In October 2011, Gerald Seib wrote that political and economic pressures in the wake of the financial crisis were “pushing business leaders into the public cross hairs.”[1] I submit that the very existence of the largest American banks was becoming an issue. In such a case in which a gulf between business and society is so fundamental or deep, corporate social responsibility programs do not suffice and may even backfire. While it is normal for the norms and values of a business sector to differ from those of the wider whole (i.e., society), it is uncommon for a rupture to be so deep that corporate marketing and CSR are not sufficient business responses. I submit that in such cases and where corporations have a lot of power over government officials, CEOs extend their toolset to government to fill in the trench. The "Occupy Wall Street" protests is a case in point.
From the corporate standpoint, the time was ripe for the field of business and society, whose topics include corporate social responsibility, corporate citizenship, and stakeholder management. The fundamental matter to be “managed,” or assuaged, in that field of business concerns divergent norms as well as values between the individual corporations or the business sector and the wider society. Tension is not always or invariably present, but the fact that a corporation and even the business sector is a part of a wider whole (i.e., a society) suggests that the respective interests, perspectives, norms, and values are likely to differ. Generally speaking, the interests of a part are not identical to the interests of the whole of which the part is a subunit or part. An externality such as from dumping chemicals in a river or polluting the air means that a company's interest, norms, and values can differ from those of a society.
Self-interest can obviously affect norms and values. A powerful corporation's executives and board may believe that the company's power over members of the U.S. Congress is normal and right because such dominance is in the corporation's financial interest. Meanwhile, voters may feel that such a distended dominance by the moneyed interest harms democracy and is thus a norm that should not exist.
According to Seib, societal populists and corporate executives were not on the same page in 2011. In as much as the executives were utilizing corporate social responsibility to create the impression that the corporate norms and values being espoused were in line with societal norms and values, the field of business and society may not have been equipped to deal with divergent talking points that are grounded in antipodal, or antithetical, social realities. In short, corporate social responsibility as marketing or "window-dressing" can be detected as fake, thereby increasing the rift rather than reducing it. Indeed, it can be said that the topic began as an ideal to bridge the gap between corporations and societies only to end up in marketing.[2] Foisting the illusion of convergent corporate and societal values can backfire by illuminating boardrooms as places where only a narrow perspective of short-term profit pervades.
In the context of the “Occupy Wall Street” protests spreading across the U.S. during the Fall of 2011, Seib pointed to the existence of “a radical disconnect between the picture populist critics paint from the outside, and the one business leaders describe from inside.”[3] This disconnect had gone back to September 2008, when bankers viewed the collapse of the housing market (and those of related financial products, such as CDOs) as a result of over-reaching, dishonest and languid mortgage borrowers.
Meanwhile, the wider society saw greedy and fraudulent mortgage originators and investment bankers behind the adjustable-arm steep mortgages and the "crap" bonds that were based on those risky mortgages. This disconnect infuriated the general public, especially because contrition would not come from Wall Street. Greed refuses any constraint, including even acknowledging even some responsibility. Banks would engage in mass foreclosures without a hint of guilt for having misled people into going for oversized houses. The mortgage producers at Countrywide and other companies conveniently made the bad assumption that a few years of mortgage payments would enable the mortgage borrowers to shift from step-wise increasing-rate to fixed 20-year mortgages so as to avoid the higher interest payments. This flawed assumption was no doubt helped out by the fact that more mortgages would be sold, and thus higher bonues received. The interest of the economy, not to mention society as a whole, was of lesser concern. Hence the clash in norms and values between the part and the whole.
In the populist protests, the crowd also saw American companies with enough profit and cash to create jobs domestically yet without the will to do so. In the first decade of the twenty-first century, American corporations had cut their work forces in the U.S. by nearly 3 million, while increasing employment abroad by almost 2.5 million. In the fall of 2011, Standard & Poor predicted corporate earnings growth of 13.5% for the third quarter, which, according to Seib, suggested “to Wall Street protesters that companies were hoarding profits without creating work.”[3] Saving money by moving factories "off shore" fits the business value of efficiency, and even the maxim in trade that goods should be produced where doing so is cheapest (e.g., where the goods are most plentiful). The cost of such a norm of and value on going abroad is externalized to the host country, which is left with the impaired social contract between a large corporation and the society.
Generally speaking, a government says, in effect, to a company: We'll let you incorporate and even expand into multinational corporations but we expect you to provide jobs in addition to benefiting your customers with goods and services. This version of the social contract that includes the obligation to provide as many jobs as possible (i.e., while still allowing for a reasonable profit, and thus dividends) is controversial, however, because CEOs could retort that providing goods and services that reduce suffering and increase happiness is sufficient. From a utilitarian standpoint, therefore, such CEO's could even claim an ethical justification. Such a justification would likely merely be marketing to craw back some of the lost reputational capital, a long-term intangible asset.
According to Seib, business leaders cited more practical factors that more easily fit into the traditional business calculus. From the business perspective, third-quarter expectations were less than expected. The managers pointed to the benefits of an artificially weak dollar that had already strengthened at the expense of exports. More broadly, businesses were looking at weak consumer demand and increasing costs with government regulations, which make augmenting the domestic work force more costly. Seib juxtaposes this business view of a hostile business environment with the societal view that looked angrily at unpatriotic and greedy corporate chieftains.
I submit that when a divide is so gaping, depating the factors in the business environment doesn't fit. Corporate social responsibility programs, such as having employees volunteer at soup kitchens, are not restorative. Firstly, the benefit from such programs would not come close to the original costs borne by society from the reckless and even fraudulent banking practices. Secondly, the people hurt from those practices are not necessarily helped by a program. This is especially true if the "restorative" program in oriented to another society problem, such a disease. Thirdly, corporations benefit from the good public relations from a CSR program. An angry populist is not likely to be pleased that one of the selfish, reckless banks is actually benefiting as it makes contrition. Fourthly, the gap between the business sector (or an industry, but not likely an individual company) and a society can be so deep enough that capitalism itself is severely questioned at large. Filling in such a deep trench goes beyond what CSR can do; a bulldozer rather than some shovels are needed in such cases. I contend that the "Occupy Wall Street" protests that took place three years after the financial crisis deepened or perhaps only exposed such a trench. I suspect this is why the U.S. Government, which was refusing to hold mortgage producers and investment bankers criminally accountable for the fraud--protecting the powerful financial sector--took an active role in stopping the protests. To have the very legitimacy of corporate America, or even just the banking sector, even questioned in such a public way was likely too much for a government whose elected officials could receive unlimited campaign contributions.
1. Gerald F. Seib, “Populist Anger Over Economy Carries Risks for Big Business,” The Wall Street Journal, October 11, 2011.
2. William C. Frederick, my doctoral professor in the field of Business & Society, came to this conclusion, as did I. When upon retirement from teaching he turned to the application of the natural sciences to economizing and power-aggrandizement in relation to societal "ecologizing" forces, and then to management, I truly became one of his students (for twenty years). I gave a conference paper, for example, on how a company could be run on ecologizing rather than profit-maximizing principles. The field of Business & Society is indeed wider and more abstract than the CSR topic.
