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Shareholders or stakeholders?

Making the case for, and against, corporate social responsibility

Clive Crook
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LONDON, England (CNN) -- CNN's Becky Anderson talks to Bjorn Stigson, the President for the World Business Council for Sustainable Development and Clive Crook, the Deputy Editor of the Economist, Clive Crook about corporate social responsibility.

Becky Anderson: Gentlemen, this is a debate on the merits of corporate social responsibility, a topic that commands an awful lot of time and attention from executives all over the world. But, is CSR just for show, Bjorn?

Bjorn Stigson: No, CSR is not for show. Business is really part of society. We cannot succeed in societies that fail and the challenge for us in business is, "What are we really going to do about it?"

BA: Clive, define if you will, what you believe CSR really means.

Clive Crook: Some of it is just good management, treating your employees well, being open and transparent in the way you deal with the rest of the world. A lot of CSR is just that, and there can be no objection. But in addition other ideas are brought in. Sustainable development is one of them which I think is a dubious concept and some of the policies that are pursued in the name of sustainable development, I think, are quite harmful. It can happen for instance, in the name of CSR, that Western multi-nationals have withdrawn investment from developing countries, often under pressure by NGOs, and that ends up leaving those countries worse off, leaving the workers in those countries with fewer jobs.

BA: Is there then a genuine business case for corporate social responsibility?

BS: When you look at business response to sustainable development it's really two different agendas: You have on one hand a business agenda. But then there is also another agenda, the public policy agenda, dealing with a whole set of issues that come into business whether we like it or not, and that we have to respond to if we want to maintain a license to operate, and innovate and grow.

CC: There is a problem here. Public policy is a political matter. It is something I would prefer to see governments, which are accountable to their voters, concentrating on. I'm not sure it's desirable to have companies trying to make public policy. That's the realm of CSR that I have a problem with.

BS: I agree with Clive that it is the role of governments to create policy but governments find it increasingly hard to do that in isolation. Given the amount of resources that business is dealing with in society, I think it's very reasonable that we can raise our voice and give our view, but it's up to governments in the end to decide.

BA: But wouldn't existing government infrastructure and policy in many parts be more effective if corporates threw their financial weight behind these policies and infrastructure and helped forge relationships on a long-term basis?

CC: That begs the question, "what are the appropriate policies?" That is one of the difficulties. Very often these are intensely political questions.

BA: What sort of negotiation do you believe, Clive, there should be between stakeholders and businesses?

CC: Well I have a problem with this very concept of stakeholder, I'm afraid. It seems to me that we need to remember the managers of public companies are not the owners of those companies. They're managing them on behalf of the owners, the shareholders. Other views do need to be taken into account and any well-run company takes into account the views of its customers, its suppliers and so forth, these other so called stakeholders. But to elevate those groups to the same level as shareholders is, I think, a mistake. The shareholder is king.

BS: The shareholders are a very important stakeholder, but so are your employees, so are your customers, so are your suppliers. If you don't make a profit you have not created enough value to compensate for your resources, but you have to do it in the broader context.

BA: CSR has won the battle of hearts and minds, I think that's clear to say. There have been three waves: Since recognizing that this thing should exist or does exist, we've moved on and annual reports are full of corporate responsibility. What is the next wave?

CC: Well I think what's in play at the moment is the whole idea of public-private partnerships. The UN is taking an interest in CSR and semi-official forums are beginning to appear in which business and governments get together to talk about CSR issues. I want to see democratic accountability exercised in the formulation of public policy. I'm more concerned about companies attempting to make public policy on their own. I think that's harmful.

BS: I think there is a tendency to rush into public private partnerships. Believing you can have multi-stakeholder, public-private partnerships that are going to be efficient is completely underestimating in my view. There should be a warning sign on public-private partnerships like on pharmaceuticals, "Use with caution, and only when you cannot succeed on your own."

BA: Gentlemen, we're going to leave it there. Thank you.

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