The Social Responsibility of Unions

The theory of corporate social responsibility (CSR) holds that the primary responsibility of a corporation is to benefit society, i.e., companies should always act in the best interests of stakeholders and not just be accountable to their shareholders. In making their decisions, companies cannot simply maximize income, they must consider the costs to stakeholders.

The sloppiness of CSR theory is problematic but rarely discussed in academic literature. The definition of a stakeholder is imprecise and fluid. Customers are one form of a stakeholder, and socially responsible companies are scolded when they harm or fail to respond to customers. We netted a nice little subprime mess when we threatened banks and mortgage companies with discrimination charges for not making more loans to low-income customers.

However, not all customers are created equal in the world of CSR. Smith & Wesson’s parent company settled up with class-action anti-gun litigants who demanded millions for health-care costs from gun injuries. Smith & Wesson won the accolades of the CSR community for parting ways with those other nasty gun manufacturers and addressing the greater social good.  The accolades were as short-lived as the company’s profits. Hell hath no fury like a Smith & Wesson customer who perceives a company that will not fight for the Second Amendment.  Smith & Wesson lost so many customers that the parent sold it at a loss.

CSR theory does not provide a resolution when stakeholder interests are at odds, i.e., in a world of many stakeholders with varying demands, which stakeholder wins? Time Warner was besieged with customer and public policy experts’ demands for a recall of Ice-T’s famous “Cop Killer” song (on his “Body Count” CD).. However, recording artists (other stakeholders) demanded that Time Warner back artistic expression and threatened to leave its stable of stars if it caved to other less worthy stakeholders.  Enter the Time Warner shareholders, including the public pension funds that covered “cops.” Police officers and their pension managers showed up at Time Warner’s annual meeting and supported a recall through their spokesperson, Charlton Heston, then-head of the NRA.  Trouble is afoot when Moses shows up as a stakeholder at your annual meeting.  The CD sold really well, Time Warner garnered a lot of free advertising, and Ice-T ended up playing a “cop” in a television series.  The end result of that stakeholder/shareholder division was a mess and results contra to everyone’s intent and best interests.

            Perhaps the greatest flaw in CSR/stakeholder theory is its application only to companies.  Indeed, it applies only to large companies because, after all, no one expects local businesses to do anything but stay in business by earning money. Non-business organizations are immune from the demands of CSR.  That’s a pity for just as a corporation cannot have a conscience, ala Sir Alfred Coke, neither for example, can a union.  Unions need the tenets of CSR.  Without such a social conscience and accountability to stakeholders, we end up with societal problems such as our auto industry.  As a National Review writer put it, the auto companies build cars for a hobby; they are running a pension plan. Actually, we as taxpayers are now building cars as a hobby, subsidizing their sales, and running a pension plan until Toyota and Hyundai corner the market or the last UAW worker is gone, with the former more likely to come first what with the fabulous health care plans of the UAW.  

            Unions should adhere to the doctrine of social responsibility, the same demand they use to corner companies. Unions should consider their stakeholders because union demands and decisions are, like companies, also driven by a desire to maximize income through increased wages, benefits, and pensions. Stakeholders for public employee unions would be us taxpayers. If teacher unions had been forced to consider the impact of their demands on stakeholder/taxpayers, the near-universal budget deficits at the state level might have been averted.  CSR Teacher unions would weigh the costs and consequences to their student stakeholders before striking.  Imagine the emotional CSR arguments that pit “the children” against greedy teachers who demand pensions sans contributions. If the teacher unions in Wisconsin had just been forced to consider the cost of their strike in terms of damage to the marble at the state capitol building, they would have had a $7.5 million figure in the con column on their strike.

            The CSR theory has never offered much to companies in its flawed assumption battle between social good and companies.  Ironically, the good-of-the-whole CSR approach to running any organization ultimately destroys the benefactor. Oddly, public sector unions may be on the verge of accomplishing the same thing with their benefactor states because they were indifferent to their own stakeholders.

About mmjdiary

Professor Marianne Jennings is an emeritus professor of legal and ethical studies from the W.P. Carey School of Business at Arizona State University, retiring in 2011 after 35 years of teaching undergraduate and graduate courses in ethics and the legal environment of business. During her tenure at ASU, she served as director of the Joan and David Lincoln Center for Applied Ethics from 1995-1999. In 2006, she was appointed faculty director for the W.P. Carey Executive MBA Program. She has done consulting work for businesses and professional groups including AICPA, Boeing, Dial Corporation, Edward Jones, Mattel, Motorola, CFA Institute, Southern California Edison, the Institute of Internal Auditors, AIMR, DuPont, AES, Blue Cross Blue Shield, Motorola, Hy-Vee Foods, IBM, Bell Helicopter, Amgen, Raytheon, and VIAD. The sixth edition of her textbook, Case Studies in Business Ethics, was published in February 2011. The ninth edition of her textbook, Business: lts Legal, Ethical and Global Environment was published in January 2011. The 23rd edition of her book, Business Law: Principles and Cases, will be published in January 2013. The tenth edition of her book, Real Estate Law, will also be published in January 2013. Her book, A Business Tale: A Story of Ethics, Choices, Success, and a Very Large Rabbit, a fable about business ethics, was chosen by Library Journal in 2004 as its business book of the year. A Business Tale was also a finalist for two other literary awards for 2004. In 2000 her book on corporate governance was published by the New York Times MBA Pocket Series. Her book on long-term success, Building a Business Through Good Times and Bad: Lessons from Fifteen Companies, Each With a Century of Dividends, was published in October 2002 and has been used by Booz, Allen, Hamilton for its work on business longevity. Her latest book, The Seven Signs of Ethical Collapse was published by St. Martin’s Press in July 2006 and has been a finalist for two book awards. Her weekly columns are syndicated around the country, and her work has appeared in the Wall Street Journal, the Chicago Tribune, the New York Times, Washington Post, and the Reader's Digest. A collection of her essays, Nobody Fixes Real Carrot Sticks Anymore, first published in 1994 is still being published. She has been a commentator on business issues on All Things Considered for National Public Radio. She has served on four boards of directors, including Arizona Public Service (1987-2000), Zealous Capital Corporation, and the Center for Children with Chronic Illness and Disability at the University of Minnesota. She was appointed to the board of advisors for the Institute of Nuclear Power Operators in 2004 and served on the board of trustees for Think Arizona, a public policy think tank. She has appeared on CNBC, CBS This Morning, the Today Show, and CBS Evening News. In 2010 she was named one of the Top 100 Thought Leaders in Business Ethics by Trust Across America. Her books have been translated into four different languages. She received the British Emerald award for authoring one of their top 50 articles in management publications, chosen from over 15,000 articles. Personal: Married since 1976 to Terry H. Jennings, Maricopa County Attorney’s Office Deputy County Attorney; five children: Sarah, Sam, and John, and the late Claire and Hannah Jennings.
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