways. In order to avoid the problems arising from the lack of a clear and agreed
definition of it, CSR has been used as an “umbrella term” for all the debates dealing with
the «responsibilities of business and its role in society» (Scherer and Palazzo, 2007:
1096), including subfields like business and society, business ethics, corporate
sustainability, or stakeholder theory. Therefore, in light of the above and in the presence of
a strong disagreement about the appropriate role of the corporation in society, «CSR is
best understood not as a concept, a construct, a theory but as a field of scholarship», an
area of study “without paradigm”, because in it there is no prevalence of a particular
theoretical approach or a particular method (Crane et al., 2008: 6-7).
In this paper, I adopt the latter view of CSR, in order to present in its essential lines one
of the main approaches in the current business ethics and management literature among
those that have attempted to construct a more encompassing view of social reality and
that have in turn informed a perspective of the purpose of the firm broader than the
traditional one1. The approach I examine has focused on the “political role” of the firm
(Scherer and Palazzo, 2011). Starting from the observation that corporations have become
active players in the governance of societies, especially at the global level and often
alongside governments, scholars from this strand of research believe that the decisions
made by companies are not just related to the pursuit of economic goals, but also to the
respect of the interests and rights of the social groups that are governed by those
decisions (D’Orazio, 2011).
1
The long-standing traditional view – the so called shareholder primacy – holds that a corporation must pursue the
interests of its shareholders by maximizing profits (Friedman, 1970). Thirty years ago, the seminal work by R. Edward
Freeman (1984) introduced what is still today the most prominent alternative to the traditional view – the Stakeholder
Theory - according to which managers of for-profit corporations are called to pursue not only the interests of
shareholders, but those of all the organization’s stakeholders (Freeman et al., 2004).
1 The corporation as a political actor
The debate on the relationship between business and politics has been traditionally
based on a model that considered state agencies as the only political institutions that
directly focus on the wellbeing of society and business firms as exclusively economic
actors. According to this view, the regulatory framework of business behavior consists of
laws and moral rules. Current theories of CSR are also built on the assumption that a
regulatory framework exists, in which national legislation, values and expectations of social
communities define the responsibilities of firms. Over the last decade, however, the once
clear separation between the political and the economic sphere has become hazy. In fact,
the process of globalization and the pluralism of modern society have caused the loss of
cultural homogeneity and have eroded the national context of governance. In several
cases state systems have failed in their attempt to regulate the economy, dealing with
transnational social and environmental problems, providing public goods, administering
citizenship rights, and serving the public interest.
Under these conditions, multinational corporations (MNCs), as well as civil society
groups, have started to participate in the formulation and implementation of regulation in
policy areas. These areas include the protection of human rights, the implementation of
social standards, the preservation of the environment, the struggle against corruption and
the production of global public goods. This kind of development shows a shift in global
business regulation from a state-centric model toward new multilateral non-territorial
models, with the inclusion of private and non-governmental institution as key actors
(Scherer and Palazzo, 2008). On the global level, therefore, non-state actors play an
active role in what has been called “governance without government”. The result is that
some MNCs promote positive social change and assume direct political responsibilities
traditionally belonging to democratic governments, as it is shown by their massive
participation in the UN Global Compact (Rasche and Kell, 2010). For this reason,
globalization and pluralism need to be embedded in a new concept of the firm as an
economic and political actor in market societies.
In the last years, scholars from different fields have significantly contributed to the
definition of this new concept. A particularly noteworthy contribution comes from the
political philosopher Iris M. Young (2008), who has suggested the social connection
model, offering a new analysis of the meaning of responsibility in a global context, with a
shift from a model based on liability to a model based on social connection. According to
the model of responsibility based on social connection, «all agents who contribute by their
2 actions to the structural processes that produce injustice have responsibility to work to
remedy these injustices» (Young, 2008:137). When MNCs are engrained in a system that
produces injustices as a whole, they are “socially connected” to injustices, even if they are
not their direct cause. At the same time, when MNCs have the power to influence the
transformation of unjust structures, they have a responsibility to find lasting solutions, in
cooperation with other actors. Thus, such responsibility is essentially “shared
responsibility”, which can be discharged only through collective action (Young, 2008:155).
In conclusion, «responsibility from social connection is ultimately political responsibility»,
and political responsibility is understood as communicative responsibility: «Most
fundamentally, what I mean by ‘politics’ here is public communicative engagement with
others for the sake of organizing our relationships and coordinating our actions most
justly», including the communicative activities in which we persuade one another to join
such collective action or decide which direction we wish to take (Young, 2008:156).
Young’s view on political responsibility provides the conceptual and theoretical frame for
corporate responsibility to participate in, and in some instance, to actively organize the
communicative platforms that allow a variety of different actors to deliberate and decide on
the collective courses of action needed to respond to specific problems. Young’s is one of
the most influential theories, having spurred the birth of the field of research in corporate
responsibility known as “political CSR” (Scherer & Palazzo, 2007; Palazzo, 2011) or
“corporate citizenship” (Crane, Matten, Moon, 2008; Crane, 2011) or “collaborative
responsibility” (Wettstein, 2012a).
Political CSR: from liberal democracy to deliberative democracy
In 2007, Scherer and Palazzo proposed a «politically enlarged conceptualization of
CSR», on the one hand based on Habermas’ conception of deliberative democracy, and
on the other hand explicitly drawing from Young’s account of political responsibility. In their
contribution, Scherer and Palazzo show «that CSR is increasingly displayed in corporate
involvement in the political process of solving societal problems, often on a global scale»
(2007:1110). In today’s global governance structure, corporations are seen as actors
exerting power to an extent commonly held by governments. This requires a turn in the
traditional thought on corporate responsibility, a turn that «embeds corporate decision
making in processes of democratic will formation». CSR must be interpreted in light of the
«corporate move into the political process of public policy making through the creation of
3 and collaboration with global institutions of political governance»; and it is displayed within
an «ongoing process of observing and participating in public discourses» (2007:1110).
According to Scherer and Palazzo (2011) it is difficult to place the profound changes
brought about by globalization and by the emerging post-national constellation within the
accepted model of liberal democracy, which considers corporations as private actors and
not as political actors. In their view, the theory of deliberative democracy is an alternative
model that seems best equipped to conceptualize the growing importance of private actors
in the processes of global governance and to tackle the problem of the democratic deficit
created by the increasing corporate engagement in public policy. In fact, the model of
deliberative democracy is able to recognize the contribution of both the state and non-state
actors to global governance, both in traditional, institutionalized processes and in those
processes of public deliberation that arise outside of the political institutionalized sphere.
Democratic legitimacy in this model is guaranteed by the existence of a closer link
between the decisions made by political institutions and the process of public will formation
driven by NGOs and other civil society actors that map, filter and transmit problems,
values, needs of citizens. While the model of liberal democracy focuses on the beneficial
outcomes of the political process, deliberative democracy is based on the argumentative
involvement of citizens in the decision-making process.
The conclusion to Scherer and Palazzo's argument is that the current politicization of
the corporation will lead to the formation of a new theory of the firm that goes beyond «the
narrow economic mindset» (2011).
Corporate citizenship as a political concept
Crane, Matten and Moon (2008) have argued that firms should be considered as statelike agencies and not so much as citizens, since they often adopt a state-like role and
protect citizens’ rights in cases where governments are neither able nor willing to perform
this function. Starting from the observation that in today’s world corporations «are
becoming much more part of politics» and that therefore they should be considered «as
political actors», they suggest using the concept of citizenship as a «useful heuristic for
examining the political role of corporations» (2008:1-2). This concept «offers a way of
thinking about roles and responsibilities among members of political communities (i.e. in a
horizontal dimension) and between them and their governing institutions (i.e. in a vertical
dimension)» (2008: 2). This is of great importance, considering that current debates about
the roles and responsibilities of the corporation are characterized «by concerns about who
4 the corporation should be responsible to, why, and in which way that responsibility should
be discharged» (2008:4).
To guide the analysis of how corporations and citizenship can be connected, authors
refer to three issues on which the debate on citizenship has played in the past: status,
entitlements and process. Citizenship is traditionally considered as a formal legal status
within a particular political community, which in turn provides the basis for various
individual rights. These entitlements are of three types: civil, political and social; the
process is the process of political participation that assumes the obligation «to participate
in democratic governance» (2008: 6-7).
The expression “corporate citizenship” in the use Crane, Matten and Moon make of it, is
not a new label for CSR or a name for philanthropy. An extended vision of “corporate
citizenship” actually expresses a genuine political concept, pointing to the roles and
responsibilities of all the members of a political community. Political communities consist of
those who rule (the government) and those who are ruled (the citizens). In this approach,
corporations find themselves on both sides of this dichotomy, as they increasingly take on
roles similar to those of the states, and at the same time try to take on the role of “good”
citizens in the community. Therefore, Crane, Matten and Moon (2008) present two distinct
modes in which the concept of citizenship illuminates the business-society relations.
If we consider the first relationship between corporations and citizenship, i.e.
corporations as government (Matten and Crane, 2005; Crane, Matten and Moon, 2008:
chap. 3), corporations have a responsibility to provide public goods and to allocate, define
and administer rights. According to Matten and Crane (2005), «corporations may enter the
arena of citizenship at the point where traditional governmental actors start to fail to be the
only […] actor to guarantee the governance of citizenship rights. […] They can be said to
partly take over those functions with regard to the protection, facilitation and enabling of
citizens’ rights». If we consider the second relationship between corporations and
citizenship, i.e. corporations as citizens (Moon, Crane and Matten, 2005; Crane, Matten,
Moon, 2008: Chapter 2), corporations, like other citizens in democracies, claim rights and
participate with other members of the community in the political process and in “social
governance”.
The intention of Crane, Matten and Moon is to provide «a rich and multi-faceted picture»
of how corporations and citizenship meet, «that does justice to the complexity of political
role and status of corporations» (2008: 13).
5 Corporate human rights responsibility as collaborative responsibility
In his main work, Wettstein states that since «the corporation has always been a public
institution serving a genuinely public purpose», thus being a “quasi-governmental
institution”, it is consequently required to meet state-like human rights obligations
(Wettstein, 2009:336). On this account, MNCs are required to make positive contributions
to human development, consistent with their expertise and resources. Thus, the scope of
corporate human rights obligations is limited only by the corporation’s capabilities
(Wettstein, 2009:135-139).
In a more recent study, Wettstein noted a mismatch between individualism which is
characteristic of “common sense morality”, and the need to «assign moral responsibility
[...] in the context of collectively produced harm in this interdependent, multiactor world»
(Wettstein, 2012a: 158). Today’s world is characterized by a larger degree of structural
interconnection, and since this factor «has changed both the nature of the harm as well as
that of the responses required to prevent and alleviate it» (2012a: 156), in Wettstein’s
opinion the way of thinking about the nature of the moral responsibility of the corporation
must evolve accordingly. His claim is that it is necessary, in what he calls the “collective
age”, «to reframe corporate responsibility as a conception of collaborative responsibility»
(2012a:158).
In general, collaborative responsibility is characterized by the fact it «assigns
responsibility to all those institutional agents whose contribution is deemed essential for a
viable solution to a prevailing global problem, irrespective of whether they are or were
involved in causing the problem in the first place» (2012a: 161). Therefore, adopting this
view implies accepting the moral imperative that new global challenges require collective
responses, putting more emphasis on positive responsibility.
Wettstein explains this with the need to achieve «a more adequate ethic for the
collective age», able «to provide guidance for ascribing responsibility beyond the negative
duty to do no harm» (2012a:168): collaborative responsibility puts into question the
assumption of commonsense morality according to which moral agents are mainly
responsible for the damage caused by them directly (2012a: 167). Consequently, the
problems of global society cannot be «reduced to mere issues of philanthropy» and
entrusted to the discretion of moral agents, since contributing to the solution of such
problems for actors with great power, as corporations are, is «an actual moral obligation»
(2012a:168-169). Corporate responsibility is therefore characterized by the inclusion of
positive obligations. Indeed, corporations are among the institutions that have most
6 increased their power «in the process of fragmentation of political authority» ongoing
globally, a process which has led to «the blurring of the line between public and private
sphere» (2012a:161). Wettstein’s conclusion is that «corporations must increasingly take
responsibility and work in collaboration with other private and public institutions in order to
find effective solutions for the pressing global problems we are faced with» (2012a: 162).
Wettstein adopts Young’s vision, which considers the power to influence the processes
that generate unfair outcomes as the deciding factor to distinguish different levels of
responsibility: according to Wettstein, «it is those with the greatest power to have a
potential positive impact on the situation who bear the largest share of responsibility”. On
this assumption he then states that «there is no doubt that large corporations are among
those institutions with the most profound potential impact on today's global structures.
Thus, they should naturally also be among those institutions with a responsibility to
contribute positively to the solutions of our global problems» (2012a:170).
Nevertheless, the existence of a positive obligation (to improve an unsatisfactory state
of affairs) requires the actor to have «an idea about the (common) good in society», a
point that is very controversial especially when referring to the definition of global
responsibilities (2012a:176). To avoid the accusation of “moral imperialism” (2012a:175),
Wettstein introduces the element of collaborative responsibility as human rights
responsibility.
Wettstein’s argument is that human rights – understood as moral rights that generate
equally fundamental moral obligations, belonging to the realm of justice – represent «at
least a starting point for a cross-cultural idea of the common good», they «are our best
shot at formulating an ethic of global reach and, perhaps, universal validity» (2012a:176).
In Wettstein’s view, human rights provide «an actual moral foundation for collaborative
responsibilities of corporations» (2012a:178), because the simple fact that corporations
possess the capabilities necessary to contribute to the solution of global problems is not
enough to put a moral obligation on them to participate in the search for the solution to the
problem.
Finding in human rights the basis of the corporate responsibility implies a positive
answer to the question on whether the corporation can actually be forced directly from
human rights or whether human rights fall within the exclusive sphere of the State2
2
The debate on the legal and ethical responsibility of MNCs to respect human rights is one of the most significant
recent developments in the field of business ethics: credit for this goes to the research carried out by John Ruggie, the
Special Representative of the UN Secretary General on the issue of human rights and transnational corporations and
other business enterprises, and to the publication in 2011 of the UN Guiding Principles for Business and Human Rights
7 (D’Orazio (ed.), 2012). Wettstein's argument on this controversial point is that by adopting
a moral perspective (and not just a legal or political one) from which the moral rights
appear «as the most fundamental entitlements of human beings», that is, as those claims
«that protect the very foundations of our humanity», then, «their moral imperative cannot
be limited to Governments alone but must logically apply to everyone» (2012a: 179) 3.
Wettstein’s argument assumes the acceptance of an «extended notion of human
rights», that is, an interpretation that defines human rights not as side-constraints to
human action but as actual goals to the realization of which one should devote himself,
along the teaching of Sen (1985). Therefore, in the moral evaluation of actions or
situations it is necessary to take into account not simply the avoidance of direct or indirect
violations of rights, but also the realization or non-realization of them. Adopting this
extended interpretation of human rights implies a shift in emphasis: the focus must not be
exclusively on liberty rights, but on socioeconomic rights as well. The solution of the most
urgent global problems requires indeed giving high priority to socioeconomic rights
especially because «any solution might potentially conflict with the liberty rights of
privileged groups» (Wettstein, 2012a: 179).
The idea of collaborative responsibility extends its focus beyond the consideration of the
impact of isolated business activities and includes «leverage achieved in collaboration with
other actors and institutions as a relevant criterion for responsibility, even without prior
as the concluding work of his mandate (Wettstein, 2012c; Santoro, 2012). The Guiding Principles are based on the
conceptual groundwork of the UN Protect, Respect and Remedy Framework on Human Rights and Business published
in 2008, and are meant to implement it, thus fulfilling the need of practical guidance much felt by transnational
corporations which are pressured to uphold human rights in countries where the rule of law is weak and abuses are
commonplace (Muchlinski, 2012). Ruggie claimed that «the root cause of the business and human rights predicament
today lies in the governance gaps created by globalization» which have provided a «permissive environment for
wrongful acts by companies of all kinds without adequate sanctioning or reparation». The solution he proposes is a
Framework resting on «differentiated but complementary responsibilities», as the basis to outline «the specific
responsibilities of companies in relation to all the rights they may impact». The framework «comprises three core
principles: the State duty to protect against human rights abuses by third parties including business; the corporate
responsibility to respect human rights; and the need for more effective access to remedies» (UN, 2008:3-4). Thus the
Framework, in addition to the traditional attribution of primary responsibility for human rights to governments,
established direct responsibility to respect human rights also for corporations.
3
In the UN Framework, while the duty of States to protect is grounded in International Law, the corporations’
responsibility to respect has a non-legal basis, consisting in a “societal expectation” for all corporations to respect
human rights wherever they operate. The reason Ruggie gives as to why companies ought to respect human rights is an
economic reason, since the «failure to meet this responsibility can subject companies to the courts of public opinion
[…] and occasionally to charges in actual courts», and subsequently affect their reputation or their very «license to
operate» (UN, 2008:17-18). Wettstein (2012c) exposes the conceptual flaws underlying this instrumental (economic)
account of the reasons as to why corporate responsibility requires the respect of human rights. The Wettstein claims that
only a genuinely moral argument in favor of corporate human rights responsibility, based on «the inherent ethical value
of human rights as moral entitlements» (2012c: 19), would be more plausible and would place corporate responsibility
beyond the mere respect of human rights, thus overcoming the UN Framework’s rigid division of responsibility
between States and corporations.
8 involvement of the company in bringing a certain problem about». Therefore, the
plausibility of such a responsibility «is highest precisely in cases in which the most
fundamental human rights of people are at stake» (Wettstein, 2012c: 29).
Echoing the work of Shue (1996: 52), Wettstein (2012c) argues that for every basic right
there are three types of duties: the duty to respect it, the duty to protect it, and the duty to
realize it, duties that must be all met in order for a right to be fully honored. This does not
imply, however, that all agents have equally extensive obligations in each of the three
types of duties. The crucial question then is how to distribute the duties among the
potential “duty-bearers” (2012c:28). While the duty to respect human rights is not
particularly difficult conceptually or normatively, because it is a universal duty that «holds
equally for all of us, to some degree, and at all times», it is much more difficult to
determine who the duty-bearers are for the other two types of duties. Indeed, the duty to
protect and the duty to realize human rights require both a positive action and are
particular rather than universal, since they burden some of us and not all, in varying
degrees and moments. This means that honoring fundamental rights in all their
dimensions requires «a moral division of labor» (Shue, 1988: 689) and is «a deeply
collective task» (Wettstein, 2012c: 28). It is precisely in respect to this point that Wettstein
judges unconvincing the approach adopted by the UN Framework on human rights and
business (2008). In his view, «predetermining the distribution of obligations between
States and corporations to proactively engage in the protection and realization of rights at
the outset appears as unwise in the face of global problems that cannot be solved by
Governments» (2012b: 753).
According to Wettstein, a suitable approach to the question of the distribution of
responsibility would be to assume that «all those agents with considerable power and
unique and indispensable capabilities must naturally and at the outset bear their fair share
of responsibility for finding solutions to prevailing human rights problems» (2012b: 753). It
should be noted that Wettstein’s argument on the normative foundation of human rights
obligations lies in the existence of human rights and not in capabilities, that are only a
criterion on the basis of which the obligations can be distributed among specific agents
(2012 b: 754) .
Concluding, Wettstein, suggests capability «as a linchpin between CSR and the
business and human rights debate» according to which the formulation of «positive human
rights obligations for corporations becomes not only possible, but indeed plausible»
(2012b: 755 ).
9 Conclusion: corporations as agents of justice?
Today, the international debate on the grounds and scope of the duties of MNCs
concern the role of MNCs in the quest for global justice (D’Orazio (ed.), 2013).
In political philosophy, the question of global justice concerns «the just redistribution of
global resources and the legitimacy of the global institutional order in light of global
poverty» (Arnold, 2013: 127; Pogge, 2010). According to Wettstein (2013), the very
concept of CSR is inadequate to address issues of global justice, as it generates only little
impact on the structural root causes of injustice, while an alternative perspective based on
justice would account better for the increasingly prominent political dimension of corporate
responsibility.
The demands of global justice traditionally concern the duties of States and of their
citizens. However, today there is a debate on whether such demands concern MNCs as
well. While it is widely recognised that the latter have the negative duty not to engage in
harmful activities, it is less clear whether, and to what extent, they have the positive duty to
remedy global injustices. Philosopher Onora O’Neill (2001) suggested a distinction
between primary agents of justice, which have the «capacities to determine how principles
of justice are to be institutionalised within a certain domain», and secondary agents of
justice, which are «thought to contribute to justice mainly by meeting the demands of
primary agents, most evidently by conforming to any legal requirements they establish»
(O’Neill, 2001: 189). According to this distinction, States represents primary agents of
justice, and MNCs should be considered as secondary agents of justice. However, this
distinction can work only under ideal conditions, that is, when States are capable of
establishing and maintaining justice. In non-ideal conditions, when weak or failed States
are unable to advance justice, this distinction blurs: according to O’Neill, in these
circumstances MNCs could act as primary agents of global justice.
Notwithstanding the criticism against the idea that corporations bear the responsibility to
contribute to the fulfilment of justice, some theories in favour of this idea have been put
forward: one of the most influential is the social connection model suggested by Young
(2008) and described above.
Among the most significant contributions in the emerging body of literature on the
political role of corporations, the contribution by Hsieh (2004; 2009) stands out. On the
basis of the theory developed by Rawls (1999), Hsieh (2004) has claimed that MNCs
based in developed countries have a «duty to assist» poor countries where they operate,
10 as long as such an assistance does not outweigh the benefits obtained by these MNCs in
those countries. However, MNCs have this duty only when the developed country where
they are based is not already fulfilling its obligation to assist those poor countries. Hsieh
(2009) has further developed his perspective towards the idea of MNCs as agents of
justice, attributing to corporations the responsibility to promote just institutions where they
are missing.
More recently, Hsieh (2013; 2014) has dealt with the question as to whether MNCs
have a responsibility to serve as agents of justice, framing the issue within the debate
about the purpose of the for-profit corporation. Hsieh examines the extent to which
prevailing views of corporate purpose (e.g. shareholder primacy and stakeholder theory) –
views which frame corporate purpose and responsibility in terms of whose interests the
corporation is meant to serve – support the attribution of responsibilities of justice to
MNCs, and concludes by suggesting a more promising view of the purpose of the for-profit
corporation, framed as «its function in allowing members of society to meet their wants
and needs by coordinating labor and capital in the production of goods and services»
(2013:129). The production-based account of corporate purpose, he concludes, «helps to
underwrite many, but not all, of the ways in which MNCs may be called upon to serve as
agents of justice under non-ideal conditions” (2013:142).
The analysis of this emerging body of literature on the political role of the corporation
shows a promising trend of research, which offers theoretical instruments to understand
and frame the social role and responsibility of the corporation, and to overcome the narrow
view of its purpose as a merely economic one. The debate is ongoing, but it already
provides a transformational answer to the current crisis of capitalism.
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