Corporations are being urged to take on responsibility to a wider — in fact, the widest possible — group of people rather than the narrowly defined group of shareholders. Arthur Chrenkoff explains why this is not likely to improve either corporate governance or the wider world:
Whatever you thought of Friedman’s formulation, at least both the chain of accountability and the performance assessment criteria were pretty clear. Now, not so much. It sounds great on paper, this corporate social responsibility on steroids; we take everyone’s interests into account: shareholders, employees, customers, the society in general; everyone is a stakeholder. But what does it mean in practice? Previously, boards were accountable to people whose investment in the company made the company’s existence possible. That the company should have a good workforce, satisfy the customers, and obey the laws of the land all went without saying, being the necessary conditions for successful operations. Now, the Business Roundtable recommends everyone and everything has to be taken into consideration and companies need to “deliver value to all of them”. What if you can’t? What if the interests of the nearly infinite number of stakeholders conflict with one another? How do you gauge all these interests? How do you prioritise? How do you assess “value for all”?
What this initiative seems to me to be about is giving the official blessing for corporations to be political and social actors, to pursue every trendy cause and campaign for issues that have nothing to do with the actual business conducted or business in general, and to do so without the fear of any negative consequences for the management. It’s a great way to avoid any responsibility and accountability, particularly if the bottom line suffers as a result. “Sure, our revenue is way down, but our campaign for separate toilets for each of the 32 separate genders is what the society needs and expects from us”. Previously, you assessed the management on their stewardship of the company and its commercial performance. But since now that’s only one of the criteria to be taken into consideration, it will become more difficult to sanction bad and underperforming directors. They might suck at business but they’re woke enough so, hey, it balances out. Or more than balances: after all, why should the interests of a thousand shareholders be privileged over the interests of the amorphous but clearly much numerically bigger community? Satisfying the interests of shareholders is an objective exercise, delivering value to the country as a whole – or to the whole world – is so vague that it’s impossible to disprove; it’s unmeasurable and very much in the eye of the beholder. Which is how the new corporate class wants to keep it; if you are answerable to everyone, you are answerable to no one.
