I’ve been working my way through a list which claims that economic goods fall into four categories– private, club, common and purely public– in order to debunk a misconception on how we sort economic activity. Web oriented services such as Wikipedia, NetFlix and website design hold a variety of placements in the groupings. I think it is safe to say that all three of these goods are private, since, according to a UN report more than half the world’s population is without internet service. Any good provided via the web is private to only the wealthy half of the world.
A resorting mindset is needed in order to tackle vision centered around corporate responsibilities to stakeholders, such as those described in a recent article on the American Purpose by Robert Madsen and Curtis J. Milhaupt: The Expansion of Corporate Responsibility.
Increasingly, advocates of reform argue that businesses should be concerned about their “stakeholders”—not just shareholders but also workers, suppliers, customers, and society at large. The new movement, which is often termed “ESG” (Environmental, Social and Governance issues), is not limited to progressives and liberals, but has made substantial inroads in the commercial and financial community as well. After decades of espousing shareholder capitalism, for instance, in 2019 the Business Roundtable declared a “fundamental commitment to all of our stakeholders” in order to “better reflect the way corporations can and should operate today.”
Stakeholders capitalism, “ESG” or benefit corporations are all a grappling to give this movement a name. What is it that corporations, which are intentionally private organizations, accomplish towards larger societal goals? Madsen and Milhaupt point out that corporate America has a history of such ventures, though most of us do not need convincing that capitalism works favorably upon social concerns. Even the most fervently socially-minded agree.
Yet the authors go onto express trepidation over who sets the agenda and whether expectations can be met.
Although hopes are high for what corporations and institutional investors can achieve through greater emphasis on stakeholder needs as opposed to narrower shareholder benefit, few of the ESG reformists have bothered to define what the movement’s precise goals should be. This matters because in the absence of a concrete agenda people tend to assume more than is possible, and the inexorable failure to meet those expectations generates dissatisfaction and the possibility of political backlash.
Here’s the thing– there is an entire marketplace of social concerns out there to choose from. No matter what the corporate entity decides to take on, the important step is to collect the data and account for it.
*Decide to devote its social ambitions to rectify labor inequity? Account for the extra training and support and follow the employees long-term gains.
*Decide to devote their legal staff to ironing out the thorny wrinkles in cross-country trade and all the implications of contract defaults? Account for time logged while on the company dollar, and the losses taken when the contracts fall through. Track how establishing standards allowed smaller firms to enter the market with confidence.
*Decide to use the idle time of their tradespeople and send them to a financially strapped public schools to tighten up all those leaky faucets? Account for the hours spent and estimate the savings in city water running down the drain.
The opportunities are everywhere and the beauty of the system is not to be hampered by a particular agenda, but to attack the issues which are most readily facilitated by the business and the people who make it up. To find the passion which galvanizes the employees to give of their time and expertise.
But-this is important- we can’t know how it all shakes out until it shows up in a tabulation somewhere. The trick is that the mechanics are different for social activities versus the mechanics of for profit transactions. That doesn’t mean they can’t be held to account. Already things like ‘good will’ show up on balance sheets. Think of the possibility of two colors of ink on the net income statement; one for profit and one public profit. The former total is by far the lion’s share, as by definition corporations exist to produce financial gain. Yet knowing the later, being able to track, tally, and compare it, will be empowering.
Tracking will also play into Milton Friedman’s emphasis on transparency. Through open disclosure, reports identify the social goals tackled and the benefits of eventual outcomes. It also provides signals where possible excesses, corruptions and silly virtue signaling are occurring, if not out and out fraud.
The task at hand is to identify what counts as work towards a public objective. And see how assets are used, stored and accounted for. To identify this concept of capacity and give it a number. Where do the tradeoffs get revealed so individuals will make choices with their time and energy? How could they be engaged by benefiting from a personal social objective while participating with fellow employees? The angles are multifold.
So I say– do not hold expectations in check. Run with them, write them down and see how they all add up.