The Responsibility of Business to the Whole

Home/The Responsibility of Business to the Whole

A PCDForum Paper Release Date May 20, 1997


This article was written in memory of Willis W. Harman —
philosopher, teacher, writer, futurist, and president of the Institute of Noetic
Science, as well as my teacher, mentor, and friend for some 35 years — who
died of brain cancer on January 30, 1997. Willis long held two central beliefs
about business. First, he believed that the future of humanity requires a basic
rethinking of the relationship of business to the whole. And second, he had a
deep faith in the readiness and ability of business people to lead this
rethinking through a process of critical self-reflection and action.


by David C. Korten


Business has become, in this last half century, the most powerful
institution on the planet. The dominant institution in any society needs to take
responsibility for the whole…

– Willis W. Harman, August 1990


In this widely quoted statement on business responsibility, Willis Harman
issued a wake up call. He pointed out that institutional changes have
fundamentally realigned the power relationship between business and the rest of
society and called on business leaders to examine the profound, but largely
neglected, implications of this reality.


Such an inquiry must address a number of basic questions. How did business
come to be the dominant institution of society? Is this dominance consistent
with the healthy function of society? Given the distinctive nature and
competence of business, what is its appropriate role and responsibility vis a
vis other institutions? What is the responsibility of business to the whole and
what are the most appropriate ways to assure its accountability to the whole for
the discharge of this responsibility? These seldom asked questions take us to
the heart of the dilemma’s created by the rise of business to its current
position of dominant power.


The Rise and Concentration of Corporate Power


It is not really business per se, but rather a complex interlocking web of
global financial markets and corporations, a subset of the institutions of
business, that have become the planet’s most powerful institution. The power
issue centers on the global corporation as a distinctive form of business
organization.


It is instructive to recall that the institution of the corporation was
first created by kings to serve as an agent of colonial expansion. Some claim
the American revolution was as much a revolution against the crown corporations
as against the crown itself. As a conse quence, corporations were treated with
great caution in the early days of the new republic. The few corporate charters
issued were generally for a limited duration to serve a carefully delineated
public purpose. The crown has since been replaced by the modern shareholder and
access to corporate charters has been democratized. Yet the original power and
function of the corporation— concentrating wealth and power in the hands of
an elite ruling class—have been largely restored.


Although a CEO may by choice organize the internal operations of a
corporation around self-organiz ing networking structures that decentralize
responsibility and make relationships more egalitarian, this does not change the
corporation’s formal structural overlay. Inherently one of the most
authoritarian of human institutions, the structure of the corporation is
designed to concentrate wealth and power at its apex. The CEO has the legal
authority to at any time reclaim the power or authority previous delegated,
hire, fire, and reassign staff, open and close plants, add and drop product
lines, and change transfer pricing almost at will with virtually no recourse by
the people or communities affected— either inside or outside the
organization. Nor is the CEO at liberty to relinquish this power. By law it goes
with the position.


Historically, exercise of the regulatory powers of the state was the primary
restraint on the expansion of corporate power. Together the processes of
deregulation and globalization have effectively relieved that con straint by
placing the power of global corporations and finance beyond the reach of the
state. The hopeful claims of some business observers notwithstanding, the mega-
corporations are not shedding their power. To the contrary they continue to
concentrate and consolidate it through mergers, acquisitions, and strategic
alliances. The statistics are sobering.

  • Of the world’s 100 largest economies, 51 are corpo rations. Only 49 are
    countries. The economy of Mitsubishi is larger than that of Indonesia, the
    world’s fourth most populous country and a land of enormous natural wealth.
  • The combined sales of the world’s top 200 corpora tions are equal to 28
    percent of the world GDP.
  • These same 200 corporations employ only 18.8 million people, less than 1/3
    of one percent of the world’s people—and the downsizing continues.
  • In 1995 the total value of mergers and acquisitions for the world exceeded
    any prior year by 25 percent.

The primary accountability of these corporations is to the global financial
markets in which each day $1.4 trillion in foreign exchange changes hands in the
search for speculative profits wholly unrelated to any exchange of real goods or
services.


Whose interests are represented by these financial markets to which the
world’s most powerful corporations are beholden? In the United States 77 percent
of share holder wealth is owned by a mere 5 percent of house holds. The broader
population that holds a beneficial ownership through pension funds is
represented in corporate governance by a few hundred fund managers who have no
accountability to the beneficial owners beyond protecting the security of their
benefits. Globally the share of the world’s population that has a consequential
participation in corporate ownership is far less than 1 percent. This
concentration of corporate power ac countable only to a tiny global elite denies
the most basic principles of democratic governance. It also results in an ever
increasing concentration of the world’s wealth. Forbes magazine now
identifies 447 billionaires in the world, up from only 274 in 1991. Their
combined assets are roughly equal to the total annual incomes of the poorest
half of humanity.


It is axiomatic. In a healthy democratic society the dominant institution
must be both responsible for the whole and accountable to the
whole. Not long ago, nation states were our dominant institutions. The nation
state had a clearly mandated responsibility for the whole and the institutions
of democratic societies were structured to assure commensurate accountability
to the whole.


By contrast, global corporations and financial markets serve financial
bottom-line mandates that are as narrow as their constituencies. The
deregulation and economic globalization that have increased their power, have
done nothing to broaden their mandates and or accountability. To replace the
power of the state with the power of the global corporation is tantamount to an
act of collective suicide.


We are experiencing the consequences in the form of six current tendencies
of the global system identified by Willis and colleague Thomas Hurley in a
co-authored paper written only days before Willis’ cancer was diagnosed.



  1. Destruction of the natural environment.

  2. Destruction of community.

  3. Transfer of wealth upward.

  4. Marginalization of persons, communities, and cultures.

  5. Erosion and denial of the sense of the spiritual or sacred.

  6. Creation of learned incapacity and helplessness.

Spiritually impoverished and on the brink of destroying the natural and
social fabric on which human life and civilization depend, we are creating
societies that diminish the human spirit and place our very survival at risk.
Dominated by the power and values of global corporations and financial markets,
the global economy bears a major responsibility


It is ironic that the policies that have concentrated power in our most
authoritarian and least accountable institution have been promoted in the name
of human freedom, democracy, and the market economy. In the true market economy
envisioned by Adam Smith small producers compete for the favor of small
consumers on the basis of price. We do not have an economy centrally planned by
socialist governments to serve the party bosses. But what we do have is not so
different as we might think—an economy centrally planned by the world’s
largest corporations to serve the interests of their wealthiest shareholders.


There is indeed a positive relationship between a market economy comprised
of small independent producers and human freedom. However, corporate freedom is
to human freedom and the market economy what monarchy is to democracy—they
are fundamentally at odds. Confronting this conflict is key both to reversing
the devastating trends that threaten our future and to defining the real
challenge of socially responsible management. The perhaps startling implication
is that the number one priority of socially responsible business leaders must be
a commitment to create the conditions of a socially efficient market economy.


The Conditions for a Socially Efficient Market


The market is a powerful and indispensable mechanism for facilitating
efficient economic choices. However, even Adam Smith was quite clear that the
invisible hand of the market works to the larger benefit of the society only to
the extent a number of rather specific conditions are met. A number of such
conditions have been identified and elaborated by subsequent generations of
market economists.


For example, the socially efficient market will be comprised of small
locally owned enterprises that are rooted in place and operate within a
framework of community norms and relationships. There should be no producers
sufficiently large that they can artificially manipulate prices or consumer
preferences nor associations through which producers may act in combination to
set prices outside the market. Proprietary information is also a no-no. All
market participants must have full access to relevant knowledge and technology.


One of the most basic principles of social market efficiency is that
producers must bear the full cost of the products they sell. There must be no
subsidies that distort market prices and allocation. And since markets respond
only to money and the socially efficient market must respond to the needs of
everyone, there must be reasonable equality of income and financial assets to
assure everyone an opportunity to participate. There must also be an effective
and democratically accountable government to perform functions to which business
is not suited and to provide for necessary regulation of the conduct of
business. These are all conditions of the socially efficient market as
envisioned by market theory. No serious student of this theory should be
surprised by the social inefficiency of a global economy dominated by free
floating capital and footloose corporations that command internal economies
larger than those of most states, externalize their costs by bidding down
environmental, work and safety standards, taxes and wages under threat of moving
jobs elsewhere, own and control the public media, command advertising budgets
that rival public spending on education, and use intellectual property rights
to create government protected monopolies. The existing global economy
systematically violates every one of the conditions required to align the
workings of the market with the public interest. It delinks the global
corporation from meaningful public accountability, facilitates the
externalization of costs, and limits access by both consumers and investors to
information essential to making informed decisions.


Market theory also embodies a number of basic assumptions regarding the
fundamental responsibilities of the firm. Among others it should fully
internalize its own costs, practice full disclosure with investors and
consumers, avoid any form of anti-competitive practice or price fixing, and obey
the law. While these are nothing more than fundamentals of ethical business
practice, they represent serious commitments indeed for a business operating in
an unregulated global market economy that encourages and rewards quite the
opposite behaviors. A commitment to honoring these principles represents the
essential core of the firm’s responsibility to the whole and should be the
foundation of any social responsibility program. To put it bluntly, a firm that
is not seriously committed to meeting these standards has no legitimate claim to
being socially responsible no matter how much it gives to charity or otherwise
sup ports beneficial social causes.


Profits Earned vs. Profits Extracted


According to market theory a firm’s profits measure its value added
contribution to the society. To the extent this is true, it follows that a firm
best maximizes its social contribution by maximizing the financial return to its
shareholders. The catch here is that this same market theory also assumes that
the firm fully internal izes the costs of its operation. To the extent that
costs are externalized, however, the firm’s profits represent not an addition by
the firm to the wealth of society, but rather an expropriation by the firm of
the community’s existing wealth.


Sometimes the externalization takes the form of direct public subsidies —
as for example the grant given by the State of Virginia to Motorola to locate a
research and manufacturing facility in the state. It included a $55.9 million
grant, a $1.6 billion tax credit, and a reimbursement package worth $5 million
for employee training. Every dollar of this package represented a direct
transfer of money from Virginia taxpayers to the profits of the Motorola
corporation. Special property tax breaks given by New York City to private
companies subsidized them to the tune of $301.8 million in 1994 alone. Direct
U.S. government subsidies to tobacco growers will come to $41 million in 1997.
The oil and gas industry gets $2.4 billion a year in federal subsidies in the
form of oil depletion allowances. Over a ten year period the U.S. government
subsidized Cargil’s foreign grain sales by $1.3 billion. The U.S. government is
currently in the process of giving away spectrum rights to the broadcast
industry that former Senator Robert Dole estimates are worth from $12 to 70
billion. Mc Donald’s receives $1.6 million from the government each year to
advertise its fast food products overseas. The conservative Cato Institute
estimates that such direct and tax break corporate subsidies total$135 billion a
year.(1)


In the 1950’s taxes on U.S. corporations provided 31 percent of the federal
government’s general revenues. Their share is now down to just 15 percent. In
1957, corporations provided 45 percent of local property tax revenues in the
United states. By 1987, their share had dropped to about 16 percent. Since
corporations rely on public services and infrastructure, expect the full protec
tion of their assets by the U.S. military, and depend on workers educated at
public expense they rightly bear a fair share of the tax burden required to pay
for these and other public services. When they are excepted from paying their
fair share of taxes, the cost of the services they enjoy is shifted to other
taxpayers.


There are also the costs imposed on society by the products corporations
sell. For example, the health consequences of the cigarettes from which
corporations profit cost the public an estimated $53.9 billion a year. Similarly
society bears a $135.8 billion burden for the consequences of unsafe vehicles.
There are as well the costs born by workers who suffer injuries and accidents as
a result of unsafe work places ($141.6 billion) or die from workplace cancer
($274.7 billion).(2)


These are all uncompensated costs imposed on society by the operations and
activities of corporations. Every such externalized cost, whether in the form of
a direct cash payment or in the form of diminished health and quality of life,
involves privatizing a gain and socializing its associated costs onto the
community. Each such externalized cost represents an unearned public subsidy to
the firm’s profits — a taking by the corporation from the society —
and is properly deducted from reported financial profits when determining the
value added contribution of the corporation to society.


Ralph Estes, author of Tyranny of the Bottom Line and Corporate
Social Accounting,
has compiled estimates from a number of studies of the
costs that corpora tions impose on U.S. society. He came up with a conservative
total annual figure of $2.6 trillion based on 1994 dollars—not even
including the direct cash subsidies and special tax breaks estimated by the Cato
Institute.(3) This figure compares to total 1994 before tax
corporate profits in the United States of $515 billion.(4) In
other words society subsidizes America’s corporations by more than five times
the amount of the profits they generate for their shareholders.


Some of the externalized costs might be considered a form of income transfer
from society to the corporation and its owners. As disturbing as this may be,
the truly tragic forms of cost externalization involve the absolute, and
sometimes permanent, destruction or depletion of the real productive capital of
the society. For example, when a corporation:

  • Employs workers in insecure jobs with inadequate pay, the stress of
    economic insecurity and attempting to maintain self and family on less than a
    living family wage results in family breakdown and violence, depleting the
    social capital of society.
  • Hires young women in places like the Mexican maquiladoras under conditions
    that after three or four years leave the workers with eyesight problems,
    allergies, kidney problems, and repetitive stress injuries that permanently
    impair their productive efficiency and render them unemployable it both destroy
    individual lives and deplete society’s human capital.
  • Strip mines forests, fisheries, and mineral deposits, dumps wastes, and
    sells toxic chemicals that do not breakdown naturally in the environment it
    depletes the earth’s natural capital.
  • Funds campaigns against environmental and other regulations essential to
    protecting the long-term health and viability of the society and demands direct
    subsidies, subsidized infrastructure, and relief from their fair share of taxes
    it depletes society’s institutional capital by undermining the credibility and
    legitimacy of the democratic governments that prove unable to enforce the laws
    and provide the services essential to protecting the long-term health and
    viability of the society.
  • Cuts its own investments in research and employee training, downsizes
    workers and closes plants in denial of any responsibilities to once loyal and
    productive employees and supportive communities erodes the corporation’s own
    physical, intellectual, social, and moral capital.

These are not hypothetical concerns. Take the case of the Benguet Mining
Company in the Philippines documented by Robin Broad and John Cavanagh in their
book Plundering Paradise. In the quest for gold, Ben guet Mining cut
deep gashes into the mountains, stripped away trees and top soil, and dumped
enormous piles of rock into local rivers. With their soils and water sources
depleted, the indigenous Igorot people in the area can no longer grow rice and
bananas and have to go to the other side of the mountain for drinking water and
to bathe. The cyanide used by the Benguet corporation to separate the gold from
the rock poisons the local streams, kills cattle that drink from the streams,
and reduces rice yields of people in the lowlands who use the water for irrigation. When the tailings and cyanide empty into the oceans they kill the coral
reefs and destroy the fishing on which thousands of coastal people depend.


While no specific estimates are available, the cost of Benguet Mining
operations born by the community almost certainly exceed the amount of the
company’s profits and local payroll by a wide margin, resulting in a substantial
net loss to society. Tragically there is nothing at all special about the
Benguet case. It is much the same with Shell Oil in Nigeria, Texaco in Ecuador,
Freeport-McMoRan in Indonesia, or countless other less publicized cases of
predatory corporations devastating the lives and habitats of people who have no
democratic voice as they extract and destroy natural capital for a quick profit.


Or consider the report recently cited by Bob Herbert in the New York
Times(5)
on working conditions endured by young women ages
15 to 28 working at factories that make Nike shoes in Vietnam. Three meals of
rice, a bit of vegetable and perhaps some tofu costs the equivalent of $2.10.
Renting a room costs at least $6 a month. Workers must cover these and all other
expenses out of a paycheck of $1.60 a day. Those interviewed complained that
since starting work at the factory they have suffered frequent headaches,
general fatigue, and weight loss. Workers are allowed one bathroom break and two
drinks of water per eight hour shift. Again, Nike is unfortunately not all that
special. It just happens to have become the poster child symbol of corporations
that profit from worker exploitation.


The profitability of a good many of our largest corporations has little to
do with efficiency. Their profits depend to a disturbing extent on their ability
to use their extraordinary economic power to extract huge subsidies from the
larger society. That in turn allows them to outbid their competitors for capital
and undercut their prices to consumers to further consolidate their power and
demand still more subsidies. As ecological economist Neva Goodwin bluntly
explains, "Power is largely what externalities are about. What’s the point
of having power, if you can’t use it to externalize your costs—to make them
fall on someone else?"(6)


Of course there will be those who argue that the public benefits from these "cost
savings" in the form of lower prices. Here we must again come back to the
concept of market efficiency. Where prices are lower due to a subsidy this
distorts the market signals, giving the subsidized product an advantage over
nonsubsidized alternatives and increasing the hidden burden on society. The
various subsidies enjoyed by the automobile have no doubt contributed to making
the automobile the dominant form of transportation in the United States, at
enormous cost to our quality of life. The removal of these subsidies would
likely shift the balance in favor of more environmentally and socially efficient
public transportation and urban densities.


Corporations have long portrayed themselves as powerful engines of wealth
creation for the benefit of the whole of society. This is a part of their
reality. The corporation also presents a darker face to the world — a
powerful engine of wealth extraction and concentration. Both faces re real,
which defines a central dilemma of our time. How do we exorcize the dark side
with out destroying the essential and beneficial wealth creation face of the
business sector? Fortunately, there may be a truly market based solution to this
dilemma based on linking together two fundamental market principles:
internalized costs and fully informed buyers.


A Market Based Approach to Corporate Responsiblity


There has been a growing interest in various kinds of social accounting and
auditing as a means of increasing the public accountability of corporations to
their multiple stakeholders. A variety of initiatives seek to provide more
information to the public on a host of concerns ranging from environmental
performance, product safety, affirmative action, working conditions, and
community charities. All make an incremental contribution toward increasing
corporate accountability. Most, however, are at once fragmented, detailed, and
partial. Beyond the quite valid idea that a corporation should serve more than
the narrow financial interests of its shareholders they are not grounded in a
coherent theory of either the market or the corporation. The corporation was
never intended to function as a public charity or policy advocate and is not by
design suited to such functions.


It is important to note that for all its power, the global corporation is a
rather crude and simplistic organizational form. It is designed to be
accountable to one constituency, its shareholders, for one thing, profit.
Compare the corporation’s accountability structures to the rich complexity and
sophistication of the structures of modern democratic government designed to
hold government accountable to the whole for the whole.


To ask the corporation to be responsible in some way to a broader set of
stakeholders for meeting a variety of often vague and fragmented standards is to
deny its nature as an institution designed to pursue a single clearly defined
objective for a single interest constituency. It essentially means asking the
corporate CEO to be responsible for making value choices on behalf of the
corporation’s shareholders, customers, and the society beyond profit
maximization. Even if the law and the corporate board were to grant a CEO such
discretion, what reason do we have to expect he or she will exercise it to the
larger benefit of larger society? To whom and through what mechanisms is a
corporate CEO accountable for the exercise of this discretion? Why should we
assume that all persons who happen to head powerful corporations have the wisdom
and the motiva tion to make decisions for the whole? And even for those who do
have the wisdom and motivation, by what right do they hold such power over the
rest of society?


Our efforts to correct the dysfunctions of unaccountable corporate power
must be based on a more focused approach grounded in market theory and our
understanding of the nature of the corporation and its accountability
structures. A straightforward focus on internalizing costs and assuring all
stakeholders free access to relevant information relating to cost
internalization meets both these conditions and would offer a market based approach to making the corporation a more socially responsible entity. Indeed,
actualizing these two conditions of a socially efficient market should be the
central focus of any corporate responsibility program.


The centerpiece of such a social responsibility initiative would be a
corporate cost internalization audit. We might call it the market efficiency
audit (MEA) to highlight the fact it implements a basic market principle. Some
critics of environmental, health, and safety regulations argue that such
matters should be left up to the market to be arbitrated by investor and
consumer choice. Of course to exercise this choice intelligently requires access
to the relevant information. Providing that information is the primary purpose
of the MEA.


The MEA would not be a general social audit of all the things the firm might
do to benefit society beyond its bottom line. Rather it would be a clear and
specific measure of the corporation’s externalized costs—the total public
subsidy of its operations. As with financial accounting, market efficiency audit
accounting should seek to arrive ultimately at a single bottom line number. This
figure could be compared to the corporation’s total sales, profits, and tax
payments, and to averages for the industry and for all corporations to assess
the extent of the corporation’s welfare dependency.(7)


The full audit report should be in the public domain and readily available
to any interested party. A summary of the results should be included in the
firm’s financial prospectus for review by all actual and prospective
shareholders. The basic results should also be included in the labeling of any
product of the corporation.


Just as a shirt label might report the cotton content, it might also
indicate that the public subsidy content is say, $15. Thus the buyer will know
the uncompensated cost to society of his purchase and can make an informed
choice to chose an item from a more socially efficient producer. The lower the
public subsidy content of a given product the more socially responsible the pur
chase.


Similarly, the lower the percentage of a corporation’s subsidy to total
sales the more socially responsible it is to invest in that corporation. It
would be a far more meaningful indicator for socially responsible investing than
the crude yardsticks now applied. Corporations could be ranked by their
percentage of cost internalization just as they are now ranked by profit.


Firms seriously committed to being at the forefront of social responsibility
may lead the way by undertaking MEAs on a voluntary basis as a demonstration of
their commitment to serving the public good. However, an annual MEA should in
due course be a legal requirement for any corporation with $500 million or more
in either sales or assets. The preparation of a MEA by smaller corporations and
unincorporated businesses should be encouraged, but not necessarily required.


Some will surely argue that such an audit would be an unnecessary and
expensive diversion of economic resources because the amount of externalized
cost for their corporations is negligible. Any executive who really believes
this should be an active proponent of the MEA and be an early voluntary adopter.
The audit should confirm the responsibility of their company and thereby
strengthen its public legitimacy and good will. In any event the public that has
granted the privilege of a corporate charter has both the need and the right to
know.


The MEA cannot rightfully be considered an unjustified socialist intrusion
of the state into private affairs. It in no way denies shareholders of their
right to profits commensurate with the contribution of their investment to
increasing the wealth of the society or the freedom of choice of consumers. It
simply calls on the institutions of the market to play by the rules of the
market so that consumers, investors, and communities negotiating for corporate
investments can make more fully informed market decisions.


Furthermore, the burden of proof to establish that it is producing a net
benefit to society should rest with the corporation that enjoys the special
privileges conveyed by the corporate charter. The idea that the corporation
enjoys such privileges as a natural right is a legal fiction without moral
foundation. If there is a cost involved in producing such proof, it should be
considered a price paid for those privileges—a part of the normal cost of
doing business as a corporation. In any event, the costs involved will rarely be
more than a small fraction of the public subsidy the corporation enjoys. Any
corporation that finds it an excessive burden would be free to avoid the
scrutiny by giving up their corporate charter and the special privileges it
bestows.


Maintaining the independence and integrity of the MEA will pose an important
challenge. There will be need for a well developed set of MEA accounting
standards established by qualified and independent professional group under
public oversight. A corporation’s MEA accounting system should be maintained by
a special unit accountable directly to a committee of outside board members and
be subject to audit by an accredited independent external agency. Ralph Estes
has suggested that the ultimate governmental oversight might be the
responsibility of the Securities and Ex change Commission.


The idea of MEA accounting is not new. Corporate social accounting was a
lively topic, especially within the accounting profession, in the 1970s. With
the current upsurge in public awareness and concern about corpo rate
responsibility it is now an idea whose time has come.


It could become an organizing issue for various groups concerned with
increasing corporate responsibility and accountability. Groups developing
social auditing instruments might join with professional accounting groups to
develop appropriate accounting and auditing standards. Advocacy groups
campaigning on corporate issues can raise public consciousness of the extent and
implications of cost externalization and build political support for legislation
mandating the implementation of MEA accounting. Business groups that have a
serious commitment to increasing business responsibility should call on
corporations to make cost internalization a basic principle in corporate codes
of conduct.


Such measures can never be an adequate substitute for a strong and
vigorously enforced regulatory frame work designed to protect the public from
the worst consequences of cost externalizing corporate practices. They can,
however, be an important supplement to such measures consistent with sound
market principles.


If MEA accounting were to become a standard feature of corporate management
practice it would bring to light vast hidden inefficiencies of a system of
business that in the name of the market violates nearly every principle of an
efficient market economy. It will almost surely lead to radical and much needed
restructuring of the institutions of the business sector as the market purges
the truly inefficient and restores a needed institutional balance in society by
significantly reducing the dominance of the largest and most subsidy dependent
global corporations and the disproportionate allocation of wealth to
shareholders over workers.


It will also raise the prices, and thereby reduce the use, of many harmful
market goods. Traumatic as this may be for the corporate world during the
transition period, the end result will be a healthier business community,
healthier societies, and an increase in both the legitimacy and efficiency of
the world’s market economies. In pressing forward this agenda, business leaders
will be working to fulfill their social responsibility to the whole in ways that
are both powerful in their positive implications for society and consistent with
their roles and the nature of the institutions they head.


_______________


David C. Korten is president of the People-Centered
Development Forum and author of When Corporations Rule the World. This
article may be freely reprinted with appropriate credits without further
permission.


Endnotes


1. "The End of Corporate Welfare as We Know It?"
Business Week, February 10, 1997, p. 36.


2. Estimates are from Ralph Estes, Tyranny of the
Bottom Line: Why Corporations Make Good People Do Bad Things
(San Francisco:
Berrett-Koehler, 1995), pp. 177–185.


3. Ibid, p. 178.


4. U.S. Bureau of Economic Analysis, Survey of Current
Business
, June 1996 as reported Otto Johnson, editor, 1997 Information
Please Almanac
(New York: Houghton Mifflin, 1996), p. 64.


5. March 31, 1997, p. A-5.


6. Neva Goodwin, "Externalities and Economic Power"
(paper presented at the fall retreat of the Environmental Grantmakers
Association, Bretton Woods, N.H., October 13–15, 1994), p. 2.


7. A related approach, the corporate "Social Impact
Statement," is presented in Ralph Estes’ Corporate Social Accounting
(John Wiley & Sons, 1976, Chapter 4). It matches corporate social benefits
against social costs to arrive at a net social surplus or deficit. Estes is now
organizing a national Stakeholder Alliance to press for full corporate
accountability.


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