Abstract
We argue that political corporate social responsibility (PCSR), while hailed by many as a solution to societal problems not dealt with by government, reflects both a triumph of neoliberal corporate power and a harbinger of democracy’s demise. Drawing on the remarkably PCSR-like – declarations of BlackRock CEO and billionaire Larry Fink, we demonstrate how scholarly PCSR is suspiciously compatible with corporate deregulation and privatisation of the public sphere. Our article recommends scholars abandon PCSR when critically evaluating corporate domination and democratic alternatives to it in the neoliberal era.
Introduction
In January 2019, Larry Fink – CEO of US$6 trillion investment firm BlackRock
1
– sent a letter headed ‘Purpose and Profit’ to the chief executives of his corporate investors. Repeating a similar dispatch from the previous year, he proselytised that major corporations must now actively contribute to society rather than focus on profits alone. Fink affected an alarmist tone, claiming that the ‘world’s leading democracies have descended into wrenching political dysfunction’, unable to meet societal expectations (Fink, 2019). Fink was nothing if not bold, declaring that the public is now avidly turning to big business for government-like activities: Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies, both public and private, to address pressing social and economic issues. These issues range from protecting the environment to retirement to gender and racial inequality, among others [. . .] stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively [. . .] Companies cannot solve every issue of public importance, but there are many – from retirement to infrastructure to preparing workers for the jobs of the future – that cannot be solved without corporate leadership. (Fink, 2019)
Fink was clearly moving beyond the simple business case for Corporate Social Responsibility (CSR) to what has been termed political corporate social responsibility or PCSR (Scherer and Palazzo, 2007). Eerily mirroring Fink’s letter, Scherer et al. (2016: 276) describe PCSR as those responsible business activities that turn corporations into political actors, by engaging in public deliberations, collective decisions, and the provision of public goods or the restriction of public bads in cases where public authorities are unable or unwilling to fulfil this role.
It is precisely this kind of political agency that Fink was imploring his fellow CEOs to embrace. While Fink does not use the term PCSR, both he and those who do have stressed how corporations are under pressure from society to intensify their political roles (Palazzo and Scherer, 2008). Emphasised is how the growing power of large firms might compel them, from a ‘pro-social’ sense of duty, to use that power for publicly beneficial purposes (cf. Whelan, 2012). Advocates submit that PCSR extends corporate behaviour beyond the profit motive towards wider socially and morally legitimate activities, including ‘public health, education, social security, and protection of human rights’ (Scherer and Palazzo, 2011: 899; see also Ehrnström-Fuentes, 2016). In the so-called ‘post-national constellation’ (Habermas, 2001), where the global economy has depleted the influence of individual nation states, PCSR not only reveals how corporations are taking over where government left off, but also presents a normative political position for why they ought to do so, even to the extent of championing ‘pure public goods, such as when corporations contribute to peace and conflict resolution’ (Scherer et al., 2016: 276).
Larry Fink’s letter provides a timely opportunity to critically evaluate why corporations might now be calling for greater political influence and assume state-like activities. Having said that, speaking out about PCSR has been difficult, both for us and for others. As Mehrpouya and Willmott (2018) point out, PCSR has become a ‘knowledge brand’ in which published material on the topic is regulated by a limited number of scholars who are largely unfavourable to dissenting voices (p. 3). Despite this gatekeeping behaviour, it is our considered conviction that PCSR is flawed not only because it proffers an ill-defined and malleable notion of a corporation’s responsibilities (Veldman, 2018), but also because it unwittingly valorises an extreme, yet subtle, version of neoliberal capitalism, including its accompanying socio-economic pathologies. It is in the spirit of debate and critique – specifically critique of an emerging orthodoxy – that urges us to speak out about the dangers of PCSR.
The central problem with PCSR is not simply its descriptive inaccuracies. One might aver, for example, that believing a multinational corporation would enthusiastically provide public services, even if unprofitable, is rather naive. In this respect, we could simply dismiss Larry Fink’s letter as yet another instance of a self-satisfied billionaire evoking CSR to soften his company’s image (see also Giridharadas, 2018). Notwithstanding that possibility, we ask whether there is an even deeper problem: what if advocates of PCSR are (in a very limited sense) actually right, and firms are stepping in to play a governmental role as Larry Fink encourages? If that is so, then we do not conclude it will enrich ‘democratic processes of defining rules and tackling global political challenges’ (Scherer and Palazzo, 2007: 1110), but the exact opposite; the corporatisation of the public sphere will ultimately help de-democratise the economy and society, a trend already well underway in neoliberal countries around the globe.
PCSR and neoliberal capitalism
Fink’s letter to his corporate allies appears generous, caring and civic-minded, and we have no reason to doubt his sincerity. However, it (and the PCSR ethos it reflects) veils a darker truth we suggest. Fink asserts that democratic states have essentially failed and their citizenry are looking to the corporate world for stewardship. He is unequivocal: ‘stakeholders are pushing companies to wade into sensitive social and political issues – especially as they see governments failing to do so effectively’ (Fink, 2019). But why would firms even want to meet this challenge? The PCSR literature answers in a sanguine fashion. 2 Scholarship has distinguished PCSR from both instrumental CSR (focused on the pursuit of economic self-interest) and strictly normative CSR (that morally evaluates business behaviour) (Scherer and Palazzo, 2007; see also Scherer, 2018). PCSR, by contrast, is rooted in what is perceived to be a genuine desire for corporations to be involved in ‘the political process of solving societal problems, often on a global scale’ (Scherer and Palazzo, 2007: 1110) in response to changing conditions of social legitimacy (Palazzo and Scherer, 2006). This is portrayed as a historic phenomenon where globalisation is engendering ‘a transition from voluntary, business-driven, and case-wise philanthropic acts to a long-term politicized collaboration with government and civil society actors’ (Scherer and Palazzo, 2007: 1111). This transition is said to have moralised corporations, meaning they are ‘driven by a concern for the public good that goes beyond the selfish calculations of economic actors’ (Scherer et al., 2016: 273). Crucially, firms do this in order to secure their own legitimacy – especially with respect to democratic exchange – in a context where the strict distinction between public and private spheres has significantly weakened (Palazzo and Scherer, 2008).
An obvious criticism at this point is that PCSR misrepresents the character of capitalist business corporations. As Mäkinen and Kourula (2012) elaborate, the assumption that a multinational firm will voluntarily forego the profit motive and undertake governmental duties is tenuous at best. Whelan (2012) similarly questions the ‘political CSR literature’s uncertainty as to MNC motivations’ (p. 717) (see also Edward and Willmott, 2008; Fleming and Jones, 2012). This makes us wonder what exactly is prompting firms to undertake state-like activities. A clue appeared in the wake of Fink’s (2018) letter. Writing in Forbes, Harvard Business School Professor Bill George (2018) quickly asserted that the letter did not make Fink, as some had accused, a clandestine socialist. Au contraire, George praised Fink as being ‘one of the world’s great capitalists’ of our time. The reason given was that Fink offers a picture of society where the interests of big corporations and the public are in no way incompatible.
Fink’s stance repeats that proposed by neoliberal politicians and neoclassical economists for some time. As Wendy Brown (2015) observes, the advent of neoliberalism saw a resurgence of liberal economic principles designed to progressively replace state governance with market mechanisms controlled by business firms. Private enterprise and free markets ought to dominate the modern polity, since governments are inferior. Fink (2019) abides, claiming that governments have failed to find solutions to ‘years of stagnant wages, the effect of technology on jobs, and uncertainty about the future [that] have fuelled popular anger, nationalism, and xenophobia’. Aligned with the tenets of devout neoliberalism, Fink dwells not on how corporations have contributed to these problems, but instead holds them up as a saviour against society’s woes.
In practice at least, our worry is not that PCSR is merely a ‘smoke screen’ for capitalist firms to continue with business-as-usual. A more disconcerting thought is that it might also represent a predatory corporate project, where the crisis of democracy and intensifying social problems are viewed as a unique commercial opportunity. If corporations are willing to ‘fill the governance gap left by declining power, capacity, or willingness of states to engage with global governance issues’ (Veldman, 2018: 77), then hastening the deregulation process is the main reason why. The subtext is this: rather than governments functioning as a public counterbalance to unbridled capitalism, they should permit firms to govern themselves because the state is too ineffectual. Once we cut through the ‘future prosperity’ rhetoric, Fink presents an argument for a minimalist, night-watchman state. While this has perhaps always been part of the CSR story (see also Banerjee, 2008, 2014, 2018; Veldman, 2013), it is used here for an expansionist agenda. Corporate agency must include ever larger swathes of social territory, including institutions and services once limited to the state. Fink’s vision, therefore, is not about society enjoying the warm generosity emanating from the corporate bosom; it is a political directive for large companies to absorb the public sphere and appoint benevolent (and unelected) CEOs to manage it. This is a direct affront to democracy and a natural extension to the neoliberal project.
Despite its claims that under contemporary global capitalist conditions businesses will ‘assume a state-like role’ (Scherer and Palazzo, 2011: 900), PCSR inadvertently risks valorising, even abetting, a neoliberal corporate power grab that is specific to our historical moment. It resonates with the populist right-wing narrative that democratic governments are broken beyond repair and citizens now demand ‘strong’ leadership from the business elite: ‘PCSR entails those responsible business activities that turn corporations into political actors [. . .] in cases where public authorities are unable or unwilling to fulfil this role’ (Scherer et al., 2016: 276). Within the PCSR universe, corporate capitalism is considered eminently attuned with (and even a protector of) democracy. Proposed is ‘a new understanding of global politics where private actors such as corporations [. . .] play an active role in the democratic regulation and control of market transactions’ (Scherer and Palazzo, 2011: 901). It is easy to see how this argument chimes with corporate capitalism in the neoliberal era and its cynical desire to contain/manage democracy for its own specific interests.
Democracy at the hands of the corporation
For Scherer and Palazzo (2011), what distinguishes PCSR from earlier approaches is that the traditional boundaries between political, economic and civil spheres are no longer tenable. As a result, corporations become political actors that ‘assume enlarged corporate social responsibilities and maintain their legitimacy by providing solutions to public issues, complying with changing societal expectations and by submitting their corporate governance to democratic control’ (Scherer et al., 2016: 276). Drawing on Jürgen Habermas, (1994, 1996, 2001), the type of democracy said to be occurring here is deliberative, where corporations interact with citizens and civil society to form a consensus. Public deliberation and collective decision-making will then determine the corporate ‘provision of public goods’ (Scherer et al., 2016: 276). This neatly aligns with Fink’s (2019) comments about ‘stakeholders’, ‘purpose’ and ‘engagement’. As CEOs seek to maximise profits, he proclaims, they should keep communications open with ‘not only shareholders, but also employees, customers, and communities’.
For us, PCSR’s conceptualisation of democracy in the neoliberal context has a number of problems. The first concerns the conjecture that corporate participation in the public sphere will reinvigorate and spread democracy. When Scherer and Palazzo (2011) ask ‘how and in what sense regulatory activities of private actors can be integrated into the established concept of democracy’ (p. 917), they fail to account for how such integration might do anything but enhance democracy. They locate deliberative democracy in civil society rather than the state and its public institutions, a corollary of the assumption that globalisation renders the public/private sphere distinction obsolete. With Habermasian deliberative democracy, citizens engage in free and equal dialogue over issues with the state in order to forge political agreement. In the hands of PCSR, however, the state and its institutions (understood as increasingly powerless and irrelevant in the ‘post-national constellation’) recede from these deliberations in favour of direct interaction between corporations and the people. When at their most optimistic, Scherer and Palazzo (2007) claim that this empowered citizenry might even achieve ‘a democratic control on the public use of corporate power’ (p. 1109), although how that is possible without the presence of liberal democratic institutions remains an open question.
The optimism is unwarranted if we examine the realities of corporate activity that, since the global financial crisis, have become even more vociferous in bolstering corporate power as inequality widens (Piketty, 2014). Corporate interest in PCSR is not a response to globalisation. It is the further expansion of a power imbalance that multinational firms have deliberately fostered with the approval of governments apropos market liberalisation (Mirowski, 2013). That these same corporations might assume the role of government so as to secure an amorphous sense of legitimacy is less about democratic revitalisation than an insidious attempt to maintain a system that thrives on inequality. The results are intrinsically antidemocratic, of course. For example, how would ‘public’ expenditure be determined under PCSR? The easy answer is to say interactive and fair deliberation. But when one player in the deliberation is backed my massive amounts of global capital and economic power, we all know whose interests will prevail. While there might be some civic debate or political negotiation, one does not have to be overly cynical to assume that public expenditure would be subject to top-down management decisions about how to distribute the crumbs that fall from the corporate table rather than ‘argumentative involvement of [. . .] citizens in the decision-making process’ (Scherer and Palazzo, 2011: 919).
Hence an even more troubling limitation with how PCSR conceptualises democracy. A close reading of Fink’s letter reveals a profound fear of the public, based on the idea they have become ‘frustrated’, ‘angry’ and lacking ‘confidence’ and ‘trust’ in the marketplace. We are told that contemporary governments are unworkable since they have ‘exacerbated, rather than quelled, this public frustration’ (Fink, 2019). But at no point does Fink oppose the structural precepts of neoliberal capitalism when lamenting this public frustration, even after citing growing wealth inequality and declining wages. We must mention here that Fink openly supported the corporate tax cuts implemented by the Trump administration in 2018. In his 2018 letter to CEOs, however, he failed to ask them about the public services that could no longer be funded from the tax their companies once paid. Instead, he inquired, ‘[w]hat will you do with increased after-tax cash flow, and how will you use it to create long-term value?’ (Fink, 2018).
We contend that Fink’s rendition of PCSR leans more towards ‘quelling’ civic dissent for the sake of business continuity, rather than letting it inform decisions in the boardroom through the deliberative democracy forms advocated by proponents of PCSR (e.g. Scherer and Palazzo, 2011). Filtered through the specific interests of BlackRock and its clients, the practice of PCSR becomes a defensive response to corporate anxiety, a worry that neoliberal capitalism may well have sown the seeds of its own destruction on account of its overwhelming success. This is a very real fear, in the words of Porter and Kramer (2011), that ‘the capitalist system is under siege’ (p. 62).
Using Habermas (1994), PCSR scholars seem to honestly believe that corporations assuming a pseudo-government role might somehow encourage ‘the democratic self-determination of deliberating citizens’ (p. 7) as firms strive for legitimacy in a polarised world. We view things differently. When endorsed by enormous business enterprises who have a tremendous stake in the spoils of neoliberal capitalism, PCSR is a sign of corporate weakness in the face of liberal democracy, the response to which is an attempt to subsume the functions of government. Whereas PCSR scholars deploy terms like ‘legitimacy’ and ‘public will formation’ (Palazzo and Scherer, 2008: 774) to analyse this corporate foray into the public sector, we prefer the word ideology. By reinforcing the fantasy that massive multinational corporations really care about civic concerns, welcoming the public at large to democratise its strategic objectives, PCSR scholarship could be read as an intellectual apology for some disconcerting trends in the global economy.
Democracy and dissensus
The defective assumptions of PCSR impel us to earnestly question whether it is really fit for purpose when it comes to theorising the basic power dynamics of multinational corporations, governments and civil society under neoliberal capitalism. Having said that, PCSR does have one redeeming feature. Unlike most scholarship in organisation and management studies, at least it puts the topic of democracy on the table for debate. This is not merely an arcane academic issue; it echoes widespread public alarm over the failure of liberal democracies to address ballooning wealth inequalities (Reich, 2016) at the hands of multinational banks and corporations (Stiglitz, 2019). This broaches the question of how discussions about the meaning and function of democracy can be used to supersede the limitations that transpire when democracy is couched within PCSR (i.e. an implicit justification of corporate expansionism).
The problem with deliberative democracy (at least when handled by PCSR) is that it is rooted in consensus politics. It assumes that corporations and citizens can alone negotiate a mutually agreeable and beneficial provision of public goods. But will this corporate-led initiative result in political harmony and social justice? We doubt it, particularly given how late capitalism has brazenly deepened inequality and legally consolidated corporate power on a global scale (Robé et al., 2016). And if firms do embrace PCSR initiatives, they do so in a way that is financially beneficial to them, eschewing ‘bigger issues like human rights, fraud and corruption, tax evasion and inequality’ (Veldman, 2018: 2).
Similar concerns about the possibility of a false consensus being gerrymandered to mask the pursuit of self-interest by powerful political players (in our case corporations) have informed the development of what French political theorist Chantel Mouffe (2000a, 2000b) calls ‘radical democracy’. We do not have space to provide a detailed account of the debates surrounding this idea (for this, see Martin, 2013; Trend, 2013). For our purposes, however, the utility of Mouffe’s work arises from its profound suspicion of the deliberative approach to democracy as espoused by PCSR theorists. Deliberative democracy wrongly postulates the availability of a public sphere where power would have been eliminated and where a rational consensus could be realized . . . this model of democratic politics is unable to acknowledge the dimension of antagonism that the pluralism of values entails and its ineradicable character. (Mouffe, 2000a: 13)
Indeed, returning to Fink’s (2018) letter, it is important to remember why the billionaire was considered proto-capitalist rather than socialist. The text carefully elides Mouffe’s ‘ineradicable pluralism’ by stating that the interests of BlackRock and ‘the people’ are fundamentally compatible. Fink’s (2019) announcement reinforces the message, promising to realise that presumed symmetry in the name of ‘purpose and profits’ and effectively privatise the public sphere.
Following Mouffe, the consensus that might be assumed between corporate and civic interests cannot be deemed either possible or desirable. Instead, democracy works from the central premise of dissensus. That is to say, within a pluralistic society democracy is the place where our irreducible differences come into political contact with each other. Mouffe (2000a) refers to this socio-political dissymmetry as ‘agonistic pluralism’: ‘a well-functioning democracy calls for a vibrant clash of democratic political positions’ (p. 16), without which the demos is frequently reduced to a tyranny where one position silences all. For example, Fink’s approach to corporate involvement in government simply could not accommodate or reconcile a political perspective, calling for the end of financial capitalism or even a modest modification to it (in relation to corporate tax, for instance). Indeed, Fink’s pronouncements are only possible by virtue of the power accorded to him as sovereign of his company, rather than from the diffusion of power through genuine participative dialogue. Fink gets to speak not because he is a citizen or a representative of the people, but because of his formidable economic clout. His talk of ‘inclusion’ belies the sinister undertones of BlackRock’s opportunistic interest in PCSR, a modus operandi that scholarship in the area seems oblivious to.
It could be retorted that ‘agonistic pluralism’ is exactly what landed Donald Trump in the White House and gave us Brexit – hardly emblems of progressive politics! Perhaps. By definition, agonistic pluralism can never come with guarantees. But Mouffe (2000a) makes an important point on this topic. If political differences and oppositions are hidden from the public sphere – as often happens in neoliberal societies – there is a good chance that they will reappear elsewhere in highly dysfunctional forms, including the rise of right-wing populism (see also Rummens, 2009). The ascension of Trump to the US presidency occurred because he spoke to people who had been abandoned by the Washington Consensus, marginalised politically and impoverished economically. The absence of public avenues for the cultivation of dissensus and confrontation of difference can breed deep-seated political disaffection, manifesting in even more antidemocratic ways.
Larry Fink’s public statements indicate that he is well aware of the civic discord that can be created by political exclusion. Yet his response is to convert everyone into less powerful clones of himself: ‘human capitalists’ and cunning ‘investors’. In his Chairman’s letter to BlackRock shareholders issued as part of the 2017 Annual Report, Fink said this about retirement: We are already at an inflection point: the deep populist sentiment around the world is driven by frustration and fear about the future – including the prospects for a secure retirement. We must find a solution. We cannot accept a system that excludes so many individuals from the benefits of investing, and political lethargy is not an acceptable excuse for leaving billions of human beings unprepared for retirement. (Fink in BlackRock, 2017)
This is where deliberative democracy and ‘consensus’ politics eventually lead when controlled by powerful corporations: further privatisation of the state or at least its strategic capture. Following Mouffe, the radical alternative to PCSR and its idealistic nodding to deliberative democracy comes from a commitment that operates not from the hand of power but ‘where civil society holds corporations to account for their actions, and in so doing disrupts corporate sovereignty’ (Rhodes, 2016: 1502). This disrupts the assumption that the profit-maximising enterprise can, will or even should act as political agents independently responsible for the democratic provision of public goods.
The value of democracy is its insistence that political power rests, ultimately, in the hands of the people rather than a feudal lord, despot, monarch or corporate executive. This democratic ideal has not been, and perhaps never can be, fully realised. Regardless, it is what we must strive towards, providing a standard to evaluate our present circumstances. We live in a global economy where chronic inequality has been driven by deregulated markets and large corporations who have been helped by corporate-friendly governments. Academic PCSR’s insistence that we look to those very same corporations for the solution and cede even more power to them is reckless – no matter how much hope one puts in the democratic possibilities of deliberation and the corporation’s need for legitimacy. If Fink’s version of it is anything to go by, PCSR is a self-interested practice where business firms pursue a false political consensus and advance an elitist agenda that can only exacerbate global inequality. In its place, we require a rejuvenated democracy where corporations are held accountable to the people, not the other way around.
In short, forget PCSR and remember democracy.
