Why Socially Responsible Companies Should Have Legal Status

I’ve been giving a lot of thought to “socially responsible companies” lately. A socially responsible company (SRC) has more than a simple fiduciary responsibility to its shareholders (wall-street speak for “make as much money as possible so we can line the pockets of the owners“); it also must give due consideration to the social context in which it operates. The big idea behind SRCs is to give companies the freedom to protect not only their shareholder’s wallets, but also their stakeholder’s welfare.

If publicly-traded SRCs were certified and given official legal status as such, they would have the legal protection needed to consider options other than maximizing profits without regard to the social consequences. In other words, rather than waiting to be sued for having done something wrong, dragging it out through the courts for as long as possible, then settling for an undisclosed sum while not admitting guilt or responsibility, companies could actively pursue doing something right, even if it might cost the shareholders money.

Consider for example the gambling industry; in particular, casinos.

CasinoCasinos make money when people gamble; the more people gamble there, the more money the casino makes. But the tools now exist for a casino to identify likely gambling addicts by way of analyzing the data they collect on their customers. If a casino were a registered, legally-protected SRC, it would have the protection it needed to pursue the development and refinement of these tools, so as to get the customers who might otherwise spend themselves into financial oblivion the help they need, or at least cut them off, even if doing so resulted in financial losses for the casino. This makes an awful lot of sense to me. The way the system works now, the casinos either have to A) gamble that implementing these tools will give them a competitive advantage (“Worry-free gambling here! We’ll cut you off and kick you out if the computer says you have a problem!”), or B) hope the government or the communities in which they operate don’t protest or pass laws mandating these tools, while doing nothing and continue to screw a small percentage of their customers, who are gambling their way into bankruptcy. Guess which one they prefer? (Not sure? Read the article.)

 

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