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Corporate social responsibility" is hardly a new refrain, but it now comes at an awkward moment. To an ever-larger extent, it seems, corporations are being called upon to respond to the needs of "stakeholders" other than investors. At this writing, despite seven years of a healthy economic expansion and strong profits, the real median wage is still below where it was in 1989, before the last recession, and a significant portion of the American workforce continues to experience downward mobility. At the same time, federal and state governments have limited financial means to ease the stresses on the workforce. While the recovery has helped balance public budgets and even generated some surpluses, governments are under continuing pressure to rein in spending.
Yet this renewed interest in corporate social responsibility comes, ironically, at a time when investors-many of them large institutions with the capacity and will to topple underperforming CEOs-are escalating their demand that corporations maximize shareholder returns. The movement for better and more responsive "corporate governance" seeks to ensure that managers act in the best interests of their shareholders. Compensation of top corporate officers is more tightly linked to share prices than ever before. The steady improvement in corporate profitability over the last few years is due, at least in part, to restructurings that have resulted either in layoffs or in diminished wages and benefits.
Of course, many American corporations continue to be exemplars of "responsibility" to their employees and communities, and it is not my intention in this essay to criticize corporate behavior. The nation is now far more competitive-and, arguably, far more productive-than it was in the 1980s. This allows our society to achieve a whole range of social objectives that it otherwise could not achieve. Moreover, many companies have taken an active role in improving their communities and have given their employees a share in their new-found prosperity.
The issue here is not whether companies should be responsible in some way to society, but rather how they should be responsible: Is there a new meaning for corporate social responsibility, consistent both with the greater need for corporate responsiveness to employees and communities and with the greater demands from investors for performance?
Consider some recent activities of American companies in light of these...