Corporate Social Responsibility

Many of the world's largest businesses rival nationstates, religions, and even nature itself as agents of change. Multinational corporations have become the primary force shaping human material well-being. They determine our collective values and shape our shared experience; they create our future. Fifty-one of the world's hundred largest economies are businesses. For example, Wal-Mart Stores, number one on Fortune magazine's list of the five hundred largest U.S. corporations in 2002, had sales just short of $220 billion. The combined gross national products of New Zealand, Greece, Costa Rica, and Cuba was $212 billion that same year. To put it another way, “One hundred and sixty-one countries have smaller annual revenues than Wal-Mart does” (Derber 1998, 3). Since there are approximately 190 nation-states in the world at present, that means Wal-Mart has greater revenues than all but some 29 nations. The spread of globalization and the daily influence of business on the lives of billions of people make businesses a social as well as an economic force.

Until the late 1980s the prevailing model of modern corporate behavior was to maximize profits for stockholders. Milton Friedman (b. 1912) the Nobel Prize–winning economist and author of Capitalism and Freedom (1962) legitimized the stockholdercentered view of business. According to Friedman, “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible” (Friedman 1962, 133). The book still serves as the theoretical defense of the unregulated free market system.

Opponents of that view claim that in the absence of a regulatory environment, it is dangerous for the stockholder to be the sole interest of the corporation [Page 282]as it leads to unethical and even illegal behavior in the pursuit of profit. They claim that a stakeholder view is more realistic and accounts for the expanded role of business and its enormous influence on the lives of people. Stakeholders are defined as virtually anyone who has an interest in the organization or is affected by the organization. They include not only stockholders, but also employees, members of the communities in which the corporation is located, suppliers, customers, and nongovernmental organizations (NGOs) that look out for environmental and social abuses.

Former Enron CEO Jeffrey Skilling (with current President and COO Jeffrey McMahon in the rear) testifies before the Senate Committee on Commerce, Science, and Transportation on 26 February 2002.

AFP/Corbis; used with permission.