“We are part of a growing movement, comprised of many across the industry who recognise the grave responsibility that those creating powerful technology have to ensure what they build is used for good, and not for harm.”
Powerful words, but who wrote them? Voices from the fringe? No. These words were penned by staff at Microsoft, who circulated a letter internally calling for the company to cancel its $19million contract with US Immigration and Customs Enforcement (ICE) in light of the cruel policy of separating migrant children from their parents. The letter further calls on the leaders of the company to “draft, publicise, and enforce a clear policy stating that neither Microsoft nor its contractors will work with clients who violate international human rights law.” Within a few hours of posting, it had over 100 signatures and counting.
My views on U.S. immigration policy https://t.co/AZ84yWhFmR— Satya Nadella (@satyanadella) June 20, 2018
This is not an isolated incident of employee activism. Across multiple sectors, particularly those competing for highly skilled labor in the millennial generation, companies are facing calls from within their own walls to live up to ethical values. Ranging from revolts against Donald Trump’s Muslim “travel ban” in Silicon Valley to business boycotts following the adoption of anti-LGBTI laws in North Carolina, employees are pushing their companies into more activist stances as a cost of doing business.
This rising employee social activism was presaged by the growing benefit corporation movement. “Benefit corporations” agree in their founding documents to take account of wider stakeholders than just their shareholders, including the environment, community, and workers. This gives them wider latitude, in theory, to move beyond the short-term pursuit of profit maximisation for shareholders that is the hallmark of traditional corporations. These benefit corporations are sometimes referred to as the “fourth sector’, following public, private and non-profit enterprises.
Benefit corporations have grown in number at the same time that there has been an exponential growth in “impact investing”. Defined as “investments made into companies, organisations, and funds with the intention to generate social and environmental impact alongside a financial return,” impact investment by some measures make up 30 per cent of the investment assets under professional financial management.
Last year, the World Economic Forum launched the Fourth Sector Development Initiative (FSDI) to spur rapid investment in “a strong supportive ecosystem that is tailored to their unique requirements. In doing this, the WEF cited the need to invest in new business models in order to achieve the Sustainable Development Goals (SDGs) by 2030. But while benefit corporations are a welcome development, what does this say to those fighting within traditional corporations today to demand more socially and environmentally responsible decision-making?
Benefit corporations are both an interesting and necessary evolution of the corporate sector to focus beyond maximising shareholder value, and at the same time a cop-out for the corporate sector as it is today. Because efforts to develop the benefit corporation sector are essentially buying into the argument that the existing private enterprise structure should necessarily and exclusively focus on profit maximisation and shareholder value to the exclusion of any other consideration. But the actual legal requirement for this is not so absolute.
A piece in the Harvard Law School Forum on Corporate Governance and Financial Regulation argued that “there’s no legal reason that all companies can’t consider a wide range of interests in order to make responsible corporate decisions. Nor is there reason [benefit corporation] advocates should provide them with excuses not to do so by overstating the limitations placed on directorial discretion by existing law.”
One of the most astonishing, and depressing assertions in the announcement of the FSDI was that it would be “exponentially easier” to direct over a trillion dollars in investment into the development of the fourth sector to achieve the SDGs, “rather than trying to re-engineer the other three. This is throwing in the towel on a massive scale, telling private sector to just keep on doing what it’s doing because of course it can’t change. It’s always sexier to build something new instead of trying to fix something broken, but the truth is that if we don’t address the business imperatives that are driving rampant environmental destruction and rising inequality, we are rearranging the deck chairs on the Titanic.
Will we achieve the SDGs without the corporate sector? No, if for no other reason than they were explicitly designed to be delivered via private sector investment and implementation. It will take benefit corporations, C- corps, government and non-profit organisations bringing multiple tools to bear to achieve them. But let’s not be too hasty to dismiss the transformative potential of employee activism within traditional corporations and keep their feet to the fire.
Quinn McKew is the deputy executive director of ARTICLE 19, a CIVICUS partner.
This article is part of a series to celebrate CIVICUS’ 25th anniversary and provide perspectives and insights on citizen action around the world.