Saturday, 3 November 2018

Can Corporations Be ‘Good Citizens’?

The idea of ‘good corporate citizenship’ has become popular recently among business ethicists and corporate leaders. You may have noticed its appearance on corporate websites and CEO speeches. But what does it mean and does it matter? Is it any more than a new species of public relations flimflam to set beside terms like ‘corporate social responsibility’ and the ‘triple bottom line’? Is it just a metaphor?

The history of the term does not promise much. It does indeed seem to have evolved out of corporate speak – how corporations represent themselves rather than how they view themselves – selected, perhaps, for sounding reassuring but vague. Its popularity has far preceded its definition; ‘corporate citizenship’ is still evolving, looking for a place to settle.

But what it is about is important. For it represents a political turn to the old question, Who are corporations for and how is their power to be managed? Are corporations bound to serve society’s interest, or are they free to follow their own? Are they public institutions, part of the governance of our society and publicly accountable to us for their actions, or are they private associations accountable only to their managers and owners?

For around a hundred years this question had an institutional answer in the form of ‘managed capitalism’, with governments playing a central role in corporate decision-making. They were outright owners of many businesses; they directed negotiations with labour – itself institutionally empowered by the state as a countervailing power to the large corporation; and they used the wide discretionary authority of the state to cajole and coerce company directors to serve what they saw as the public interest.

Managed capitalism unravelled in the face of the competitive pressures of globalisation and the demand from consumers – a faction that had been underrepresented in corporatist bargaining – for greater choice. Skilful politicians presented this necessity as virtue, and the result has been a new mode of capitalism in which corporations are expected to serve society by serving the market by serving themselves. The state appears to have retreated, and in many ways it has. It has not given up the governance of business – the state’s regulatory apparatus has actually expanded enormously in the past 30 years; it has had to since the rise of the corporation long ago converted most markets into oligopolies divided between a few key players beyond the disciplinary power of Smithian competition. But the state has given up its political authority, that is, its sovereignty or power to command.

There was a time, it is said, when bankers and financial traders in the City of London used to test their bright ideas by asking themselves ‘Would this cause the governor of the Bank of England to raise his eyebrow?’ Now, so long as they do not go against the letter of the rule of tens of thousands of pages of regulations, they can do whatever they believe makes business sense – even if it violates propriety or undermines social welfare.

Not only the deleterious economic consequences, but also the glee with which certain companies trade against the stability of their nation’s economy, and not only in the financial sector, has made many people uncomfortable with our remarketised regulatory capitalism. Left and right alike wallow in nostalgic dreams of reasserting the state’s sovereignty against market forces and international treaties – as in Donald Trump’s efforts to bring back economic management by phone-call, personally threatening the head of Ford with punitive taxes if he opens more car plants in Mexico. More realistic politicians, though, recognise that there is little they can do beyond tweaking the details of the regulatory state and issuing moral exhortations for companies to be more patriotic.

Corporations are more powerful than they have been for a long time, though not yet as powerful as the great colonial corporations like the British East India Company (for which, incidentally, that great philosopher of liberalism John Stuart Mill worked his entire professional life) that once mustered private armies to rule despotically over vast territories and peoples to the benefit of their shareholders. They have become important providers and arbiters of citizens’ rights in spaces governments have ceded to the market, such as privatised prisons or logistical support for front-line soldiers, and in spaces they were never much present in, such as the internet, or never effective in, such as worker safety in poor countries. Consider how the management of the delicate trade-offs of online free speech has been largely placed in the hands of social media companies like Youtube and Twitter. Consider how accustomed we have become to the sight of protestors petitioning corporations to do all sorts of things we might once have expected from governments, from tightening factory building codes in Bangladesh to ending deforestation in Borneo to paying corporation tax at the official rate rather than the Luxembourg rate.

Corporations have also been empowered as independent actors in their own right. Large companies, even just sports teams, now bargain shamelessly with governments for tax-breaks and subsidies in return for bringing jobs to one area rather than another. We have also become accustomed to the sight of corporations defying and even suing governments, as in the case of AIG shareholders suing the US government for nationalising it in 2008 (to save it and the US financial system from collapse). Or Philip Morris suing the Australian government over its plain-packaging laws, under the investor-state dispute settlement clauses of international trade treaties that have recently been getting so much public attention.

This is the context for the political turn. For if the larger corporations do as a matter of fact and law have enormous influence over how our lives go it seems that they have the power of political governance institutions without the public accountability that should go with that. The optimists among the business ethicists talking about corporate citizenship see it as a means to bring the corporation to take its political obligations seriously. I take a more pessimistic view.


Citizenship is centrally concerned with an agent’s political status and relationships, that is with her membership of the political regime she lives under and the rights and duties to the state and to other citizens that follow from it. This at least is how political philosophers think of citizenship, as an idea rather than in terms of particular definitions found in statutes. There are two dominant philosophical accounts of citizenship, each a longstanding and influential tradition: the liberal and the republican. If corporate citizenship means anything it should be possible to explain it in terms of one of the other.

Let us start with the liberal conception of citizenship, the form that dominates modern democracies. Elements of it can be traced to the later Roman empire, as can the legal concept of the corporation, but its intellectual breakthrough was the rebellion against tyranny by early modern European philosophers like John Locke and Montesquieu. Citizenship is construed as a legal status, individuals’ entitlement to protection of their rights both with respect to others and their own government. Exactly what those rights are is one of the main disputes of liberalism, but it would certainly include the Lockean trio that was lightly adapted by the writers of the US Declaration of Independence: ‘life, liberty and property’.

Liberal citizenship is an oddly apolitical affair. This causes great despair for political activists – one reason every election is hyped as being about the end of the world is that this is what it takes to motivate citizens to turn out. But this passivity is a feature not a bug. Liberalism distinguishes between private and public spheres of life and prioritises the former. The freedom of individuals to live their own private lives as they see fit is the important thing, and our political rights to engage in the determination of the character and policies of government are merely instrumentally important as a guarantor of that private liberty. Citizenship is an identity available to us, but not our full-time preoccupation. Hence the procedural institution of representative government: only a handful of people are professional politician, i.e., full-time citizens, and it isn’t a particularly glamorous job.

To be a good liberal citizen is thus rather easy. One must only respect the equal rights and freedoms of others, pay one’s taxes, and obey the proscriptive laws of the state. The other things that make for a happy society, like mutual civility or civil society institutions from churches to sports clubs to charities for the rehabilitation of criminals, are the outcome of private voluntary decisions and associations by good persons rather than citizens.

In one sense, the liberal conception of citizenship seems a good descriptive fit for the corporation in the age of regulatory capitalism. The early modern theorists of liberalism were concerned to distinguish the free citizen from the subject, and they did this in terms of the rule of law. A country where both governments and individuals are subject to the rule of law no longer has subjects but citizens. The last decades have seen this realised in practise for corporations, as governments have lost the authority to simply order individual companies about and corporations have gained new powers to dispute government decisions, and even parliamentary legislation, in courts.

On the other hand, this aspect of liberal citizenship – equal legal rights – is purely passive. It’s hard to see how it could fulfil the hopes of some business ethicists to impose new responsibilities upon corporations towards society. But nor do we do have the legitimation of bold political leadership that some CEOs dream of – the Silicon Valley attitude that government should just get out of the way and let us fix things. For what is at stake there is not merely the rights of the governed but the duties of government. As Milton Friedman put it in a famously scathing essay on The Social Responsibility of Business,

“What it amounts to is an assertion that those who favour the taxes and expenditures in question have failed to persuade a majority of their fellow citizens to be of like mind and that they are seeking to attain by undemocratic procedures what they cannot attain by democratic procedures.”

In keeping with its foundational horror of tyranny, liberal citizenship places constraints on political action rather than mere speech. Liberal citizens are fundamentally equal, and none are more equal than others. Political decisions must respect this formal equality and must be taken by social choice procedures which count every citizen equally no matter the differences in their private wealth and power. If companies are to be seen as citizens, and see themselves as citizens, they must abjure taking advantage of their greater resources to directly achieve political results. They are permitted to try to persuade other citizens, but not to exercise power without consent, whether by tweaking voters’ news feeds before an election, buying up politicians, or using your savings account to serve the national economic interest by propping up the stockmarket.


Liberal citizenship cannot support the expansive political role of the corporation that would make the concept of corporate citizenship worth bothering about. So let us turn to the alternative I mentioned earlier, republican citizenship. This is the tradition of classical Greek democracy, most famously revived for the conditions of modernity by Rousseau in his search for a way that individuals might unite together while each remaining as free as before. In contrast to the liberal focus on protecting one’s private life, republican citizenship has a rather moralistic ‘athletic’ focus on political agency – on public spiritedness and political participation. As Pericles of Athens put it in his famous funeral oration,

“We do not simply regard a man who does not participate in the city’s life as one who just minds his own business, but as one who is good for nothing.”

The good republican citizen is active in co-determining and furthering the public interest, and accepts responsibility both to rule for and to be ruled by the interests of the community. Though somewhat out of fashion, aspects of it linger on even within that most classically liberal of political systems, the United States. Politicians say things like, “Ask not what your country can do for you, ask what you can do for your country.” While activists (and many political philosophers) push for expanding the scope and participation of political debates beyond the political class. (One can see this attitude at work in the national conversation about policing and race going on right now in America.)

In this republican perspective, government is citizenship, not some bureaucracy separate from society staffed by the winners of elections, and citizenship is the central activity of social life.

Republicanism affords much more scope for political action than liberalism. We might see many more corporations risking part of their customer base, and hence their profits, by slapping rainbow or confederate flags on their products, or declaring themselves for immigration or against gay marriage. Republican citizens have a duty to engage in politics, rather than merely a right to do so, and that engagement should follow from their beliefs about the public good rather than furthering their private interest.

As this makes clear, republicanism is not only more enabling than liberalism but more demanding too. One can’t help wondering how many corporations – the great majority are tiny and family owned – would want to have to take up positions on every political issue of the day, like a Fox News or MSNBC, and whether they could afford to expend resources and lose customers in arguing their points. Republicanism also requires conformity to the collective will once it is arrived at (which is why Sparta rather than Athens shows off its purest form), something alien to contemporary societies outside the civil service or times of war.

Those who believe in corporations’ right to lead society seem to want to combine the rights of citizenship with the authority of government. But this amounts to a desire to escape from politics, not to take a greater role in its endless tedious rounds of argument and consensus building. The republican conception is certainly not for them.

On the other hand, those who believe that politicising corporate behaviour will allow societies to hold them accountable have failed to appreciate how divisive the resulting politics might be if every fast food chain has to pick a side on abortion and everything else. Nor is there any guarantee that political outcomes will be any friendlier than current politics to the typically leftish causes, such as economic equality and environmental sustainability, that most business ethicists espouse.


Perhaps I have been too literalist in trying to pin down what is, after all, no more than a metaphor pointing vaguely towards seeing the corporation in political terms. But metaphorical language sometimes needs pinning down. Otherwise one can find that one has bought something one did not expect. Metaphors draw relations between objects – they describe one thing by saying that it is in some particular respect the same as another thing. Over time and repetition the origins of a metaphor may be left behind and the similarity claim may be interpreted more literally. This seems already to have occurred with respect to ‘corporate personhood’ in America, which a series of legal decisions such as Citizens United have stretched into something approaching the constitutional rights of individuals with only the vaguest claims about who corporations are to deserve them. It is hard to see corporations as the kind of agents for whom free expression is intrinsically valuable and thus a right in need of protecting even at a cost to society (as it is for human beings). But that is nevertheless how the metaphor seems to have panned out (previously).

So interrogating ill-formed metaphors can be worthwhile. My concern is that, neither of the two basic concepts of citizenship are very helpful in considering the political activities and aspirations of corporations; neither of the two obvious ways of interpreting the metaphor make sense.

The present – imperfect! – way that companies are held accountable to society is in terms of external standards: laws passed and enforced by governments, and social expectations of good enough behaviour enforced by citizen activists and the media. The idea of corporate citizenship suggests that we see powerful independent civil society organisations as empowered citizens rather than as unaccountable governments, and then internalises the corporation’s sense of social responsibility. Corporations are expected to judge their responsibilities to society for themselves – this is what the status of citizenship really comes down to.

Delegating judgement to corporations allows discretion about the form as well as the content of citizenship. One worrying way that the metaphor of corporate citizenship may pan out is that corporations will cherry-pick different aspects of liberal and republican citizenship. Such a chimera may actually enable rather than constrain bad corporate behaviour.

For example, the powerful body of republican citizenship can be combined with a liberal head. This kind of citizen feels empowered to, and is permitted to, participate in political activities, such as lobbying officials or funding political campaigns, and it may do so with all the weight that a corporation’s concentration of wealth and organizational resources permits. (This follows from the republican emphasis on political agency). Yet such interventions may also be carried out to advance the private interests of the corporate agent, rather than reflecting any kind of public-spiritedness, as in the prison company – or prison-officers’ union – sponsoring legislation to send more illegal immigrants to jail. (That is, the liberal emphasis on the right to pursue one’s own private interests and to privacy: not to have to disclose one’s true interests or reasoning to the wider society.)

Thus, corporate ‘citizens’ may assign themselves leadership roles in politics commensurate with their economic power, while remaining substantially politically unaccountable to other citizens. True, it may be that other corporate agents, including NGOs and regulators, would be weighty enough to exercise some oversight and constraints. But that reduces democratic politics somewhat to a spectator sport in which human citizens watch titans like Google and the NSA fight about their privacy rights.

One final implication of this is that through their political participation corporations may be able to alter (and reduce) not only their legal obligations but also the moral obligations currently placed on them by societal expectations. By building a political consensus behind the framing of environmental protection as undermining the competitiveness of the national economy, or of unions as ‘job killers’, society’s understanding of companies’ moral’ responsibilities to ‘minimise’ pollution or to treat workers ‘decently’ may shift in a way that is quite convenient for corporations. Indeed, this seems to be pretty much what is already happening.

This essay was previously published on 3 Quarks Daily