Corporations must balance individual freedom and the collective good.
Corporations must balance individual freedom and the collective good.

Capitalism is the backbone of American society and companies are what make capitalism run. But although companies create jobs, produce wealth and satisfy consumer needs, they also generate pollution, create negative social changes and in some cases destroy jobs instead of creating them. Many argue that companies have responsibilities to society, not just to themselves.

Core Issue

The central question that informs debates on ethics and American business has to do with a duality present in American society, that is, the relationship between individual freedom and the collective good. This conflict extends from the realm of citizenry to that of business and government and beyond; today with globalization, the actions of American businesses have an effect on billions of people around the world. The question is whether that impact will be positive or negative.

Corporate Responsibility

Moral obligation of companies, more often referred to as corporate responsibility, is a philosophy, an ultimatum given to businesses to do good, a professional practice and a subject of academics. In general, corporate responsibility can be broken into five areas: environmental, social, economic, relational and voluntary. Economic responsibility requires corporations to care for rather than solely use the environment. Social responsibility mandates that corporations contribute to the improvement of society. Economic responsibility argues that corporations should contribute not just to their profits but to overall societal economic development. Relational responsibility requires corporations to ethically manage their interactions with customers, employees, business associates, the communities in which they are situated and the communities on which they have an effect. Voluntary responsibility means that corporations should do things that aren’t required by law, simply because they are the right thing to do.

Three Questions

Three basic questions are used in the field to help businesses find their moral compass. The first is “To whom is this business responsible?” This question helps illuminate the company’s relationship with the five areas of responsibility listed above; it also underscores the importance of transparency in its operations and interactions. A second question is “For what is this business responsible?” Central to this question is the concept of sustainability and the recognition that within a society, both people and institutions have not only rights, but responsibilities as well. A third question is “How should this company meet its responsibilities?” This question shines a light on business practices so they can be evaluated in terms of the responsibilities listed above.

Legitimacy

Debates about corporate responsibility ultimately impact perceptions of a company’s legitimacy. The comparison of what is with what should be defines our societal ideas of what our current social contract looks like. Companies need to be aware of and participate in this discussion both to help shape it, and to make sure they are not left out of it.