Corporate Political Responsibility - The political responsibility of companies

Extract from

Winfried Weber, Die Purpose-Wirtschaft, 2024, eBook (Amazon Kindle, http://tiny.cc/9eznzz ) (Translation by the author)

The last few years will go down in history as a turning point, as years of massive threats to liberal democracies and freedom. Companies in particular are asking themselves whether and how they should respond with new attitudes and strategies.

The division of responsibilities between politicians and entrepreneurs/executives has been cemented and unquestioned for decades. Entrepreneurs take responsibility for a sustainable economy and must first and foremost pay attention to solvency. Politicians maintain an open society - they gain power by basing their programs and decisions on votes or lose it when the opposition announces better alternatives. This is how both "jobs" were defined. These decision-making patterns were the focus of day-to-day business for both functions. In view of the current geopolitical and economic crises and disasters, economic actors in particular are faced with the question of how they should react to the threat to liberal society, entrepreneurial freedom and the rule of law posed by authoritarian and totalitarian aggressors and movements.

At the forum "Liberal democracy in danger - what can companies do?", Ralf Fücks from the Zentrum Liberale Moderne summarized the current situation of companies in Germany in seven theses. Firstly, the German business model needs to be fundamentally rethought. Secondly, the naive convergence theory has been refuted (change through trade). Thirdly, society is moving into a new period of the primacy of politics over economics. Fourthly, for many people of the younger generation, the climate crisis is a systemic crisis of capitalism. Fifthly, a moralization of the economy can be observed everywhere in the Western world. Sixthly, in order to be economically successful in the long term, ethical and normative issues are becoming more important. Seventh, companies must see themselves as political actors. (Fücks 2022)

As early as the 1980s, Peter Drucker pointed out that entrepreneurs cannot ignore their contributions to the preservation and further development of liberal democracy alongside their focus on efficiency and effectiveness. Democracies offer the best environment for innovation and future viability, the further development of civil society and diversity in the economy and society, especially in times like these. Managers do not have to be better politicians, but they play a key role in maintaining our constitutional state and our system of values (see Drucker 1996 and Weber/Paschek 2017). Drucker had recognized that managers, as part of the social elite, have a special responsibility that goes beyond profitability:

“The leaders of this pluralist society of organizations are the servants of such institutions. At the same time, they are the major leadership group such a society knows or is likely to produce. They have to serve both their own institution and the common good. If the society is to function, let alone if it is to remain a free society, the men we call managers will remain “private” in their institutions. No matter who owns them and how, they will maintain autonomy. But they will also have to be ‘public’ in their ethics.” (Drucker 1986)

Peter Drucker spoke of the next society as a "bearable society" (Drucker 1993). Liberal democracy is the guarantor of freedom, security and prosperity. Companies and their management played one of the most important roles in the defense of freedom. Managers and knowledge workers in companies assume social and political responsibility in a tolerable society. Drucker's personal experiences as a fierce opponent of the National Socialists, active in Germany as a scientist, journalist and publicist until spring 1933, whose texts were soon burned and who went into exile as early as 1933, were to remain a warning to him throughout his life. The sleepwalking in large parts of the economy of the Weimar Republic (the historical period of Germany between 1918-1933) also contributed to its collapse.

The discursive freedom of management and its discursive engagement is therefore so important for society. And, according to Drucker, only strong organizations that promote democracy can protect liberal society from a relapse into authoritarian or even totalitarian forms of society. Professional politicians can only play a part in promoting a culture of democracy, in shaping the political culture and the norms that underpin it.

„In the half-century after the Second World War, the business corporation has brilliantly proved itself as an economic organization, that is a creator of wealth and jobs. In the next society, the biggest challenge for the large company especially for the multinational may be its social legitimacy: its values, its mission, its vision.“ (Drucker 2002) 

In times like these, there is a moment of truth in every corporate decision that favours totalitarian developments, promotes them, serves the geostrategic interests of these regimes or enriches itself from them.  When liberal democracies are in danger, legitimacy is also at stake in companies. Today's young people, especially those in knowledge work, will want to work in companies where leaders speak out on issues and their values that are important to the open society and that show the direction in which their own workplace makes a relevant contribution.

Management, as "society's major leadership group" (ibid.), is always already a political actor that articulates its economic interests politically and must nevertheless gain legitimacy in a "next society" (ibid.). In the next society, which Peter Drucker outlined as a liberal society under the epochal change of digitalization, companies can no longer ignore the external effects of their decisions for which no one has paid or taken responsibility to date (climate change, social exclusion or the preservation of democracy).

Not every decision of future stakeholder capitalism is yet reflected in positive effects on the balance sheet. Larry Fink/BlackRock or Jamie Dimon/JP Morgan Chase, whose decision to invest more in climate-friendly and socially responsible companies is currently being criticized by some clients. The tenor is that their "woke" strategy discriminates against entire industries that are still dependent on fossil fuels.

Nevertheless, only a few governments in democratic countries are currently in a position to charge polluters for the costs of external effects and to sanction strategies that are not geared towards the common good. For this reason, sustainable investment strategies open up remarkable strategic opportunities - outside the political system - to capture the centrifugal forces of modernity.

What does this mean in practical terms? After the political upheavals of recent years, which companies can use which approaches to develop relevant contributions to the preservation of democracy and social responsibility? Who will we do what kind of business with in the future? How do companies deal with changing values (including those of the next generations)? Which improvement approaches make sense and are practicable?

The following examples from corporate practice can illustrate this development.

Entrepreneur Judith Borowski from the wristwatch manufacturer Nomos Glashütte presented her practical approach to corporate communication in defense of liberal democracy at the aforementioned forum, "Liberal Democracy in Danger". The background to her political branding approach was customer inquiries from Israel and the USA as to whether Nomos watches were "assembled by Nazis" (Borowski 2022). Judith Borowski on the civil society activities of Nomos Glashütte:

"We have foreign, homosexual and disabled employees, and we also have a duty to look out for these people. We are currently offering the workforce seminars on how to deal with Pegida and the right. We want to explain what is behind their slogans. Our stance against Nazis is well known in the region. We do this for our employees, but also for the reputation of our company. If we squander our openness to the world, we also have an economic problem." (Borowski 2018)

The next example is Hans-Walter Peters from the banking association. He was a co-initiator of We4Europe, an alliance of companies founded by former Innogy CEO Peter Terium, including Telekom, Lufthansa and Deutsche Bank. We4Europe is committed to an open, united and strong Europe. On the banking association's website, Peters writes, "banks, as essential players in a liberal economic order see it as their duty to actively support this peaceful, free Europe which is united in solidarity and capable of action both internally and externally." (see We4Europe, n.d.)

Yvon Chouinard founded the sportswear company Patagonia in 1973 and transferred the company to a charitable foundation in 2022. The current mission is as follows: "The earth is now our only shareholder". Since 1985, Patagonia had already committed to using one percent of sales to preserve and restore the natural environment. Quote: “For our 50th year, we’re looking forward, not back, to life on Earth. Together, we can prioritize purpose over profit and protect this wondrous planet, our only home” (see Patagonia 2023). The revelations of the Facebook Papers brought to light that Facebook management under CEO Mark Zuckerberg had knowingly done too little to combat hate messages, fake news and other harmful content on the platform. Patagonia canceled its advertising on Facebook back in June 2020 and called on other companies to join the Facebook boycott. "Facebook's business model is based on disinformation and hateful statements", said Ryan Geert, Head of Europe ("why we are pushing Facebook to prioritize people and the planet over profit"). Customers obviously rewarded this approach, as sales rose again after a brief drop in turnover.

In 2021, six pilot companies came together under the umbrella of the Hertie Foundation and the Robert Bosch Foundation to form the Business Council for Democracy (BC4D), and today there are already over 60 companies that want to promote a diverse and tolerant culture of debate. The BC4D enables employers to expand their commitment to democracy with a networking program and training for their employees. A pool of professional trainers train managers and employees on communication issues. How can I distinguish fake news from serious news and how do I recognize suspicious sources? What can I do if I am exposed to hate attacks myself? How does digital counter-speech work? What advice and legal options are available? What makes people susceptible to digital manipulation? What consequences does digital polarization have for our society? (Becker 2023)

The start-up Streitgut offers services and a platform with which it aims to improve the culture of debate in Germany. "It sounds wacky and like a pony farm, but we're very serious about it. That's why we work with the best research teams in the world and high-reach people and institutions - and that's why we're so happy to have you on board!", is how they outline their profile on their website. Daniel Privitera initially started the project in 2017 as a personal hobby. He organized open discussion evenings at various locations in Germany. In 2020, he then produced his own TV program for the Phoenix TV channel. Since 2021, streitgut gUG has officially existed, working with research teams at Harvard and Stanford led by Julia Minson and Robb Willer as a scientific advisory board. (Streitgut 2023)

The concept of Corporate Political Responsibility (CPR), introduced by Johannes Bohnen, is a concept that can be used to strengthen the brand and reputation capital (Bohnen 2020). Bohnen's core thesis is that companies must invest in the social and political prerequisites for their economic success. Those who promote democracy strengthen the foundations of liberal democracy and thus ultimately strengthen themselves. In operational terms, this means that every company should also further develop the socio-political dimension with its brand development. The previously too narrow economic understanding of branding and brand management must be expanded to include this option. Above all, it is important to adopt an attitude. At the beginning of the measures, an inventory should be taken. Where do we stand, what is already there and which existing elements can be combined. The concept includes measures such as relevance for stakeholder target groups, credibility, working out our own special features and strengths, setting up our own think tanks and networking with others, strengthening the culture of debate within the company and the discourse skills of managers, promoting and strengthening participation projects and civic engagement in the company's environment. Bohnen sees the CPR guidelines as follows:

"Don't get lost in the details when commenting on political issues. Rather comment on issues of long-term relevance. Be impartial and stand up for the cause of liberal democracy, which must be protected in your own interests. [...] The basic assumption is that politics, democracy and social cohesion cannot function without ambitious and innovative contributions from all social actors, namely companies. [...] In concrete terms, this means that products, services and jobs cannot be viewed in isolation, but must be placed in a social context." (Bohnen 2022)

As society's major leadership group, management knows only too well from organizational effectiveness that leadership means responsibility. “Those who know that they can influence how they are observed” (Luhmann 2000) handle this carefully and in moderation. Those being led also have this option and can react with unpredictability, resistance and arbitrariness, hidden, subtly or openly, and refuse to exercise power.

However, even though an astonishing number of people can be "obedience nerds" (Sven Papcke, see chapter "Acephalous versus stratified"), their need for security takes precedence over their desire for freedom and thus facilitates command structures of all kinds (ibid.), managers are aware of the anti-democratic dangers in times like these. In day-to-day management, they then try to establish clear boundaries in terms of attitude and communication. And they constantly ask themselves what actions could result from this in others and in themselves.