State sovereignty is undermined to the extent that powerful corporations are involved in the exercise of political authority without being legitimated for this and without submitting to the usual responsibilities incumbent on government authorities.
—Jürgen Habermas, Between Facts and Norms, pp. 433–434.
Abstract
According to Palazzo and Scherer, the changing role of business corporations in society requires that we take new measures to integrate these organizations into society-wide processes of democratic governance. We argue that their model of integration has a fundamental problem. Instead of treating business corporations as agents that must be held accountable to the democratic reasoning of affected parties, it treats corporations as agents who can hold others accountable. In our terminology, it treats business corporations as “supervising authorities” rather than “functionaries.” The result is that Palazzo and Scherer’s model does not actually address the democratic deficit that it is meant to solve. In order to fix the problem, we advocate removing business corporations from any policymaking role in political CSR and limiting participation to political NGOs and other groups that meet the standards we set out for a politically representative organization (PRO).
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Notes
Both of these claims might be challenged. With respect to the first one, it might be denied that the new role of corporations creates a democratic deficit. As long as there is a legitimate state functioning in the background, it might be thought why is it a problem for democracy if corporations provide public goods and engage in self-regulation? With respect to the second claim, it might be denied that deliberative democracy is a promising way to remedy this deficit. Deliberation presupposes a level of knowledge and rationality that many citizens may not have. These challenges are important. If they succeed, then they cast doubt on, respectively, the necessity of a democratic response to political CSR, and the value of a democratic response to political CSR that is deliberative. We do not pursue these challenges here, as doing so would take us far outside of the scope of this paper (but see Hussain and Moriarty 2014). Moreover, we think that these challenges can be rebutted. We focus on developing our own (different) challenge to Palazzo and Scherer’s model of democratic accountability for corporations.
Relevant considerations include moral considerations, considerations stemming from a shared political identity, and considerations connected with a fair compromise between different views. For the sake of simplicity, we leave aside Habermas’s view that the legislature in a constitutional democracy should function as an arena in which representatives can authoritatively reach fair compromises between competing social interests.
In saying that society should be governed by the free, unforced deliberation of its “members” we are assuming that, in most cases, the parties who may be affected by an authoritative legal norm will be members of the society. But to avoid confusion, we want to be explicit about participation. At the most basic level, Habermas thinks that participation in institutionally defined forms of deliberation is determined by the “all affected principle” (see our discussion of this principle in “What Role Should Corporations Play?” section). So on his account, deliberative democracy requires that society should be governed by free, unforced, rational deliberation among all those who are possibly affected by society’s authoritative legal norms.
Various features of social life may need to be altered to achieve these goals (Cohen 1989; Mansbridge 1999). For example, to ensure that all citizens can participate in the deliberative process, it may be necessary to restructure ownership rights in the mass media so that everyone has adequate access to newspapers, television, the internet, and other channels of communication. It may be necessary to enact limits on work hours to ensure that citizens have the time to read newspapers, think about important public issues, and participate in public debate. It may further be necessary for citizens to have access to adequate resources, so that they can engage with each other in deliberation as equals rather than as dependents.
This is a list of functions that states legitimately perform, not a list of functions they actually perform. In addition to these legitimate functions, states perform other illegitimate functions, such as suppressing the free speech of their own citizens, and invading other states without just cause.
Since corporations may engage in political activity across national boundaries, we might ask: which states should play these roles? The state that is the “home” of the corporation, or the state that is its “host”? Or some other state? These are good questions, and Palazzo and Scherer do not supply answers to them. As a first approximation, we might suppose that they would give the same answer to this question as they give to the question of who should participate in deliberation about a decision. So, if all parties affected by a decision should have a right to participate in deliberating about it, then all states affected by a decision have a right, or perhaps a duty, to regulate the deliberation about it. Nothing in our paper hangs on how these questions are answered, however, so we set them aside.
For a description of the FSC’s governance system, see http://www.fsc.org/governance.html.
Other writers, including Edward and Willmott (2008) and Moog et al. (2015) have criticized the FSC in connection with Palazzo and Scherer’s model of democratic accountability for corporations. But our criticism is novel. Edward and Willmott claim that the FSC gives too much weight to the voices of “certification bodies and commercial clients” and not enough weight to the voices of “local communities and indigenous people” (p. 420). We are claiming that institutions like the FSC should not give any weight to corporate voices in policymaking, at least insofar as they are understood as supervising authorities. Put another way, Edward and Willmott think that the FSC does not live up to the model of democratic accountability described by Palazzo and Scherer. We believe the model itself is flawed. Moog, Spicer, and Böhm argue that the effectiveness of the FSC (and other multi-stakeholder initiatives, or MSIs) is “significantly limited by the broader political and economic context in which they operate” (p. 471), and has failed to achieve its ultimate goals “of reducing deforestation and forest degradation (p. 484). They do not challenge, as we do, the role that corporations play in the FSC and other MSIs, only the value of the outcomes achieved by these initiatives.
We agree with Baur and Palazzo, who recognize that only legitimate groups in society—those who are civil, engage in argument, and make good faith efforts to reach agreement—should be permitted to participate in social deliberation (Baur 2011; Baur and Palazzo 2011; see also Baur and Arenas 2014). But we think that there are further conditions that should restrict whether an organization can participate in social deliberation.
A complication is that people tend to associate with others who are like themselves. Thus, if a person were faced with a choice of joining two basketball teams, one whose members shared his political views, and another whose members did not—but which were otherwise identical—he would probably choose the former. We do not believe that this poses a serious threat to our claim, however. The main reasons that people join and leave, e.g., basketball teams are basketball related. Non-basketball-related considerations—political preferences, musical tastes, religious identities, and so on—play a role only at the margins. The same is true, we will see, of corporations. Faced with a choice of joining one firm or another, a person may give preference to a firm whose employees share her political (or musical or religious) views over one whose employees do not. But these considerations will be secondary to whether the person is willing and able to perform the tasks the job requires. The same is true from the firm’s side: job-related-reasons will dominate non-job-related reasons in its decision to extend an offer of employment or not.
In saying ‘mainly’ here, we acknowledge the possibility that workers, managers, and shareholders participate in the corporation in part because of non-economic interests, e.g., because they endorse the corporations’ values or certain non-economic aspects of its mission statement (see, e.g., Meyer and Allen 1997). We thank an anonymous reviewer for stressing this point.
It might be objected that we could allow for business corporations to play a role in the governance processes described by Palazzo and Scherer as supervising authorities, so long as we take adequate measures to neutralize the asymmetric power that these organizations have with respect to the other parties. Note that our criticism does not appeal to the idea of power differentials. The key point is that business corporations are embedded in market competition, so they are under constant pressure to make profits. This creates a constant pressure to make arguments in support of policies that would generate higher profits, rather arguments in support of policies that would advance the common good. So the problem is that business corporations lack the proper motivation to participate in governance process as a supervising authority.
The other “side” of this problem, as it were, is that some legitimate interests may not be represented by NGOs. So even if all legitimate NGOs participate in deliberation, not all voices may be heard. More generally, we acknowledge that hard questions must be asked about who should participate in deliberative processes (Banerjee 2014; Baur and Palazzo 2011). We leave these questions for future research. Our focus in this paper is on who should not participate in them, viz., corporations, because they are not PROs.
We thank an anonymous referee for this point.
This paper is equally the work of both authors. For helpful comments on it, we thank two anonymous reviewers for the Journal of Business Ethics.
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Hussain, W., Moriarty, J. Accountable to Whom? Rethinking the Role of Corporations in Political CSR. J Bus Ethics 149, 519–534 (2018). https://doi.org/10.1007/s10551-016-3027-8
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DOI: https://doi.org/10.1007/s10551-016-3027-8