In part 2 of the feature on corporate misconduct, Profs. Rafael Alcadipani, FGV-EAESP, and Cíntia Rodrigues de Oliveira Medeiros, Fagen UFU take a sharp look at ethics, legal frameworks and ways forward to combat corporate social irresponsibility and corporate crime.

Good, But Not Enough: The fight against CSiR, 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. Read Part 1 of this article.

Root of all evil

Research on CSiR (Corporate Social (ir)Responsibility) advocates that corporate irresponsibility is the result of bad governance protocols and a lack of board oversight. Additionally, CSiR occurs when the strategic management of stakeholders implements immoral practices grounded on deception and manipulation. That means, irresponsible behaviour is caused by the lack of moral values and ethical principles among corporate leaders.

CSiR also crops up when companies do not incorporate CSR into their business strategies or when there are pressures emerging from local markets or even corrupt local governments. As such, CSiR is believed to be the outcome of poorly managed corporations and the lack of moral values of top executives. And more and better CSR is seen as the antidote to CSiR.

Sharp practice

Corporate actions that harm organisational actors and/or society may be punishable by the law, especially criminal law, and have been discussed under the banner of corporate crime. Interest in criminal actions involving corporations can be traced back to white-collar crime – a violation of the criminal law by a person of respectability and high social status in the course of his occupation. Examples include the misrepresentation of corporate financial statements, manipulation in the stock market, and bribery of public officials. Essentially, the notion of white-collar crime focuses on the law-breaking misconduct of powerful corporate individual agents.

Bone of contention

But this notion usually does not distinguish between crimes that individual agents commit against the corporation for their own private benefit, such as fraud, and crimes committed for the benefit of the corporation. Research on corporate crime deploys different terminologies, such as white-collar crimes, corporate wrongdoings, economic crimes, organisational crimes and corporate frauds to designate similar phenomena. As a result, there are controversies around the idea of corporate crime.

Also, there is the significant concern around the question: can a corporate harmful action that is not against the law be considered a crime? The search for answers to this question has fuelled interesting debates. For example, while for some, corporate crime refers strictly to violations of criminal laws or convictions under these laws, for others, such crimes also include civil laws and regulatory violations.

Additionally, scholars have considered that the state definition of crime should be abandoned and replaced by definitions that take into account human rights given the ability of corporations to influence the enforcement of law. It has also been argued that when corporations engage in morally unacceptable practices that are not in violation of any present legislation, new laws and regulations must be created to avoid the recurrence of undesired corporate misconduct.

The cornerstone of crime

Different levels of analysis explain the basis of corporate crimes: micro perspectives, which advocate that corporations offer several opportunities for crimes to be committed, but the decision to commit the crime is individual; macro perspectives, which assert that corporate crimes are committed by organisations or groups of individuals and can be attributed to institutional pressures originating from the competitive and legal environment in which the corporation operates; and meso-level or organisational-level perspectives, which consider corporate crimes emerging from corporations seeking to achieve performance targets. Meso-level perspectives also regard corporate crimes as the result of the interplay between individual choices and institutionalised values and social norms mediated by organisational features, such as culture.

That is to say, corporate profit-seeking activities, unethical corporate agents, flawed governance policies, lack of proper state regulation, and corporate environmental factors, such as competitive pressures, social contexts and legal frameworks, influence the occurrence of corporate crimes. The underlining idea is that corporate crime is an exceptional corporate dysfunction caused by multiple factors that can be combated with the appropriate state regulatory and legal framework.

Rule the roost

Finally, it is important to note that MNCs can exert influence worldwide, particularly in countries in the Global South that have not developed a legal framework that addresses corporate crimes. Corporate interests and their political allies wield disproportionate influence over the legal system and law enforcement of local communities, reducing the likelihood that harmful corporate consequences will be criminalised or controlled.

Next, we have the authors’ verdict on CSiR and corporate crimes.

A dangerous camouflage

CMS perceives corporate harm as caused by the very essence of what corporations are. Framing corporate harm as mere corporate social ‘irresponsibility’ or as a ‘crime’ can be deceitful if it assumes that corporate-produced harms to society are exceptions to ‘normal’ allegedly positive corporate activities. By adopting such a naive view, CSiR and corporate crime perspectives take for granted that corporations and society have similar interests.

As such, the notions of CSiR and corporate crime can be instrumental to disguising corporations’ will to dominate in society as well as the fact that harm is a ‘natural’ consequence of what corporations do in attempting to maximise profit.

In the case of CSiR, particularly by portraying the harm inflicted by corporations as irresponsibility, by positing CSiR as the other side of the CSR coin, by perceiving CSiR as the consequence of bad governance protocols, and by advocating that CSIR can better inform CSR practices, CSiR is positioned as the ‘evil’ that CSR fights. In this way, CSiR works to legitimise CSR as non-problematic, as if only CSiR was problematic, and, as such, it ignores several critiques of the latter as serving as a smoke screen to corporate harmful actions against people and society.

Also, the term irresponsibility encompasses diverse types of corporate harms that can include significant environmental disasters and the death of numerous people, which are quite serious and painful occurrences. Referring to them as ordinary irresponsibility can be a discursive strategy to downplay the importance and significance of corporate wrongdoings as if they were minor events and, therefore, protecting corporations from more serious blame.

Good, but not enough

Unlike CSiR, framing corporate harmful actions as crimes highlights the seriousness of the corporate harm and can be perceived as giving the appropriate weight to the occurrence. But most corporate crime research suggests that corporate crime is performed by ‘bad apples’, be they individuals or companies, that need to be addressed via the appropriate legal regulations and sanctions. The logic of the ‘bad apple’ usually focuses on individual responsibilities and disregard the systemic logics that generate issues, as if excluding the ‘bad apple’ would be enough to avoid further similar issues.

The missing reality check

Given that there are various cases in which significant harm perpetrated by corporations affects people from the Global South, it is important to inspect CSiR and corporate crime research via postcolonialism-inspired lenses.

For instance, research on CSiR posits that, in multinational corporations, a given company can act irresponsibly in one geographical location and responsibly in another, and a universal conception of CSR and CSiR has been proposed to institutionalise CSiR control and foster CSR promotion. In both cases, there is no mention of the colonial condition of the Global South as an explanation for corporate irresponsibility in the region. In fact, very rarely has CSiR research considered the colonial difference and the North and South divide in accounting for corporate harm, as if corporate irresponsibility is the same and can be accounted for in similar terms all over the world.

Additionally, research on corporate crime as much as CSiR is mainly produced by Global North scholars looking at the realities of the North, offering a Western-centric perspective, as if corporate crime could be understood equally wherever it occurs worldwide. Adding insult to injury, the corporate crime Western-centric view of institutions reinforces the privilege of the North, which is portrayed as having superior and more solid institutions than the South, without taking into account the persistent influence of the colonial past over Global South as well as how companies take advantage and reinforce the postcolonial condition. Institutions from the Global North are always used as the norm against which the Global South is compared, quite often in a derogatory manner.

Power in the wrong hands

Research on corporate crime also perceives such crimes as a malfunction and exception to the Western view that the state regulates corporations. However, corporations are extremely powerful actors in society and can shape their environment, undermining the state as an agent that can regulate corporate activities. To do so, corporations may promote legislation that benefits corporate citizens at the expense of citizens; hinder or redirect the creation of agencies to protect the public good from the actions of corporations and the externalities they create; and privatise functions that have historically been performed by local, state and federal governments.

A grim picture

If we focus on the relation between states and corporations in the Global South, a different and a far more problematic portrait can emerge. In various cases, harm inflicted by corporations on society generates death. To make sense of this, the concepts of Necrocapitalism and Necropolitics are helpful.  Necrocapitalism is a form of capitalism driven by specific economic actors – transnational corporations, for example – where a country’s trade and industry are founded on, linked to and dependent directly or indirectly on death and the profits accruing from it. Necropolitics is the use of social and political power to dictate how some people may live and how some must die.

Such views indicate the extent to which corporations can go for their benefit in postcolonial regions of the world.

Wake-up call

Corporate harm is an issue of paramount importance in the contemporary world, and through their study, Profs. Alcadipani and Medeiros, seek to increase the awareness of corporate and management contradictions that sustain the persistence of corporate harm in our world. And this knowledge will keep instances of injustice and suffering such as Bhopal burning in our minds and enable companies to think twice before they expose us to dangers. Let there be no more ‘cities of the living dead’.

Useful links:

• Link up with Prof. Rafael Alcadipani on LinkedIn
• Read Part 1 of this article: The Harm of the Powerful: A spotlight on corporate social irresponsibility and corporate crimes
• Discover and apply for a programme at FGV-EAESP, Brazil.

Learn more about the Council on Business & Society

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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.  

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• IE Business School, Spain
• Keio Business School, Japan
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• Warwick Business School, United Kingdom.