Political play: Market Forces proves a force to be reckoned with

There is a burgeoning ‘social responsibility’ industry – managers and consultants employed in HR, people and culture and corporate affairs divisions, and in the major professional services firms – that is pushing companies to adopt more and more so-called socially responsible strategies and initiatives.

Pressure on companies to adopt such strategies began in earnest with the marriage equality campaign several years ago, and many social and political issues have become the mainstays of corporate concerns about the importance of acting – and being seen – to act in particular ways.

Now we are seeing pressure on businesses over a range of matters, from the use of traditional language – such as ‘she’ and ‘he’ – through to manufacturing practices, procurement and areas of investment. Even distribution can be a target, with Lego forced to stop distributing toys through service stations.

It is easier for corporate leaders to succumb to pressure rather than withstand it. The consequences to reputational attack on social media for “failing” to act responsibly are becoming too great.

The corporate social responsibility industry has a vested interest in diverting company resources towards such activities. But more importantly, the aims and objectives of the industry amount to subverting companies from their traditional roles and functions – and pushing them towards open political activism.

There is a legitimate business case for some CSR activities, particularly those related to core business activities and interests.

In today’s more complex business environment and questioning society, well-managed companies should use good commercial judgement to consider their activities’ social and environmental impact on relevant stakeholders in the community; thus helping protect the financial interests of shareholders.

But the notion that to earn an abstract ‘social license to operate’, companies must promote the non-shareholder interests of wider groups of stakeholders in community, is a way of legitimising the idea that companies should take stances on social and political issues unrelated to their business activities.

What this amounts to is nothing less than a license for companies to become involved in political debates that are faintly – if at all – connected to shareholders’ interest.

This threatens to transform the business of business into politics. The approach being pushed by the CSR industry will inherently, inevitably, and inappropriately, politicise company brands and reputations.

The politicisation of companies is hardly an abstract concern.

What this reflects is the activist mindset and influence of the CSR professionals who boldly assert that the “focus is now clearly on business’ role in society as a driver of change” and that the next step for CSR is enabling companies to participate in driving ‘systemic change’ around social, environmental, and economic issues.

Market Forces has already succeeded in bringing pressure to bear on some of Australia’s key financial institutions. Its decision to ramp up that pressure should be a wake-up call for company directors and senior managers – as well as shareholders – about CSR activists’ determination to play politics with shareholders’ money at the margins of what might be permissible under company law.

Unfortunately, the recent debate about ‘politically correct’ companies indulging in gratuitous political diversions has generated more heat than light about how to stop CSR from becoming an ever more expansive justification for escalating corporate involvement in politics.

Corporate leaders who might wish to limit CSR to appropriate business parameters are currently unable to be guided by any alternative set of principles, practices or institutional framework to counter the metastasising CSR doctrines and structures.

One approach might therefore be to introduce into the language and practice of corporate governance a new clarifying principle to overtly qualify the ‘industry’ approach to CSR.

Inserting a ‘Community Pluralism Principle’ into company constitutions, or into ASX’s corporate governance guidelines, would remind directors and senior managers of the importance of ensuring CSR activities do not distract from the company’s core business purposes and negatively affect its brand by acquiring a reputation for being political.

This would also remind corporate decision-makers that public companies, given their special legal rights and privileges, should aspire to be pluralistic institutions that serve, respect and reflect the views and values of the whole community.

This is impossible if, in the name of CSR, companies are associated with divisive political positions on which not all stakeholders, employees, customers, and shareholders will agree in a pluralistic society. This is especially so at a time of growing political polarisation between ‘elites’ with progressive views and ‘ordinary’ citizens with more conservative views.

But it would be naive to think the CSR industry will now simply give up on forcing business to become an active player in politics.

Peter Kurti is a senior research fellow at the Centre for Independent Studies and Adjunct Associate Professor of Law at the University of Notre Dame.