A note on the social role of companies #SIF12

There is a curious view of companies that state that companies should do only one thing: maximize shareholder value. This view is sometimes thought of as a hardline, capitalist view and it views companies as value-neutral, value-agnostic. And there is a subtext of this being the “pure” nature of the corporation, all else a dilution of the essence of what it is to be a company.

But consider the following case. Assume that persons A, B and C get together to start a company, the purpose of which is to usher in artificial intelligence into the world, and that they believe that AI as a general purpose technology will be the savior of our sadly tribal, biologically rooted existence (note that I am not saying I share their analysis). They produce consumer AI and with that they make a lot of money that they funnel back into the company and they start setting up foundations for AIs that will enable their software to evolve and grow forever. They offer shares on an open market, but split the share so that they retain the vote (many companies in SIlicon Valley do this) — share holders know this, and are aware of the company’s objectives.

In one sense this company is optimizing the value of the share holders, but those values are non-monetary. In another this company seems like a strange hybrid thing in the eyes of the reductio-capitalists who want to see only monetary value optimized.

So, how does this work? One observation would be that historically companies have always been enmeshed in society. If we, with Ferdinand Tonnies, analyze the old forms of social organization like the Gemeinshaft of the old village, any commercial enterprise was a part of the social institutional framework in the village. It is first with the growth of the city that monetary values start acquiring more weight. Maybe companies have always been social, always have been geared towards optimizing a basket of values that go beyond the monetary?

The Stockholm Internet Forum made me think about these things a lot. I do believe that the last couple of years have seen citizens expect to be treated by their governments as consumers, but as Alistair Campbell said in a talk I recently heard this evolution has been mirrored by one in which consumers increasingly want to be treated as citizens of the corporations they interact with. We have understood the first, but not the second of these trends.

In essence then: what if the notion of corporate social responsibility is nothing but a pleonasm? An unnecessary statement of the obvious: that companies are value-laden parts of society that need to acts as such and express values too? That means that the leadership of a company should be able to defend the values expressed by the company as a whole, not only separate CSR programmes, and it seems to me that would be an interesting development.

All in all I believe that corporations would benefit from being treated as integral parts of society, not merely profit mechanisms. The really difficult thing to sort is where companies do better for society by producing profit than by doing what a vocal set of people believe is right. In many – but not all – cases the focus on profit will be the same as the best thing for society, and that is what causes the confusion, I believe.

This thought needs to be developed more.

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2 Kommentarer.

  1. “How selfish soever man may be supposed, there are evidently some principles in his nature, which interest him in the fortunes of others, and render their happiness necessary to him, though he derives nothing from it, except the pleasure of seeing it.”
    The Theory of Moral Sentiments, Adam Smith.

    The market as a societally useful coordinating system for harnessing self-interest, one of man’s many motivations, to produce good outcomes.

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