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What companies owe society

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Posted: Wednesday, November 14, 2012 12:00 am | Updated: 7:32 pm, Thu Nov 15, 2012.

Freshmen Business students know all too well about the concept of professional responsibility: What do I owe to myself, my company and the world at large? The final third of the semesterlong course is dedicated to the question of what companies owe society. This question, once the topic of theoretical debate, is becoming reality, not just in the classroom but in greater happenings around the world and here in the states.

The reality is seen in the likes of the once-relevant Occupy movement or the impending capital gains tax increases that are likely to be a part in any grand bargain to avert the fiscal cliff. 

Never before has such a frontal attack on the pure profit motive of business been attempted since the populist movement that rode on the United States on the backs of farmers set against the business world in the late 19th and early 20th centuries. Now the buzzword of social responsibility has transcended the gap between politics and business and populist ideals of accountability to the “greater good,” and a “social conscience” is becoming ever more popular, even on Wall Street.

But what is society if not the summation of individuals with differing ideals and preferences? It is impossible to fully respond to the concerns of everybody in society because everybody is different. The values of someone are inherently different from the values of another, and these values have to be ranked in order of preference. Corporations cannot do that and instead are forced to rely on — and are only responsible to — shareholders and customers.

These two swaths of the public are a far more effective representative sample to showcase the interests of society than the aggregate of the entire population because both groups already have a vested interest in the future of the company and their own individual interests. The best way corporations and individuals serve the interests of society is by serving their own individual interests.

When I walk into a store as a customer, I expect certain things. Before I purchase anything, I am finding the answers to several questions that matter as much or more than the price of my desired item. 

How are the employees treated? How are the employees treating me? Are the aesthetics and arrangements done so in a desirable way? Do they have this in my size? The importance of these questions and many others will vary for each individual, and these differences play a tremendous role in market-based decisions. 

While I have been subconsciously asking these questions only upon entry, the owners of the store have already been asking themselves for sometimes weeks or months in advance how I as a consumer would answer these questions. If I buy their product, they know they have been successful. If I and enough others refrain, their business will have to change to meet society’s expectations or leave the marketplace.

This is the beauty of the profit motive and the free market. Corporations are forced to respond to changes in customer behavior and preferences. If they do not, they lose and another organization will rise to meet the challenge. Customers are ultimately responsible for the actions of the company, as businesses can only respond to situations with any real effectiveness. The money that flows through consumers’ pocketbooks dictates where the company will go and how it values scarce goods.

Like a loyal pet, corporations’ true allegiances lie with that of their owners. Shareholders provide the direct vehicle for any real social change, with the customer always in the driver’s seat.

So what do corporations owe society? Better yet, what do they owe me? The pursuit of their own selfish interests. If I am a customer, I provide the testing grounds for corporations. If their practices or procedures are not meeting an acceptable standard, then their venture will fail by me. The corporation continually works on my behalf to improve the quality of my visit or product in the tried-and-true hope that they will be monetarily rewarded. If I am a shareholder in the corporation, the company owes me the flexibility to ensure the customer is getting a fair deal and returns on my investment. 

If I am in neither of these two groups, the business owes me nothing but to follow the law. I am making my statement and choice by willfully not being in either group, and I am not entitled to make others’ choices for them.

The Occupy movement and the increase in capital gains tax represent different facets of the greater corporate social responsibility movement. With the fiscal cliff looming, and a governmental branch-and-a-half in favor of promoting this agenda, there is a possibility that the profit motive of business will be blunted. In effect, the greatest social catalyst of change will be damaged in the name of social change.

Dylan is a freshman in Business. He can be reached at dhoyer2@dailyillini.com.

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