Corporate Responsibility: Law and Ethics
By Christopher D. Stone
2004/04 - Beard Books
1587982250 - Paperback - Reprint - 286 pp.
One of the two most-referenced books on the social responsibilities of corporations.
This reprint of the important and well-received book: Where the Law Ends: The Social Control of Corporate Behavior is as timely and relevant today as when it was first published in 1975. While corporations remain the most effective private force in society for doing good or ill, ethical constraints and legal remedies have not kept pace with expanding corporate influence. This book provides engrossing reading as it answers the following questions: What is fundamentally wrong with the measures we have adopted to control corporations? In light of these shortcomings, what can be done to improve existing measures? What sorts of new controls can be and must be designed and implemented? The author proposes that not only the laws, but the very culture of the corporation must be confronted.
From Henry Berry, Turnarounds and Workouts, November 15, 2004:
In these days of Enron, WorldCom, Tyson, and a number of other corporate miscreants, Stone's topic of corporate responsibility is on everyone's mind--employees, government officials, legislators, executives, corporate lawyers and consultants, consumers. Stone's book was prompted to some extent by the part of the giant oil companies' role in the energy crisis of the early 1970s. This served as a wake-up call to government overseers of business, business journalists, public-interest groups, and others of the extent to which corporations, "for better or worse, [had become] the most effective 'private' forces to do both widespread good and widespread harm." In today's era of globalization, the scope for corporations' good or harm is even more widespread. Yet despite the wake-up call of the energy crisis, society has not yet struck upon a dependable, effective means of ensuring corporate responsibility, or even for forcing it by laws if necessary.
The main reason for this, so Stone maintains, is not that despite what many persons believe, corporations are by nature irresponsible. The main reason is that no one--not government officials, not public-interest groups, not employees of corporations--has a fundamental concept of what corporate responsibility is or should be. To formulate a concept of this, Stone asks basic questions and thoughtfully works his way toward answers of these. Among these questions are just "what is the corporate problem?"; "exactly what is it about corporations, and exactly what is it about the institutions we have available to control them, that so often seems to leave the one frustratingly outside the grasp of the other?"; "what sorts of new controls can be, and must be designed" to control corporate behavior and minimize harmful effects of irresponsibility?
Stone has no easy answers to these questions. In working toward practicable principles and standards, he carefully balances the nature, workings, and purposes of corporations with the ideals, mores, and needs of society. While he acknowledges that the law plays a necessary and to some degree defining part in evoking corporate responsibility, he brings in the larger point that the law alone can never provide the fundamental ground for corporate responsibility. The main reason for this is that the law is mostly reactive. In the field of business and commerce, legislators are making new laws all the time in relation to new activities or conditions which come about. Government agencies are modifying their regulations all the time. Nor can the market ensure corporate responsibility by favoring corporations which are seen to act responsibly. Examples Stone points to and the familiar examples of Enron, etc., illustrate how corporations can all too easily give an appearance of responsibility for a time, so the extraordinary success they gain by this leads to an extraordinary disaster affecting large numbers of employees and the public.
Stone's conception of corporate responsibility--as any concept of responsibility requires--involves identifiable individuals who are an integral part of the corporate structure and who have decision-making powers. These individuals are board members, members of public directorships, and a corporations' top management. Recognition of the special role individuals in these positions have in corporate responsibility is not enough, however. As Stone stresses, corporations have to make relevant information on what they are doing and how decisions are made available to the public. He begins his chapter "Mending the Information Net" with an anecdote illustrating how corporations manage and can even destroy by shredding information about their operations and goals. Stone recognizes that corporations, like government and private citizens, cannot behave effectively without some privacy. But what he's concerned about in honing in on the subject of information, its preservation, and its availability is preventing practices which allow corporations to so easily appear to be acting responsibility when in fact they are acting against the public interest, and while doing so actually working against their own interests and purposes as corporations. Such desirable practices regarding information would also ensure that board members, members of public directorships, and top management have the information they need to make relevant, beneficial decisions. Thus, situations such as Enron's president saying he was unaware of what some of his chief financial executives were doing would not be possible. The president would know what information he was supposed to have for corporate responsibility, and financial officers and other top executives would know what information, including documents, they were supposed to provide to others entrusted with seeing to corporate responsibility.
In the wake of the corporate irresponsibility manifest by Enron, WorldCom, and others, government officials, corporate leaders, and business commentators have been calling for some of the remedies Stone proposes. To these and others, Stone's "Corporate Responsibility" can be turned to for specific recommendations and for general guidance on formulating and implementing such practices conducive to this desirable end.
Christopher D. Stone is a professor of law at the University of Southern California. He has been associated with a number of government agencies, and has written extensively about corporate ethics, trade, and other business topics as well as environmental issues.
Christopher D. Stone is J. Thomas McCarthy Trustee Professor of Law at the University of Southern California. Professor Stone has written in several areas including the environment, white collar and corporate crime, legal philosophy, U.S. alternate energy policy, climate change, biodiversity, ocean policy, and trade law. He has served on or worked under the auspices of a variety of governmental agencies including the President's Commission on Communications Policy, the Energy Research and Development Administration, the National Institute of Mental Health, the National Science Foundation, the Department of Energy, and the United States Sentencing Commission.