A few years ago, I came across a twenty-five year old article from the Harvard Business Review, “Can a Corporation Have a Conscience?” The 1982 piece, written by HBS Professors Kenneth E. Goodpaster and John B. Mathews, Jr., applies principles of moral philosophy to what was then the relatively new field of corporate responsibility.
I was struck by the relevance of their analysis for business leaders struggling with corporate responsibility today. Since 1982, corporate responsibility programs have proliferated. Professionals seeking to design, implement and evaluate these efforts spend a good deal of time defining corporate responsibility for their organization. Is it compliance? Is it philanthropy? Or is it something more? I subscribe to the “something more” view and encourage my clients and students to go beyond compliance and philanthropy and define corporate responsibility as meeting the expectations of stakeholders.
Goodpaster and Mathews provide another definition, one that could help today’s executives trying to decide which corporate responsibility initiatives merit investment. Their definition suggests executives could measure a corporate responsibility program against two benchmarks: rationality and respect.
The authors distill these principles by looking at corporate activity through the lens of individual moral responsibility. In concluding that yes, a corporation can have a conscience, Goodpaster and Mathews highlight three notions of individual responsibility: 1) responsibility as accountability, that someone is to blame (Exxon was responsible for the Exxon Valdez oil spill.); 2) responsibility as rule-following, that something has to be done (General Motors is responsible for meeting its pension obligations.); and finally, 3) responsibility as decision-making, that trustworthiness can be expected (Google wants to be considered a responsible corporate citizen.) The authors zero in on this last meaning of responsibility as the distinguishing characteristic of moral responsibility.
Goodpaster and Mathews conclude that corporations can indeed demonstrate, or fail to demonstrate, moral responsibility. How? By demonstrating, or failing to demonstrate, rationality and respect, the characteristics of a trustworthy person. Rationality, because a trustworthy individual makes decisions based on some deliberate process. Respect, because a trustworthy individual takes into account the impact of his or her decisions on others.
Translated for practitioners today, acting responsibly means more than just complying with laws and regulations, or companies being held accountable when they break the law. Corporate responsibility means earning the trust of stakeholders.
Focusing on rationality and respect is a concrete way to invest in the corporate responsibility efforts most likely to earn trust from your stakeholders. Consider corporate human rights initiatives.
Companies can demonstrate rationality by adopting human rights policies and procedures, such as codes of conduct, monitoring programs, and formal procedures for handling human rights issues that arise in their operations. Corporate due diligence that seeks to ensure legal compliance while managing the risk of human rights harm, and ideally avoiding human rights issues altogether, is a deliberate and rational approach. Meaningful transparency that allows corporate stakeholders to see and understand a company’s policies and processes is a best practice that reinforces rational corporate efforts.
Companies can demonstrate respect by taking into account the human impact of its operations and policies. In other words, treat people as valuable, not simply means to achieve organizational objectives. Protecting, respecting and promoting human rights, by definition, demonstrates respect for individuals. Corporate human rights programs guided by respect will reference widely accepted international human rights standards, such as the Universal Declaration of Human Rights, feature meaningful stakeholder engagement, incorporate grievance mechanisms, and be designed from the outset taking into account the human rights impact of company activities.
It is important to note that devoting all your resources to only one of these trustworthiness attributes may backfire. Both elements need to be present to earn the trust of stakeholders. A company that has rational procedures in place, but fails to treat individuals as ends in themselves, is not acting responsibly. An apparel company that abruptly terminates a supplier for labor compliance issues with no regard for the fate of that factory’s workers is acting rationally but not respectfully. Conversely, a company that respects human rights but fails to implement them through operations or procedures demonstrates respect but not rationality. An internet search company that supports freedom of expression and privacy in its corporate code of conduct, but fails to establish internal procedures for evaluating government requests for personally-identifiable user information, is not acting responsibly.
The rationality and respect benchmarks are consistent with John Ruggie’s “protect, respect and remedy” framework for business and human rights responsibilities, which emphasizes corporate due diligence (rationality) and effective grievance procedures (respect).
So the next time your company wants to know if it is acting responsibly, ask yourself: Do our actions demonstrate rationality and respect? According to Goodpaster and Mathews, “An organization reveals its character as sure as a person does.” That was true in 1982, and perhaps even more so today, since more stakeholders are watching. No program is immune from criticism, but a thoughtful, transparent process that values individuals can go a long way toward demonstrating that your corporate responsibility program, and your company, does indeed have a conscience.