Corporate Social Responsiblity Flung Afar

Thomas Friedman gained tons of fans for a flat world in which any country's workers can compete for pieces of myriad global assembly chains -- spreading opportunity far beyond the boundaries of traditional economic super-powers.

While ostensibly spreading opportunity much more broadly, it's easy to argue that this dynamic greatly dilutes the incentive companies have to both invest for the betterment of the communities they serve and to take responsibility for damages they cause (two sides of the corporate social responsibility coin.) It's easy to argue, for instance, that this dynamic fueled the foreclosure crisis. Because the bulk of mortgages are now held by myriad investors, rather than a single bank, no one institution has the incentive to ensure that mortgages don't default -- at least they didn't before the crisis hit. This video offers a perspective on the topic from DMI's Marketplace of Ideas which I produced late last year. In it, Minnesota's Attorney General, Lori Swanson, (pictured above) and Senator Chuck Schumer are among those talking about policies proven successful in curbing predatory lending.

An article entitled, "The Responsiblity Paradox" in the newest issue of the Stanford Social Innovation Review, also takes on this issue:

In Early 2007, thousands of cats and dogs in North America fell ill with kidney ailments. Many of the pets had dined chez Menu Foods Inc., a company in Ontario, Canada, that manufactures pet foods for more than 100 brands, including Procter & Gamble, Iams, Colgate-Palmolive’s Science Diet, and Wal-Mart’s Ol’ Roy. By mid-April, investigators had traced the animals’ illnesses to melamine, an industrial chemical that tainted a few of Menu Foods’ raw ingredients. They then followed the thread to two suppliers in China, which had spiked the ingredients to cut costs and boost profits.

So where should the public point its finger? Procter & Gamble, Colgate-Palmolive, Wal-Mart, and the many other corporations that own the pet food brands? Menu Foods, which mixed the kibble? The Chinese manufacturers, which adulterated the ingredients? The U.S. Food and Drug Administration, which failed to detect anything amiss? The stores that didn’t remove the foods from the shelves, even after Menu Foods recalled them?

Traditional notions of corporate social responsibility say that companies are beholden to the communities in which they are located. But globalization has made it difficult to discern exactly which communities to include. With far-flung value chains, decentralized governance, and churning employees, multinational corporations have become what British journalist Martin Wolf calls “rootless cosmopolitans.”

Doesn't seem like there is much incentive for corporations to self-regulate on these issues and government certainly isn't discussing the topic. Sounds like a leveraged opportunity for discerning donors to step in?

Susan Herr