Responsibility Beyond Profit

That business has a responsibility to society beyond the making of profits is by now a commonplace, though still far from universally granted idea. Businessmen have often been confused, however, by the exact nature of their responsibility to improve society and how to carry it out. Last week the Committee for Economic Development, a prestigious group of top executives and academics, tried to cut through the confusion. After long and lively debate, its 50-man research and policy committee adopted a statement that lays down some principles and guidelines for corporate social action. Among them:

> The "constituency" of a large corporation embraces not only its workers and stockholders but also consumers and "community neighbors," the people who live near its plants and are inevitably affected by its activities. All have claims on the corporation.

> Major companies should adopt specific social goals--for example, in hiring and promoting blacks and reducing pollution--and measure progress toward meeting these objectives as carefully and regularly as they now gauge progress in meeting financial targets. -- Top management should encourage younger executives to contribute time to community projects in such areas as health, education and recreation--not as an "extracurricular" activity but as an "essential ingredient for managers aiming to equip themselves for broader corporate responsibility." -- Each big firm should set up a team, under a senior executive, that would look for potentially profitable "social market" activities in such fields as rebuilding ghettos and designing efficient transportation systems--and do so as aggressively as the regular marketing staff searches out other new commercial opportunities.

> Government should spur business efforts by a program of contracts, loans and subsidies for social programs--and penalties for socially or environmentally harmful activity. In areas like pollution control, where effective action depends largely on all businesses working toward that goal, corporate executives have a moral responsibility to propose and lobby for tough federal standards that all must meet.

Cultivate the Garden. The statement drew objections from some CED members who still feel that business can serve society best by conducting its own operations effectively. In a biting dissent, Philip Sporn, former president of American Electric Power Co., argued that before business gets any heady notions of saving society it must first improve its own performance. The railroad industry, he said, would serve society best by designing the "modern system of transportation" that so far it "has not even approached"; the New York Telephone Co. should improve its present "third rate" service; and the utilities' main obligation, which they have not met, is to provide "an adequate power supply, reliable and not subject to sudden cataclysmic failures." He concluded: "Let us cultivate our garden."

Sporn undoubtedly has a point. Many businesses need to do a much better job of fulfilling their basic economic functions. That, however, does not excuse them from pursuing broader social goals. The CED report is woefully bare of specifics as to just what corporations can do to improve education, medical care and housing, but it does effectively make the point that business can thrive only in a healthy society.

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