In Finland, we have this thing called limited liability companies act, which defines that the purpose of a corporation is to generate profit for its shareholders. In a hundred years, people will feel about the section in question the way we now feel about slavery in the 1800s. To be honest, having organizations whose only — not even the most important, but only — purpose is to make money for their already wealthy owners sounds pretty absurd even now.
Corporate responsibility is a theme that has slowly gained attention for the past fifty years or so. Nevertheless, a majority of companies are still in business just to maximize their profits — especially true for large companies. Some firms are trying to be better, though. However, when a multi-billion-dollar company that sells fast fashion and cuts down rainforests donates some millions to charity, it’s mostly just tragicomic.
In the core of corporate responsibility is the idea of ethics, of doing the right thing. It’s not enough to merely operate within the law. Sometimes being ethical even means acting against the law. Laws, after all, are only our society’s best estimate on what is the right thing. And sometimes our estimation goes wrong — like with the limited liability companies act.
Sometimes being ethical even means acting against the law.
Some corporations still seem to find it outrageous that someone would demand more of them, to ask that they’d do their part in building a better future for more people than just their shareholders. How could they do otherwise, they ask, when their one and only job is to make sure the company is profitable? Anything else could, after all, be illegal.
Besides hiding behind the act in question, this kind of argumentation stems from the thought — brought to us by spreadsheet-wielding and backward-facing economists — that focusing on ethics and sustainability instead of profitability would cause businesses to move abroad. After all, we can get all kinds of nice things from China with a great price-quality ratio, manufactured with child labor and coal power. That doesn’t mean we should surrender to the mythical “competition” and do the same. In fact, doing the right thing can actually prove to be a competitive advantage, as many companies struggling for the best employees in Silicon Valley have had to realize time and again.
Doing the right thing can actually prove to be a competitive advantage.
Naturally, a company needs to be profitable. If it isn’t, it’ll soon go out of business — unless it’s Spotify. However, there’s nothing that demands that a company should be profitable by any means necessary. Every dollar a company makes has a price. This price is paid with the company’s environmental and social impact, the well-being of its employees — and of course with, well, work.
Now, it’s understandable why many CEOs don’t feel comfortable with the politicization of corporate responsibility. Running a company that only wants to be profitable is difficult enough. By adding responsibilities regarding the wellbeing of employees, environment and customers, the job would likely become so complicated and stressful that we’d have to search high and low for anyone willing to take it on.
Then again doing the right thing has always been hard. Running a slave plantation was hard too, and even more so when slavery was abolished.
We got over it though. And we’ll also get over companies being demanded to do the right thing.
The post is originally published in Lauri’s own blog “Ajattelun ammattilainen” in August 2020, in Finnish, as “Yritysvastuun ytimessä on etiikka, ei laki.”