The constituents of corporate responsibility: separate, but not separable, interests? - shareholder and societal interests not mutually exclusive

Business Horizons, July-August, 1991 by Dan R. Dalton, Catherine M. Daily

* Do customers prefer a higher quality product or service? A better value for the product or service?

* Do employees prefer more wages? More fringe benefits? More job security.?

* Do managers prefer higher wages? More fringe benefits? Greater ownership positions? More responsibility.?

* Does organized labor prefer more members? More stable employment? Higher wages? More fringe benefits? More job security?

* Do debtors prefer a higher return? Better risk evaluation?

* Do suppliers prefer better terms?

* Do owners prefer higher returns? More equity appreciation?

* Do governments prefer higher levels of social responsibility? More stability? A higher tax base?

* Does the public-at-large prefer greater environmental standards? More stability.?

If, then, the "more" preferences of the constituents are relatively difficult to service with the relatively limited resources of the corporation, what are we to do? Obviously, if it were possible to service all of these constituencies at some extreme level (we cavalierly set aside infinite), the notion of "To Whom is the Corporation Responsible?" would be of less relevance. It is, in general, the perceived scarcity of resources that leads us to such questions.

When there are limitations of this sort, then, how should resources be allocated? In other words, is there (or should there be) some decisive rule to prioritize allocations among the several constituent groups? The classical dilemma has been the appropriate manner to allocate scarce resources between the shareholders (or owners) and the balance of the constituents. We will focus our discussion on allocations between two of the constituencies - the shareholders and the public-at-large. We hasten to add, however, that if our arguments are persuasive, they apply equally to all non-shareholder constituents.

COLLABORATIVE STRATEGIES

The traditional approach implicitly - if not explicitly - suggests that the selection of strategies for corporate social responsibility involves trade-offs, the proverbial zero sum game. A policy in the increasing interests of shareholders suggests a reduction in the benefits for society, and vice versa. This is normally represented as noted in the Figure. Reliance on this approach (consider the solid line) clearly indicates that any movement toward the vertical axis comes at the expense of the horizontal, and the opposite. Obviously, point "a" illustrates a strategy where the interests of the shareholder are strongly met; point "c" illustrates a clear preference towards societal interests; point "b" may illustrate something of a compromise where both interests may be reasonably met. We concede that a debate about exactly where the "right," "fair," or "balanced" point would be placed may be insoluble. We argue that it also is not at issue. Notice, also, the second - the dotted - line. It has been argued that:

The responsible objective of and the key

for corporate behavior that benefits both

business and society is to move onto the

dotted line. In this case, both the interests