andrews public responsability in the private corporation

5/21/2018 Andrews Public Responsability in the Private Corporation

1/12

PUBLIC RESPONSIBILITY

IN THE

PRIVATE

CORPORATION

by

KENNETH R. ANDREWS

FORthepast40

years,

he enterprise

ystemerving s the engine f

theAmerican conomy as been ncreasingly odified y a doctrine

of ocial responsibility.y socialresponsibility e mean

voluntary

restraint f short-term rofit

maximization. his restraint, ot

requiredby law, is purportedly

xercised

n

the public nterest.t

reflects judgmentby themanagers f a corporation hat their

powers re ultimately ubject to

public expectations hat extend

beyond hestockholdersnterestn profit. he emerging octrine

recognizes hat he invisible and ofcompetition,ostulatedn the

Wealth

f

J[ations

s

the

ethicalbalance

wheel

preventing

he

self-

seeking f men strivinggainst ach

other rom arming he public

does

not dequately heck hepower f

great orporationsapable

of

shaping

heir

nvironments. central ssumption

f

this

daptation

ofeconomic

heorys

that

regulation

y government,

hile

o

some

degree

essential

under

imperfect

ompetition,

s

not

sufficiently

knowledgeable,ubtle,or effectiveo reconcile he self-interestf

corporate ntrepreneurshipnd the

needs

of a

society eing sore-

tried s well as servedby economic

ctivity.

I

should

like

in

this paper to

acknowledge

he difficultiesf

specifying

reciselyhis heory f ocial

responsibility,

o

assert one-

theless ts powerfulmpactupon management

ehavior,

o defend

its

validity s

a

partial ubstituteor ncreased egulation

f

private

enterprise y the state, nd to

indicatehow

consideration f the

public interest s broughtnto the strategic lanning nd policy-

formulation

rocesses

f

the

professionally anaged corporation.

The

evolution

f theAmerican

conomic

ystem,

he security

f

the

franchise

rantedby the

American

public

to

the

private

firm,

he

relationship etween he ndividual

nd

the

company orwhichhe

works,

nd the

very uality

fnational

ifewill

be

crucially

ffected

by

the

extension

n

practice f

the

concept

f social

responsibility.

The

subject

s

above

all

controversial.

he

Americanpublic

is

generatinghesedaysa passionatenterestn consumer rotection,

rescueof the environmentrom

ollution,

nd

social ustice.

Even

shareholder

meetings re disturbed

y

insistence

pon corporate

involvementn thesemovements.

lthough he proponents o not

command

majorities

n

the

voting

of

shares,

they

have

alerted

institutionalolders f corporate

ecurities,

ho

own

40 per

centof


2/12

I36 KENNETH

R. ANDREWS

They have contributedIready

o new egal standards

or orporate

activity nd have influencedmanagements,

ot insensitive

o the

futureignificanceftoday syouthmovements,ore-examineettled

policies nd old industry ractices.

hemselves nderno obligation

to producereturn n shareholders

nvestment,hese

critics xpect

much greater

nvestmentn for

example pollutioncontrolthan

making

return dequate to satisfy

hareholdersnd

sustain

rowth

will llow.

Theygenerate esistance rom eople

ikethe

president

f

GeneralMotors

not because of the direction ecommended

ut the

speed expected.

THE CASE

FOR

ABSTENTION

Led

conceptually

y Milton

Friedman, heopponents f

the

bur-

geoning octrine

f ocial responsibility

ight ack.In Capitalismnd

Freedom,riedman

rgues hat hedoctrine f ocial

responsibilitys

a

fundamentally

ubversive octrine

n

a

free

ociety.

n such a soci-

ety,

there

s one

and

onlyone social

responsibility

f business-to

use its resources

nd

engage

n

activities esigned

o

increase ts

profitso long s it stayswithin herules f hegame,whichsto say,

engages

n

open

and

free

ompetition ithout

eception

r

fraud .

The manager

s the agentof thecorporation s wners;

his primary

responsibility

s

to

them.The desires f

the

tockholders

re

assumed

to be making s muchmoney

s possiblewhile

conforming

o

basic

rules.The manager

who makesdecisions ffecting

mmediate

rofit

by reducing ollution,

or

xample,

more han

present

aw

requires

is

in

effect

mposing

axes

and acting

without

uthority

s

a

public

employee.

Friedman s

rgument ssumes

hat the stockholder

s Economic

Man, interestednly

n

maximum

hort-runrofit

with

minimum

deference

o

legal

and

ethicalrestraints.

merican

ourts,

n

up-

holding gainst

tockholder

uits

he

egality

f

corporate

ontribu-

tion

to education,

ave

suggested

hat tockholders

hemselves

ave

responsibilities

s citizens.

he

legality fcorporate

ontributionso

the

public

welfare

mplies

hat

the

managers

f

corporations

re

entitled ousetheirudgmentn reconcilingmmediate eturnwith

future

rowth,

maximum

resent

rofit

ith

uture

eturn,orporate

interests ith he

nterests

f

the

community.

n

actual

practice,

he

stockholders

f

argepublicly

eld

corporations

o

not

pickdirectors,

hire

managers,

r

set the

dividend

ates.

Except

n

recourse o

their

legal powers

n

case of emergency

r rebellion,

tockholdersnd


3/12

THE LARGE FIRM IN MODERN

SOCIETY

137

ence for maximum

hort-run rofit s exercisednot by changing

management olicybut by selling is stock.

The notion hatthe shareholderf a large, ublicly eldcorpora-tion is its ownergrows ncreasinglyndefensible. e owns shares,

which

represento small a commitmentn his

part that he may

through he

mechanisms f the stockmarkethed it instantly.

Management,

owhomhas come a virtually

ermanent elegation

of

uthorityor ontinuingirection f he

publicly eidcorporation,

is stillbound torun the company o serve

hareholdernterest. ut

neither y law

nor by custom oes it have thesimple bligation o

pursue

maximum

rofit.

Beneath heargumenthat hecorporatetrategisthould onfine

himselfo his

economic unctions often bleak

view ofthe typical

generalmanager spersonalvalues and

capability.Ranging from

skepticism o contempt, his estimateof

business eadership

s

accompanied by the assumption hat

expertness

n

the social

problems

artially aused by industryies

outside ndustry

n

the

universities

r

egislaturesfthecountry. ven

nearer heroot

fthe

argument or isolationism s the undeniable

central conflict

n

responsibilityetween he need on the one handto make and show

continually

mpressive rofits

n

order to sustain

price/earnings

ratios nd the

market alues of stockholders

quity, nd the costs,

on the

other

hand, of dealing with such byproducts f economic

activity

s water nd air

pollution. his conflictersists,ong

after

we

condemn ross

orms fgreed nd corruption.

The

central

conflict etween self-interest

nd social concern

cannot

be

explained way. So longas

it

exists,

t

can be used with

dash ofcynicismo note that t is not easyto reconcile hemnor

likely

hat

business

eadersshould

even

wish

to.

If

we

add

to

the

difficulty

f

striking balance betweendivergentnterests

he

problem festablishingtandards orethical

behavior

n

complex

situations,

e

mayconclude hatthosewhowish

to argue against

corporate nvolvement

n

noneconomic

ctivities

will

always

have

something o say.

Piracy,

hypocrisy,nd naivete can

always be

alleged

or

detected

n

businessctivity.

THE CASE FOR INVOLVEMENT

The

arguments

or he

active

participation

f

corporations

n

public

affairs nd for

the

assumption

f

responsibility

orthe

impact

of

economic

ctivity pon society re nonetheless

ainingground.

t


4/12

138 KENNETH

R. ANDREWS

rulesfor ompetition

nd the prohibition f

grosslymproper

nd

dishonest ehavior,

s neither subtle nstrumentor

reconciling

private ndpublic nterestsoran effectiveubstituteor nowledge-

able

self-restraint.he second

propositions that n an industrial

society orporate

ower, ast

n potential trength, ust e

brought

to bear

on

certain

ocialproblemsf hey re

to be solved t

all. The

third proposition s that

corporateexecutives

of the integrity,

intelligence,nd humanity

equired o run

substantial ompanies

cannot be expected to confine hemselves

o narrow economic

activity nd ignore ts ocial

consequences. inally,

hedangers nd

problems f

corporate articipation

n public affairs an be

dealt

with through esearch, ducation,governmentontrol, nd self-

regulation.

o each of thesepropositions e

mustgive some

atten-

tion.

The idea that businessmen

hould be

freeof the need for elf-

restraintests n the assumption

hatgovernment

egulationan be

sufficientlypecific, nowledgeable,

nd timely

o checkor forestall

abuse without

eing damaging

o initiative.We have

had much

experience

n the

United tates

with egulation.

esides urveillance

of business ctivities y the courts nd numerous dministrative

agencies,we

have the nfluentialearings

nto ndustrialctivity y

the

Congress.

Our national

xperience

withgovernment

egulation

houldtell

us

that

necessary

s

is

regulation

t

cannotpossibly

esign

he deal

relationshipetween he orporation

nd society.

ttemptso achieve

such

n

ideal

ead quickly

o diminishingeturns.

f

corporate ower

is to

be regulatedmoreby public

aw than

by private

onscience,

largepartofournational nergy illhave tobe spentkeepingwatch

over

corporate

behavior,ferreting

ut

problems,

designing

nd

revising etailed

aws to deal

withthem, nd enforcing

hose aws

even as

they become obsolete.

Furthermore

uch

a

development

would

stifle

he

entrepreneurial

nitiative n which our

economic

system

s

based.

The alternative

o

much

greater

ut

still

nadequate

ntervention

by

the

tate

n

economic

ffairss

for

businessmen

o assume

espon-

sibility arly s a matter fconscience atherhan ccept t ate as a

matterof

law.

The

principal

ustification

or

eaving

corporate

power

relatively nchecked

s the

emergence

f

the doctrine

f

social

responsibility.

his doctrine

s

the

only

lternative e

have

to

an unworkable

xtension

f

the

role

of

government

n

our

economic

system.

t

will

of coursenever

be

prudent

o

relyonly

on

the con-


5/12

THE LARGE

FIRM IN MODERN SOCIETY

I39

dispense

s

Friedmanwould

ike

us to with very ormf

regulation.

But to argue

that

a businessman

houldknowingly

gnore

the

consequences

fhis company s

mpactuponitsphysical nd

social

environmentntilnew laws are passed is in this day wantonly

irresponsible

n

itself.

We turn

now

to thesecond

proposition

nderlying

he present

redefinition

fcorporate

esponsibility.

t has

become

ommonplace

to assert hat

n a corporateociety

orporate

ower s

necessary

o

solveproblems

eyond

he reach

of

ocal and national

government,

of

non-profit

rganizations,

nd

of ndividuals.

n

theJohnson

nd

Nixon

Administrations,

he nvitation

o businessmen

nd

corpora-

tionsto move into the public arena has becomemorefervent.

Corporate

nvolvement

n

public

ssues

s increasing

n twofronts-

educational ctivity

s a contribution

o community

evelopment

and

entrepreneurial

entures

nneeded

ervices

xpected

o produce

some

profit

orthe service

rendered.

Business

has expanded

its

search or pportunity

o devisereclamation

rocedures

or

xhaust

gases, nd

for ffluent

nd solid

waste,

ntering

nto ccasionaljoint

research

ontracts

s in

one instance

o find

orutilities

practical

way to recapture ulphurfrom he burning f fuel oil. Here, of

course,

he economic

ompulsion

s

to make

the

process

easible-

i.e.,

at least

profitable

nough

o

ustify

nvestment

n research

nd

equipment.

ut the

principal

motive learly

s to make

economical

thereduction

f

pollution,

ather

han

to seek

profit

s such.

The entry

f a number

of

firmsike

General

Electric,Litton

Industries,

Westinghouse,

nd

Xerox ntoeducation

nd the efforts

of

Lockheed,

Ford,

and of

many other

companies

o rehabilitate

housing,stablish actoriesnd trainingacilitiesnghettosimilarly

reflect recognition

fobligation

ven

more han

search

ormarket

opportunity.

he

quest

o

makethese entures rofitable

s to

make

them ffectivend expansible,

ot

to

makemoney

ut

of

the

mis-

fortunes

fthe

poor.

The

suspicion

hat

once would

have

attended orporate

ttention

to

publicproblems

s

less virulent

oday.

The

arguments

hat

a

company

hould

pursue

nly

hose

growth

pportunities

hich

pro-

ducethegreatestrofitossibilityre osing orce. or eventhemost

successful

ompany

here

s not

much

money

o be

made

in

the

ghetto;

he

hiring

f

persons

rom

disadvantaged

minority roups

does

not ncrease

roductivity.

he

need to extend

he benefits

f

a

technological-industrial

ystem

o

these

areas is

seen as

important

enough,

owever,o

ustify

orporate

ntry.

Many

social

problems


6/12

140

KENNETH R.

ANDREWS

be

worthy

f the

highest

echnical, rofessional,

nd organizational

skills hatbusiness xecutives an

muster.

Studentsfthecorporation ave notedwith nteresthe transfor-

mation

of this

nstitution.

nder the steady mprovement

n the

ethical evelofbusiness ractice,

ociologists avenoted he appear-

ance within

orporationsf a

system f privategovernment hich

regularizesnd

makes air he mpact pon ndividuals

fmanagerial

power.The sociologist, hilip

Selznick, or xample,

inds hat due

process ,which

n civil ifegoes

farbeyond odifiedaw to regulate

social behavior,

s

operative

within orporations.

. A. Berle de-

scribed hisdevelopments constitutionalization .ts impact s to

establish orms fwhat may

or

maynotbe done,

o restrain ctions

which urtail

he

rights

f

others,nd

to

extend

o all employees,

or

example,

he

rights

won

by

some n

legitimate

egotiationsetween

management

nd organized

abor. In corporations f some size,

complexity,

nd

visibility

o

the

public,

the need for ts

actions

o

appear

fair

to

its members nd

in

fact

o

all its

constituencies

s

a

powerful

heck

on

the

irresponsible

se

of private

power. The

reality of the

corporateconscience,

ike that

of the individual

conscience, s essentialto an open societyvaluing responsible

freedom.

The

third proposition,

n

effect

hat

present-day

orporate

executives

re

ncreasingly

he

kind

f

people

whocannot

e

expected

to

confine hemselves

o

pursue

conomic

ctivity

hile

gnoring

ts

social

consequences,

means

merely

that

managerswill

concern

themselves

nd their

ompanies

with

ocial

problems

ecause

they

find

t

stimulating

o

do so.

It

wouldbe untactful

or s

to

attempt

o

documentthe progress sserted n this statement hrough he

appointments

owbeing

made to corporate igh ffice

n

our

eading

companies.

But

it could

be

done. Such men

are

more

and

more

attracted

y

the

opportunity

o

apply corporate ower

to

socially

desirable nds; they

re

aware

that

ocial, political,

nd economic

affairs

re

ncreasingly

nterrelated;hey

ealize

hat

large private

corporation

s a

public

institution

nd

that its

management

s

conducted nder

he

guidance

f

mplicit

moral

values onstituting

corporateonscience.

Some executives

eel

that the

corporation

tself hould be

com-

mitted

o stands

n

certain ublic

ssues.Thus,JosephWilson,

hen

chief

xecutive fficer

f

the

Xerox

Corporation,

aid

in

I964:

The

Corporation

annot refuse

o

take a stand

on

public


7/12

THE LARGE FIRM IN MODERN SOCIETY

141

PeterMcColough,his successor s president nd chief fficerf the

company, as argued t annualmeetings f hareholders,n support

of the same view, that ndividuals n the companymust not be

prevented rom xpressing issenting iews o that the corporation

does

not

override heir iberty. imilarly, e believes that if all

corporations ere to take forthrighttands on public issues,the

variety fopinionswould be as great s among ndividuals,nd the

public would be protected rom verpowerfulnfluence n public

opinion

f a

fewpowerful

irms.f

he were

to

be deprived f the

privilege f stating ubliclyhis viewson controversialuestions r

to

contribute

o an

officialorporationosition n the ame ssues, e

would ose nterestn continuingo be an executive.

Whatever he problems f official orporate ositions n contro-

versial ssues

not

directly

elated o the

corporation s wn nterests

maybe, the mprovementn the awful, thical, nd humane uality

of

corporate racticeduring he ast 70 years s

in

any case quite

unmistakable.

rom

close

at

hand

the rate

of

progress,ubject

n

definition

o

contentious

ubjectivity,

s

harder

o realize.

mprove-

ment an be directly raced o the aspirations

f men

moving nto

top management ositions nd their ensitivityo public opinion.

As

the levels

of formal ducation

and

professionalizationise,

executiveswill

turn

to social

problems

s

concerned ndividuals

simply ecause theywant to.

In

recognition

f

their

motives nd

capability,

their

participationgenerally

will

be welcomed.

A

concernedndividualwho

is

president

f

a

substantial

orporation

cannot

ct

apart

from

t

even

fhe

would;

he must

ring

t leastthe

prestige f

his

firm

with

him.

To

enlist

ts

power by designing

ts

strategyoencompass chosenetof ocialconditionssonly second

small

tep.

The

problem

f

bringingogetherersonal

nd

corporate

aspirations

or betterworld

re

attractive

ecause

to men

who

are

intelligent

s

well

as

concerned

hey

re

intellectuallyatisfying.

o

populate

n

organization

ith

younger eople

who

are also

intelli-

gent

nd concerned ecomes

asier nd henceforth ill

probably

e

possible nly

f

the

stated

bjectives

nd observable ehavior

f the

organization

nclude

more than

self-preservation

nd

meeting

he

economic eedsof tscustomersnd employees.

The fourth

ropositionupporting

he

participation

f

companies

in

social

problems

s

mostly

n

assurance

hat

uch

ctivity,

onducted

by

the

kind f

generalists

e

are

makingwayfor,

s

neither

mpracti-

cal

nor

dangerous.

he

competence

o

deal with

the social conse-

quences

of

strategic

ecision

can be nurtured

hrough ducation,


8/12

142

KENNETH R.

ANDREWS

distinguished

y ndividual

chievement

nd

fully uthorized o deal

insocial problems,re not

o far head that

hey re out of ight.

Every rofession,

o be

sure,

s

subject

o

capture

y complacency

with tsown achievementsr conventionsbout what is practical

or

possible.

n

recent ears ach one has

been shakenby ts younger

members

o

reconsider

ts

premises. he

corporate

onscience,

he

inexorable larification

f

due

process upportingocial

usticewithin

the

corporation

s

well as

in

society

t

large,

he

new

muscularity

f

government

egulation,

igns

f

ndustryelf-regulation,he revital-

ization f

boards

f

directors,

nd

the

vailability

f

criticism rom

pluralism f standards nd prejudices

n an

open society re

all

availabletocontain orporate owerwronglyirected. he quality

of

eadership

vailable

to

the

citizenry

n

otherwalks

f

ifedoes not

suggest hat theaveragewill

be loweredby

corporate xecutives.

Up

to

this

point,

n

fact, American

ociety

has

been

needlessly

deprived

f the

participation

f some

of

ts

best

qualifiedmembers.

THE

CATEGORIES OF CONCERN

Thatthe asefor orporatenvolvementnsocialproblemsssteadily

winning

onverts

mongmanagers

f

private

nterprises

annotbe

disputed. ou

mayattribute

his

development

o

recurrent elioris-

tic

optimism,

o defensive

ngenuity

n behalf

f

capitalism, mong

other

possibilities,

r to

the professionalization

f

management

practice,

s you like. Whatever ts

origins,

we

should

n

any case

proceed o examine herange f nvolvement

vailableto a firm nd

the

considerations hich

uide

ts

hoice

of

opportunity.

he

admis-

sionofopportunityo makemore haneconomicocial contribution

extends

he

range

of

trategic

lternatives

onfronted

y

the

general

manager.

As

we will

ee,

this

omplication

makes

necessary theory

of

strategic

ecision

which

includes but is not

confined o the

optimum ombination

f market

opportunity

nd

corporatere-

sourceswhich onstitutes

firm s

conomic

trategy.

The

problems ffecting

he

quality

f

ife n the

ociety

o

which

the

ompany elongsmay

be

thought

f

s

extendinghrough set-of

spheres rom he worldcommunityo the firmtself. or multi-

national

firms

he

primary

conomic

opportunity

o

contribute o

industrializationf

underdeveloped

ations

replaces

rresponsible

exploitation.

he

potential

or

peace

as well as

economic

develop-

ment makes

East-West

trade under

some

conditions

s

much

an

issueof

responsibility

s

of

economic eturn.

he

maturing

f

world


9/12

THE

LARGE

FIRM IN MODERN SOCIETY

143

way.

We have already

aid that

esponsibility

ntails oing

arly s

a

matter

f

conscience

what

later

may

well be required

by law.

Voluntary esponsibilityas, however, arge dividends n

public

acceptance, ustomeroodwill,nd latitude reserved.

At

the

national r common

marketevel,the

choiceof

problems

susceptible

o

constructivettention

rom

usiness irmss

bewilder-

ingly

arge.National

firms end

to begin

with the environmental

consequences ftheir

manufacturing

rocessesr

the mpact

ftheir

products

ponthepublic.

Thus

theStandardOil

Company

fNew

Jersey

r General

Motors

has no doubt bout what

o work

n-the

question

hen s how

much nd how fast.After uch

a

company

as

put tshouse norder rhasbegun longprogramo make tso, t

may

then

take nterest

n other

public

problems,

itherwithin he

context

f

philanthropic

ontributionr through

usiness

perations

which

n

essence

eek

out economic pportunity

n

socialneed. Once

corporate

oncern or

ational

roblems

ike

qual

opportunity,

ace

relations,

ducation,

nd poverty

s

recognized

s legitimate, he

question

ecomes

how does

a

company

ecide

which

nes

t should

work

n.

Besidesworld ndnationalproblems, third ategoryfconcern

appropriate

or

all kindsof

firms

s

the

problems

f

the

ocal com-

munities

n

which

he company

perates.

n

the United

Statesthe

city

has become

the

special

focus

of

our

national nterest. rban

problems

ike

housing,

nemployment,

ubstandard

medical care,

ineffectiveducation,

ampant gliness,

nd defective

ransportation,

appeal

to

companies s

the

proper

arena

for conomic nd social

actionbecause

of their

nearness

nd

compactness.

ecause business

cannotremainhealthyn a sickcommunity,heproblems f the

city, espite

heir omplexity,

ill continue

o dominate hesocial

action

of

corporations.

ncreasing ophistication

ill

make t more

effectivehan

t

has

been

so

far.

Within

he

firm

tself,inally, company

as

attractive

pportunity

for

atisfying

ts

management s

nterest

n

social

responsibility.

he

quality

f

any company s

resent

trategy

s

always

ubject

o

im-

provement

s

new

technology

nd

higher

spirations

ork

ogether.

Here as in every ther ategoryfsocial ssues, ecisions difficult.

The kindof detached

elf-criticism

ssential

o

the

perpetuation

f

responsible

reedom

s

especially

are

within

business.

he

proper

role oftheboard

ofdirectors

n

supervising

his

unction,

ong

since

lost ight

f,needsrevitalization.

The actual

quality

of

life

n

a

business

rganization

urns

most


10/12

144

KENNETH R. ANDREWS

ofconcern

s importants

to external

onstituencies.t

is as

much

matter

f enlightened elf-interest

s of

responsibility

o

provide

conditions ncouragingheconvergenceftheindividual s spira-

tionswith hose f he

corporation,

o

provide

onditionsor

ffective

productivity,nd to

rewardemployees

or

xtraordinaryerform-

ance.

The

degree

o

which an

organization

s

efficient,roductive,

creative, nd capable

of

development

s

dependent

n

largepart on

the maintenance f a climate

n

which he

ndividual

oes

not feel

suppressed,

nd

in

which

kind

f

freedom

analogous

o that

which

the

corporationnjoys

n

a free nterprise

ociety)

s

permitteds a

matter

f

course.

Over-regulation

f the

individualby corporate

policy sno more ppropriatenternallyhanover-regulationfthe

corporation y government.

n the other

hand,

personal esponsi-

bility

s as

appropriate

o

ndividual

iberty

s

corporateesponsibility

is to

corporate

reedom.

THE

PROBLEM OF CHOICE

What the

corporate trategist

as

before

im to

be

concerned

with,

then, anges rom hemostglobalof theproblems fworld ociety

to

the

usesoffreedom

y

a

single erson

n

hisfirm.

he

problems

f

his

country,ommunity,

nd

industryying

etween

hese

xtremes

make

opportunityor ocial

contributionxactly

oextensive

ith

the

range

of

economic

opportunity

efore

him. The

problem

of

choicemaybe

met n

the

rea

of

responsibility

n

much

he

ame

way

as

in

product-market

ombinationsnd

in

developing program or

growth nd diversification.

To guidethepolicy-makern privatebusiness, simplepracti-

tioner s

theory

of

general

management

has

been

developed.

It

postulates

hat

very irm,

f t

s

notto

be

a

ship

adrift

n

economic

currents ver which

t

has no

control,

must

develop

a

corporate

strategy,

riented o the

future,

lexible

nough

o

permit daptation

but

firm

nough

o

establish

unique

character

or

he

firm

nd a

durable definition

f

its

business.

This

strategy

s

developed by

matching corporate

resources and

distinctive

ompetencesto

imaginatively erceivedopportunityn the company smarket

environment.his

combination, perception

f

how

best

a com-

pany s

present

nd

potential

esourcesnd

capability

an

be

applied

to

changing pportunity,

s

bound

to

be

affected

y

the

personal

values

nd

aspirations

f

the

managersmaking

hedecision.

What a

companymight

o

in

terms

f

available

opportunity

s

matched

with


11/12

THE LARGE

FIRM IN

MODERN

SOCIETY

145

fied

not only

by responsibility-in

he case of a

publicly-owned

firm-to the shareholders

ut

by a consideration

f what

thecom-

pany ought o do in the faceof theethical nd moralconcern re-

viously

escribed

nthis aper. Since

the dentification

feconomic

opportunity,

hedetermination

fcorporate

apability,

hepersonal

values of the

seniormanagement

roup,and their

aspirations

o

social

responsibility

ight ead

in

fourdifferentirections,

econ-

ciling

he

outcomes

n sucha way as

to leave

thefirmconomically

viable and its leaders

unfrustrated

onstitutes

he

art of strategic

decision.

Fromeventhis parereferenceo strategyormulation,tis clear

thatthe choiceof avenues

n which

o participate

n

public

affairs

will

be

influencedythepersonal

aluesof

hemanagersmaking

he

decision.

To

be strategic

ather

han improvisatory,

articipation

must

akeplace

within set

of ocial

and economic

bjectives

hich

reflects

he

company s efinition

f

tself otonly

as an economic

entity ut as

a responsible

nstitution

n society.

ts social

action

would nclude ssuesmost losely

elated o

theeconomic trategy

f

thecompany, o the expansion f ts markets,o the healthof ts

immediatenvironment,

nd

to its

ndustrynd

internal roblems.

The

extentof

involvement

elates

mportantly

o the

resources

available.

A

company

truggling

o

avoid

bankruptcy

ill

omit

contributions

o

good

causes. A

company

asily able

to

meet ts

dividend

nd

growth-in-earnings

argets

an

be

more

generous

ot

only

n

its

support

f education

nd other

cceptable

auses but

to

national

and

world

issuesnot directly

elated

to

its

economic

function.

We

lack

space

here

to

elaborate

the doctrinewhich

makes

strategic

he oncern or ocial

responsibility

hich

as

we

saw

earlier)

is

radically

edefining

he

corporatemanager s

iew

fhisfunction

n

circumstances

here

reedom

f hoice

s

open

to him.We

see

that

he

needs

to relate his firm s

spirations

o

social responsibility

o

a

predetermined

trategy

s explicit

n its social

as

in

its

economic

terms

nd

one

presenting

clear

view

of

the

kind

of

organization

t

intendsobe andthekind fpeople t willenrollnitsmembership.

From

this

point

of

view,

social responsibility

ecomesstrategic

corporate

esponse

o

the

needs

of ociety.

HARVARD

UNIVERSITY


12/12

1

Public Responsibility in the Private CorporationAuthor(s): Kenneth R. AndrewsReviewed work(s):Source: The Journal of Industrial Economics, Vol. 20, No. 2 (Apr., 1972), pp. 135-145Published by: Wiley-BlackwellStable URL: http://www.jstor.org/stable/2098241.

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andrews public responsability in the private corporation

Documents

judgmentby themanagers

corporation hat theirpowers

s broughtnto

ncreasingly odified

achother rom arming

snot effectiveo

ndsocial ustice

servedby economicctivity