Are corporations machines for dodging responsibilities and evading consequences? That’s a worthwhile starting point to begin any debate on corporate governance and responsible investing policy. Put another way: do corporations exist solely to maximise profit at any cost, regardless of consequence, until stopped by external sanction? Translate that characterisation from an economic into a social context, and you have a sociopath. If every entity in your community is acting as a sociopath, pretty soon you have no community, just mass extinction — which parallels the likely outcome if businesses are allowed to go on functioning as economic sociopaths.
I hope that no one still really thinks of businesses in that light. But it’s perfectly legitimate to ask what limits should be set on corporate behaviour, above all when the wider and longer-term implications of that behaviour are becoming clearer and clearer.
Science has long ago moved the debate over the environmental impact of business activity from Romantic Nature-worship to rational actuarial calculation of actual environmental impact and human survival. Social impact calculation, meanwhile, measures and articulates the broader consequences of business actions for their own societies. These developments move corporate governance from the idealistic programme of persuading companies to do good, to the perfectly pragmatic and down-to-earth effort to stop them doing more harm. They may not have been born with those considerations in their structure and corporate culture some probably never had ideas of staff pensions or company health insurance either. Yet, those have come on board for perfectly good reasons, and other such considerations and structures are long overdue to join them.
The emphasis on regulation and compliance in corporate governance and responsible investing is a welcome reminder that corporations do not exist in a vacuum. They are the creatures of highly complicated frameworks of rules, precedents, norms and expectations. If they break those frameworks, they are liable to fall to pieces, along with everything else.
There is no true law of the jungle in business, because an actual jungle is a highly complicated and interconnected ecosystem, with each part dependent on every other part. Loss and gain for each organism are balanced out in the metrics of species survival — or extinction. People’s efforts to impose their simplistic caricature of jungle law on a real jungle are more likely to leave it a desert. We can expect something similar in the corporate world, unless companies learn to know their place, and honour their obligations.