Managing with integrity: social responsibilities of business as seen by America's CEOs

Business Horizons, July-August, 1991 by Charles E. Watson

Perhaps the most important feature of our world is that we live in it with others. This fact presents enormous difficulties for anyone struggling with the question of how to behave. In attempting to answer this perplexing concern, each individual - including organizations - faces the challenge of doing well without doing ill to self and others. This often poses conflict, and much has been written about its resolution in discussions of freedom and restraint. In the realm of business we see this age-old question currently answered in academic parlance: social responsibility, constituencies of the firm, and stakeholder claims or demands.

The purpose here is to examine the many ways firms do take others into consideration to not do them harm - and sometimes do them good - while attempting to do well themselves. Considerable confusion exists within popular thought about the social responsibilities of business. We do well to ask what these should include. What are the insignias of the socially responsible firm? What do corporate leaders say and do about such matters?

RESPONSIBLE LIVING

The first obligation of responsible living is to care for oneself in ways without being a nuisance or causing harm. For a business entity this obligation begins with economic survival. As Robert E. Mercer, chairman and CEO of Goodyear Tire & Rubber, puts it, "Profits are like breathing. If you can't breathe you can forget everything else that you're doing because you're not going to be around much longer." But there is more to it than this. "A profitable, growing business," Reginald H. Jones, former chairman and CEO of General Electric, explains (1980), "provides new employment opportunities, new products and services, and new capital for a healthy, expanding economy. Moreover, it provides the material resources by which the nation can support other important noneconomic services, such as education, churches, the arts, the national security, and even government."

The second obligation of responsible living is to use one's talents and resources prudently - to be productive with one's abilities, adding to the world's abundance and well-being. In looking at any institution, one should ask, "How can it contribute best, or contribute in the most useful ways, to society?" When institutions attempt to perform functions they are incapable of performing well, society suffers. This is why the chief social responsibility of any institution must begin with performing its central task effectively.

This is not to say that business can ignore problems it could help to solve. Robert A. Schoellhorn, chairman and CEO of Abbott Laboratories, believes, "Private enterprise does have a role in addressing social problems, but that role is primarily through the conduct of the business of that enterprise .... We have an obligation to become involved in social issues and problems surrounding our business. I am less comfortable that private enterprise should become involved in social problems beyond its business." Robert H. Malott, chairman and CEO of FMC, goes further: "To talk about business altruistically going out and solving the world's problems is nonsense." Malott believes the role of business is "primarily to be successful and profitable, a good employer, and effective in its relationships with all its constituencies, not the least of which are its owners. ... American business has a role in terms of addressing social problems, but I don't think it should be motivated by the desire to solve social problems .... There are problems that are in the best interest of the health of our economic system and the businesses that are part of it if they are solved. And there are some social problems that should not be our responsibility other than to support government action by the tax we pay. I do not think that you should look at business as having a primary role in life to solve social problems."

The third obligation of responsible living is to work actively for the betterment of self and others, enhancing the rights and dignity of all concerned. Popular among many is the belief that business exists for and is driven solely by one concern: profit. But profit alone is not nearly a large enough purpose to hold the enthusiasm and loyalties of employees or to cause attention to be placed on those vital elements that must receive attention if the business is to perform effectively. Let us raise the question again: Can an organization operate successfully if its sole quest is for profit? "I don't think so," says Robert E. Fomon, former chairman and CEO of E.F. Hutton; and Charles W. Parry, chairman and CEO of Alcoa, says, "The answer is no. That's just silly.

BEYOND THE BOTTOM LINE

It is important to see that a much broader perspective occupies the attention of leaders of corporate America. The "profits only" approach denies the difficult task business leaders must face in balancing the interests of the many constituents their enterprise serves. Richard E. Heckert, chairman and CEO of Du Pont, identifies several of the important constituents he believes a business must satisfy. "I work for the shareholders. I work for the employees. I work for the customers. If I don't make a good profit, I'm not doing a very good job for the owners and for the employees. If I make too much profit, my customers worry. And it's a constant balancing act trying to deliver as much value as possible to the consumer and satisfy as well as you can the needs and demands of owners and employees." David E. Collins, when he was vice chairman of Johnson & Johnson, said, "It's hard for me even to think about what we do that's purely for profit, because that concept at J&J is so outmoded. "