Citizens without obligations? Corporations without allegiance?
June 12, 2013 — If American corporations are, as the Supreme Court ruled in 2010, citizens entitled to free speech and other rights from the nation, what corresponding obligations to the nation do these corporations have?
“For individuals, we’ve always thought that citizenship entails a balance of rights and responsibilities,” said James Post, the co-author of “Corporate Responsibility: The American Story” and a professor of management at Boston University. “Does it still mean the same thing for corporations?”
In an effort to find out whether American corporations are the kind of “citizens” that believe that they have national obligations, Remapping Debate contacted the representatives of more than 80 corporations. Most had no comment, a striking finding in and of itself.
And among the corporate representatives who did comment, most were unwilling to say that their corporation had any obligations to the United States, let alone to define any such obligations with specificity. Moreover, representatives of some American multinationals said that their companies do not even identify themselves as being American in any sense except that they are legally incorporated and physically headquartered in one of the states of the U.S.
This has not always been the case. According to numerous experts, the managers of American companies used to feel strong national and social ties (see box titled “When obligations went with benefits”). The disintegration of that sense of obligation raises crucial questions for policy makers as to whether and how to reinforce those ties, and as to what special priviledges, if any, should continue to be offered to corporations that are nominally “American.”
According to Post, the question of whether American multinational corporations have national obligations, and if so, what those obligations are, is “one of the most central and least recognized public policy questions of our time.”
Remapping Debate reached out to corporations of various sizes in a range of sectors, from huge, iconic multinationals like General Motors and Boeing to smaller, primarily domestic companies like JetBlue and RadioShack.
The majority of the fifteen corporate representatives that responded said that their companies did consider themselves to be American.
“I think that most of RadioShack’s 30,000 employees would say that it is an American company,” said Kirk Brewer, head of corporate communications at RadioShack. “The brand has been part of the American landscape for a long time, and the roots of today’s company stretch back more than 90 years.”
When obligations went with benefits
For the vast majority of their history, American corporations were perceived by both the public and by corporate executives themselves as having a broad range of obligations — including national obligations — that competed with the goals of making profit or creating value for shareholders.
“The idea that a corporation exists solely to make money is actually quite new,” explained Ralph Gomory, a professor of management at New York University. The broader sense of corporate responsibility was starkly apparent during World War II, when many U.S. companies dramatically changed their operations to aid the war effort, Gomory said, but it also extended through the 1950s, 1960s, and 1970s. “Even in the early ’80s, you would be more likely to hear a CEO talking about his responsibilities to the country or to his employees than his duty to the shareholders.”
In practice, that broader sense of corporate obligation translated to self-imposed restraints on the way that companies interacted with their communities and with their workers, said William Lazonick, a professor of economics at the University of Massachusetts, Lowell.
“For example, up until the 1980s, CEOs were extremely reluctant to shut down factories and lay off a large number of workers,” Lazonick said. “Mass layoffs were actually seen as a serious abnegation of corporate responsibility. It was understood that the company had a responsibility to it workers, and that if it failed, society at large would be on the hook for that failure.”
Margaret Blair, a professor of law at Vanderbilt University, added that the connection between American companies and the nation as a whole was felt strongly by corporate CEOs, who “saw the corporate sector as one of the major forces that was working in the best interests of the country.”
Blair pointed out that in the period from World War II to the 1980s, it was far less common to see corporate executives lobbying the government for special rights and benefits, including lower taxes. “It was accepted that, if the United States was going to be a powerful economy and have a high quality of living, then the corporate sector needed to do its part to supply financial resources to the government,” she said. “There was no sense of it being the corporations versus the government. It was much more about everybody being in it together.”