Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Rewriting the social contract

Posted by David Kassel on May 15, 2007

We may have entered a new era of cooperation between business, government, and the citizenry because the ability to address environmental and social problems is increasingly being seen as beyond the reach of any one of those players.

As a result, according to Allen White, a senior advisor to the nonprofit organization, Business for Social Responsibility, it’s time to rewrite the “social contract” that has existed for centuries among business, citizens and government.

Yet how to rewrite it? White maintains there is little consensus about that, particularly in the business community, which has done little to address pressing problems such as the rising cost of health care in this country.

In a paper titled “Is it Time to Rewrite the Social Contract?”, White provides a helpful and clearly written historical context for this issue. He notes that philosophers such as Hobbes, Locke, and Rousseau in the 17th and 18th centuries first conceived of the idea of a social contract that involved the delegation by citizens of a certain amount of authority to the government so that everyone could benefit from the shared social arrangement. These early conceptions evolved into our modern concepts of democratic government, the rule of law and due process.

In the early 19th century, the corporation emerged as a third party to this social contract between the government and the citizenry. Yet, while citizens in democracies could install or replace governments though the electoral process, they couldn’t do the same with corporations. The principal lines of accountability ran primarily from directors of the corporations to the shareholders, not to the citizens.

This director-shareholder dynamic continued into the 20th century, when it began to change, first as a result of anti-trust legislation and the regulatory control exerted by the Securities and Exchange Commission, and later with the enactment of legislation to protect the environment. These events reined in shareholder primacy somewhat. But in the final two decades of the 20th century, the social contract changed back again, with the newfound Regan-Thatcher-style faith in unbridled capitalism and the resulting expansion of privatization.

Yet, into the mix in the past decade has come “civil society organizations” (CSOs)–community advisory panels, ad hoc consultative groups, and partnerships–that have gained some new leverage with corporations on issues such as workplace safety and global climate change. Lately, these organizations have matured into a major player in the continuing evolution of the social contract, White says.

White suggests that a framework is now needed to redefine this changing relationship of business to the other players in the social contract. First, the purpose of corporations must be restated as more than just serving shareholder interests. Secondly, corporations must take a long-term view of wealth creation, rather than concentrating on short-term profits. Third, business must recognize the need to operate in new partnerships with government and civil society. Finally, a declining professionalism in government must be addressed and a consensus reached on the role government should play in addressing 21st century problems.

White frames the title to his paper as a question. But he answers it strongly in the affirmative, concluding that “rethinking the social contract remains one of the most urgent imperatives of our time.”

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