Corporate citizenship
Encyclopedia
Corporate citizenship is a term used to describe a company's role in, or responsibilities towards society. For this reason it is sometimes used interchangeably with corporate social responsibility
, and in fact many companies including Microsoft, IBM and Novartis have used it in this way to describe their social initiatives. However, many also take it to mean that corporations should be regarded as citizens within a territory - i.e. that corporations have citizenship
of some sort. This is usually based on the principle of corporate personhood
, in that in certain legal jurisdictions, such as the United States, companies are afforded some of the same legal rights as individuals. Therefore, if corporations are 'artificial persons
' under the law (e.g. they own their own assets, they can sue and be sued etc), then they can also claim some of the entitlements, privileges and protections of citizenship such as rights to free speech and political participation. Although this debate remains very active (see legal controversies below), a more recent approach to corporate citizenship has also stressed the political role of corporations in protecting or inhibiting the citizenship rights of individuals (such as by taking over previously governmental roles and functions) or direct political activity such as lobbying and party financing.
All three approaches can be seen in practice, but in the business world the first two views predominate, whilst in academia the extended view has started to gain greater prominence.
In 2003, a Supreme Court showdown over corporate free speech was narrowly avoided when the parties in Nike v. Kasky settled out of court. The suit revolved around Nike's public defense of its actions, through letters to the editor, press releases, and other public commentary, to claims it was using sweatshop labor. The legal question was whether such public relations speech was "commercial speech
," which receives less constitutional protection, or political speech, which receives the highest level of First Amendment protection.
See WSJ -- Nike v. Kasky, the First Amendment... and USSC 02-575
In 2010, Citizens United v Federal Election Commission
, , was a landmark
decision by the United States Supreme Court
holding that corporate funding of independent political broadcasts in candidate elections cannot be limited under the First Amendment
. That is, corporations now have a basic right assured under the constitution to provide funding for political ads and other communications during elections.
Both of these cases revolved around whether corporations could exercise free speech of a political nature in the same way as individual citizens (i.e. that it would be protected under the First Amendment), or whether they should be bound by more limited commercial rights. Citizens United came out in favour of the former, yet it is not clear to what extent this can be inferred to present corporations with broader protections of citizenship.
This 'extended' perspective on corporate citizenship, sometimes dubbed 'new corporate citizenship theory' has been controverisal in that it is seen by some as legitimizing a role for corporations beyond their traditional economic functions. However, in defence of their approach, proponents argue that "The blurring boundaries between government, business and civil society challenge many of our existing constructs in the social sciences, of which citizenship and governance are just two prominent examples... to deny the changes that confront us just because they have some rather problematic or undesired implications will not make them go away."
Corporate social responsibility
Corporate social responsibility is a form of corporate self-regulation integrated into a business model...
, and in fact many companies including Microsoft, IBM and Novartis have used it in this way to describe their social initiatives. However, many also take it to mean that corporations should be regarded as citizens within a territory - i.e. that corporations have citizenship
Citizenship
Citizenship is the state of being a citizen of a particular social, political, national, or human resource community. Citizenship status, under social contract theory, carries with it both rights and responsibilities...
of some sort. This is usually based on the principle of corporate personhood
Corporate personhood
Corporate personhood is the status conferred upon corporations under the law, which allows corporations to have rights and responsibilities similar to those of a natural person. There is a question about which subset of rights that are afforded to natural persons should also be afforded to...
, in that in certain legal jurisdictions, such as the United States, companies are afforded some of the same legal rights as individuals. Therefore, if corporations are 'artificial persons
Legal personality
Legal personality is the characteristic of a non-human entity regarded by law to have the status of a person....
' under the law (e.g. they own their own assets, they can sue and be sued etc), then they can also claim some of the entitlements, privileges and protections of citizenship such as rights to free speech and political participation. Although this debate remains very active (see legal controversies below), a more recent approach to corporate citizenship has also stressed the political role of corporations in protecting or inhibiting the citizenship rights of individuals (such as by taking over previously governmental roles and functions) or direct political activity such as lobbying and party financing.
Uses of the term
The term 'corporate citizenship' has been in use for some decades, but only rose to prominence during the 2000s. There is considerable confusion over what exactly is meant by the use of the term. Matten and Crane (2005) distinguish between three views of corporate citizenship:- Limited view - where corporate citizenship is used to denote corporate philanthropy in the local community, such as being a 'good citizen' in donating money to charity or helping out a local sports or arts institution.
- Equivalent view - where corporate citizenship is used to refer to corporate social responsibilityCorporate social responsibilityCorporate social responsibility is a form of corporate self-regulation integrated into a business model...
. Matten and Crane refer here to a paper by Archie Carroll who described the "four faces of corporate citizenship" exactly the same as he had previously defined the four levels of CSR - as economic, legal, ethical, and philanthropic responsibilities. Many authors, companies, and consultancies adopt a similar approach. It is also evident in annual rankings of the 'top corporate citizens', such as those by CRO Magazine and Corporate Knights
- Extended view - where corporate citizenship is seen in terms of its distinctly political connotations, such as corporate claims to citizenship entitlements, firms' participation in global governance, or corporate involvement in the administration of individuals' social, civil and political rights. Some authors refer to this as "political CSR" or a "beyond CSR" perspective.
All three approaches can be seen in practice, but in the business world the first two views predominate, whilst in academia the extended view has started to gain greater prominence.
Corporations as citizens
Although it is generally accepted that corporations are not citizens in the same way that "real" citizens are - they cannot hold passports or vote in elections for example - it has been recognized that they do share in some of the same or similar practices, such as paying taxes, engaging in free speech, and expecting certain protections from the state. There is concern, however, that extending the scope of citizenship to incorporate corporations may infringe upon democracy and equality given their access to substantial power and resources. Some authors have suggested that corporations should not be considered in terms of the legal status or identity of citizenship but could be thought of as acting as if they were citizens when they participate in politics through lobbying and governance type activities.Legal controversies
The legal context to claims that corporations have some official status as citizens varies across different legal jurisdictions, but is generally rather unclear. Two recent US cases illustrate this complexity.In 2003, a Supreme Court showdown over corporate free speech was narrowly avoided when the parties in Nike v. Kasky settled out of court. The suit revolved around Nike's public defense of its actions, through letters to the editor, press releases, and other public commentary, to claims it was using sweatshop labor. The legal question was whether such public relations speech was "commercial speech
Commercial speech
Commercial Speech is speech done on behalf of a company or individual for the intent of making a profit. It is economic in nature and usually has the intent of convincing the audience to partake in a particular action, often purchasing a specific product...
," which receives less constitutional protection, or political speech, which receives the highest level of First Amendment protection.
See WSJ -- Nike v. Kasky, the First Amendment... and USSC 02-575
In 2010, Citizens United v Federal Election Commission
Citizens United v. Federal Election Commission
Citizens United v. Federal Election Commission, , was a landmark decision by the United States Supreme Court holding that the First Amendment prohibits government from censoring political broadcasts in candidate elections when those broadcasts are funded by corporations or unions...
, , was a landmark
Landmark decision
Landmark court decisions establish new precedents that establish a significant new legal principle or concept, or otherwise substantially change the interpretation of existing law...
decision by the United States Supreme Court
Supreme Court of the United States
The Supreme Court of the United States is the highest court in the United States. It has ultimate appellate jurisdiction over all state and federal courts, and original jurisdiction over a small range of cases...
holding that corporate funding of independent political broadcasts in candidate elections cannot be limited under the First Amendment
First Amendment to the United States Constitution
The First Amendment to the United States Constitution is part of the Bill of Rights. The amendment prohibits the making of any law respecting an establishment of religion, impeding the free exercise of religion, abridging the freedom of speech, infringing on the freedom of the press, interfering...
. That is, corporations now have a basic right assured under the constitution to provide funding for political ads and other communications during elections.
Both of these cases revolved around whether corporations could exercise free speech of a political nature in the same way as individual citizens (i.e. that it would be protected under the First Amendment), or whether they should be bound by more limited commercial rights. Citizens United came out in favour of the former, yet it is not clear to what extent this can be inferred to present corporations with broader protections of citizenship.
Corporations as political actors
Some authors and commentators subscribe to a view of corporate citizenship as denoting that corporations are political actors or that they have political agency of one sort or another. This is closely related to the idea that corporations are heavily influencing or even 'taking over' certain functions of politics from governments (a phenomenon that has been remarked upon for some time and was popularised by books such as Noreena Hertz's The Silent Takeover). Corporate citizenship theorists tend to particularly focus on the spread of global capitalism and voids in global governance, such as the protection of human rights in developing countries and access to basic public goods such as clean water. Corporations, they suggest, are increasingly influential in whether these rights of citizenship are respected or not.This 'extended' perspective on corporate citizenship, sometimes dubbed 'new corporate citizenship theory' has been controverisal in that it is seen by some as legitimizing a role for corporations beyond their traditional economic functions. However, in defence of their approach, proponents argue that "The blurring boundaries between government, business and civil society challenge many of our existing constructs in the social sciences, of which citizenship and governance are just two prominent examples... to deny the changes that confront us just because they have some rather problematic or undesired implications will not make them go away."
Further reading
- Crane and Matten blog on the political responsibilities of corporations
- Crane, A., Matten, D. and Moon, J. (2008), Corporations and Citizenship, Cambridge: Cambridge University Press.
- Scherer, A.G. and Palazzo, G. (Eds.). 2008. Handbook of Research on Global Corporate Citizenship. Cheltenham, UK, and Northampton, MA: Edward Elgar.
- Yasser, Qaiser Rafique, Corporate Citizenship: A New Peak (May 2, 2011). Available at SSRN: http://ssrn.com/abstract=1828602
- Willy, Rose, Corporate Citizenship: New Dimensions (April, 2011). Asian Economic and Social Review