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

We submit that the pharmacology example, the R&D example, and the advertising example have much in common. They all have an element of risk; they are all relatively long-term (advertising to a lesser extent) in impact. And, they are all absolutely fundamental to the future of the corporation and all of its constituencies.

Some would be concerned that corporate behavior of this type is somehow tainted, as it is only done because it may result in good publicity, increased markets, and other presumably positive outcomes from the corporation's view. We do not count ourselves among those. That such behavior may be in the interests of the corporation does not constitute a problem. on the contrary, our point from the onset is that the interests of the corporation and those of society are not separable. That such behavior may not be altruistic or even philanthropic is not even interesting.

Consider a final example. Corporations with interests in paper products regularly replant forests - tens and hundreds of thousands of acres. We confess we do not know how long it takes a Douglas fir tree, for example, to reach maturity so it can be farmed for new products. We are confident, however, that the necessary time is properly referred to as "long-term." Is anyone concerned that this strategy is thoroughly shortsighted because the payback is 30, 50, 80 years downstream? Are resources allocated for other societally sensible objectives different from these? In our opinion, they are not. We only temper that view by asking if such expenditures result in new products, new markets, and new opportunities for the corporation.

Those with responsibility in the modern corporation must continue to broaden their focus and responsibly attend to the needs of all relevant stakeholder groups, including the owners of the firm. We would strongly endorse the following admonition (Cochran and Wartick 1988):

... [T]he roar of the corporate governance

issue area is not likely to subside

in the near future. Senior management

must first understand the issue area and

then seek out interactive measures that

promote not just their own self interests

or the interests of their shareholders, but

also the interests of the business system

and society in general.

References

P.L. Cochran and S.L. Wartick, Corporate Governance.. A Review of the Literature (Morristown, New Jersey: Financial Executives Research Foundation, 1988).

"Companies Change the Way They Make Charitable Donations," Wall Street Journal, June 21, 1984, pp. 1, 20.

Dan R. Dalton and Richard A. Cosier, "Business, Society and Executive Action," Journal of business and Executive Action, 1 (1984): 2-7.

Dan R. Dalton and Idalene F. Kesner, "Organizational Growth: Big Is Beautiful," Journal of business Strategy, 6(1985): 38-49.

John Kenneth Galbraith, The New Industrial State (Boston: Houghton Mifflin, 1967).

Dennis Overbye, Lonely Hearts of the Cosmos (New York: Harper Collins, 1991).

Grover Starling, The Changing Environment of business (Boston: Kent Publishing Company, 1984).