We see the headlines: Vale dam collapses, killing nearly 300 people; BP’s oil well explodes in the Gulf of Mexico; Lehman debacle causes the greatest financial crisis in history. All are examples of corporations inflicting harm on society. In an attempt to inspect such misconduct, Profs. Rafael Alcadipani, FGV-EAESP, and Cíntia Rodrigues de Oliveira Medeiros, Fagen UFU put the notions of corporate social irresponsibility and corporate crime under the magnifying glass. A two-part feature.
The Harm of the Powerful: A spotlight on corporate social irresponsibility and corporate crimes, by CoBS Editor Megha Sureshkar. Related research: When Corporations Cause Harm: A Critical View of Corporate Social Irresponsibility and Corporate Crimes: Journal of Business Ethics.
“It came without warning in the dead of the night. Most people drowned in their own body fluids. It was a total failure of all systems. The 574,000 people who survived wish they were dead too. A whole generation born after the disaster is marked, damaged.” – Satinath Sarangi, social activist, sums up the nightmare that cannot be erased from our memory.
India’s very own Chernobyl and the saga of elusive justice
Thirty-seven years ago, on the night of December 2, 1984, Bhopal died a million deaths. 40 tons of a highly toxic gas called methyl isocyanate spewed from a pesticide plant, immediately taking at least 3,800 lives and causing significant morbidity and premature death for many thousands more.
Union Carbide Corporation, the company involved in what became the deadliest and most disgraceful industrial accident in history, immediately tried to dissociate itself from legal responsibility. Eventually it reached a settlement in 1989 with the Indian Government through mediation of the country’s Supreme Court and paid $470 million in compensation, a relatively small amount based on underestimated figures, of both the dead and the injured.
What’s more, the Dow Chemical Corporation, which bought out the Union Carbide Corporation in 2001, denied responsibility towards the victims and survivors of Bhopal – many of whose bodies were trapped in a myriad of ailments and disabilities – and said that it wouldn’t pay any further compensation as the 1989 settlement was more than ‘adequate and fair’.
The same company later went on to engage in ‘corporate sin washing’ and reap the PR benefits of association with the 2012 Paralympics by being one of its sponsors. On a different note, it was also listed as the world’s second largest polluter according to a 2010 US Environmental Protection Agency report. All this while the company’s tagline was ‘putting humans first’.
Almost every year, there is at least one significant worldwide corporate scandal creating suffering for a large number of people. The term corporate social irresponsibility (CSIR) is used to designate such phenomena, which are characterised by unethical and morally distasteful behaviour that inflicts harm at different levels of intensity – from death to material loss – to both internal and external corporate stakeholders.
Despite a high frequency of irresponsible corporate behaviour, the field of business ethics and society has favoured discussions of corporate social responsibility (CSR) over investigating CSIR. And research on the former has been centred on the meaning and expectations of responsible corporate behaviour rather than irresponsible behaviour. This is problematic because, in doing so, CSR research has rarely explored events in which corporate profit maximising is in dramatic conflict with the needs of internal and external stakeholders. Even worse, what if harmful corporate actions can be considered crimes?
The term corporate crime has been widely used in recent decades for corporate practices and conduct that violate criminal laws. Such practices have had a severe impact on the daily lives of various corporate stakeholders, as they come with a heavier financial burden and have claimed more lives than street crimes. As such, research on the topic is a matter of utmost urgency.
Given this scenario, Profs. Alcadipani and Medeiros set out to conduct a probe into the notions of CSIR and corporate crimes. And they start off by shedding light on the world of Critical Management Studies (CMS).
The private tyrant and his smoke screen
CMS is a movement that examines and questions the legitimacy of existing management practices. It heavily focuses on corporate ‘dark sides’, both those taking place within organisational boundaries – sexual harassment, psychological abuse, for instance – and phenomena occurring outside organisational limits – frauds, environmental disasters, etc.
CMS has shown that corporations are far from having a non-problematic and solely positive existence in the world. One of the main characteristics of corporations that raises concern within this movement is their power and ability to influence a wide geographical, cultural, and social area with the aim of obtaining higher profits. Such power is perceived as having no or very little limits, impacting policies and societies worldwide.
Corporations are also regarded as political entities, sites characterised by power struggles in which some groups dominate others by drawing on resources from both the firm and the broader society.
And how is CSR viewed in the critical management realm? CSR initiatives have been criticised for serving only as a marketing strategy with little impact on corporate stakeholders. Such actions have also been described as mere corporate rhetorical tools that enable legitimization of corporations that cause negative environmental and social impacts.
Turn a blind eye
Within the CMS movement, postcolonial thought has been used to discuss general issues of management and organisations. The postcolonial approach promotes the examination of a range of social, cultural, political, ethical and philosophical questions based on a scrutiny of the colonial experience and its persisting reverberation in today’s world.
In this light, multinational corporations (MNCs) have been considered colonial spaces, which generate conflict with local communities and perpetuate exploitative relationships between the Global North/South through CSR activities. The Global North encompasses rich and powerful regions such as North America, Europe, and Australia whereas the Global South refers to low or middle income countries that are located in Africa, Asia, Oceania, Latin America and the Caribbean.
CSR has been portrayed as a set of Western-centric practices that do not take into account the realities of the Global South and jeopardise the well-being of groups in the developing world through displacement and unemployment. By ignoring the differences between North and South, corporations from the first region tend to inflict harm to the latter.
Now that we have seen how CMS does not paint an optimistic picture of corporations and CSR, let us discuss how early research on CSIR and corporate crime analyse corporate harm.
To cause harm and to be harmed
Debates around companies’ social irresponsibility sprung from a dissatisfaction with corporate initiatives that claim to be socially responsible. CSR initiatives are considered ‘too little, too late and too superficial’, are directed at the wrong objects, and have not resulted in an exercise of responsibility commensurate with the size and importance of the modern corporation. Social irresponsibility is then defined as a decision to accept an alternative that is thought by the decision-maker to be inferior to another alternative when the effects upon all parties are considered. Generally, this involves a gain by one party at the expense of the total system.
Frequently, CSIR has been considered in relation to what stakeholders perceive to be socially irresponsible behaviour. Examples of CSIR include environmental disasters, corruption scandals, and corporate actions that harm customers and employees. CSIR can harm companies in that, as a result, they face difficulties in attracting customers, investors and employees, not to mention lawsuits and consequent financial losses. CSIR can also produce moral anger on the part of important stakeholders, and media coverage of CSIR increases the financial risk for companies involved in acts of irresponsibility. As such, research on CSIR has mainly focused on the impacts of corporate irresponsibility on the companies themselves.
Two peas, different pods
If initially, CSIR tended to stress the limitations of the CSR rhetoric and the fact that immoral decisions were made by managers to generate profit at the expense of others, more recently, CSIR shifted its attention to the ‘old shareholder business model’, whereas CSR is presented as ‘the new and emerging stakeholder business model’. As such, CSIR is viewed as the outcome of old fashion management styles. Additionally, CSIR is explicitly or implicitly perceived as the dual-opposite of CSR, making both notions interdependent. That means, discussing CSIR has the potential to better inform CSR practices.
The main characteristics of the CSIR model are the idea that environmental degradation and pollution are inevitable and little if anything can or should be done; the perception that employees are resources to be exploited; and that social exclusion is an inevitable by-product of the operation of the market. In contrast, the CSR business model is characterised by the ideas that environmental degradation and pollution are not inevitable, should not be tolerated and it is important to raise awareness and commit to action; employees are resources to be valued; and social inclusion helps to correct market inefficiencies.
The CSIR-CSR model can be described as a conduit of corporate governance in that it acts as an enabler to action. As a problem-solving tool, it can assist planning and help facilitate a potentially better managed, more productive and socially responsible, profitable business.
Read Part 2 of this article.
- Link up with Prof. Rafael Alcadipani on LinkedIn
- Read a related article: How boards can fix corporate social (i)responsibility
- Discover and apply for a programme at FGV-EAESP, Brazil.
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The Council on Business & Society (The CoBS), visionary in its conception and purpose, was created in 2011, and is dedicated to promoting responsible leadership and tackling issues at the crossroads of business and society including sustainability, diversity, ethical leadership and the place responsible business has to play in contributing to the common good.
In 2020, member schools now number 7, all “Triple Crown” accredited AACSB, EQUIS and AMBA and leaders in their respective countries.
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- IE Business School, Spain
- Keio Business School, Japan
- Trinity Business School, Trinity College Dublin, Ireland
- Warwick Business School, United Kingdom.