Viewpoint: The missing third party: Corporations and the new social contract
Thursday, February 22, 2018
A decade ago, in a moment of impatience with the progress of the sustainable business movement, I paused to ask: Is it time to rewrite the social contract (PDF)? My response: an unequivocal “Yes.”
Why? Because the corporation cannot be ignored in defining the 21st century social order in a world fraught with geopolitical turbulence, multiple ecological crises, social discord, the question of the corporation as a party to the social contract looms larger than ever.
The social contract predates by two centuries the 19th century, joint stock, limited liability corporation and the forerunner to today’s publicly listed enterprise. Conceived by Locke, Rousseau, Hobbes and other philosophers, the contract rests on a bi-lateral, governance compact that has undergirded Western societies for three centuries. Citizens freely delegate certain roles and responsibilities to government which, in return, provides collective goods such as the rule of law, protection of property rights and personal security.
With the onset of modern industrial era the early 19th century, the large industrial corporation — forerunner to the contemporary joint-stock, limited-liability (publicly listed) corporation — appeared as a new force in shaping the social order. Early industrialists such as Carnegie, Rockefeller and Mellon laid the foundation for the modern enterprise, growing corporations into organizations of unprecedented scale and political influence.
Today, annual revenue of the five largest global corporations exceed $250 billion, topping the GDP of 75 percent of the world’s nations. In the United States, all Fortune 500 companies combined represent two-thirds of the U.S. GDP of $12 trillion in revenues and employ 28.2 million worldwide. Apple’s market capitalization recently reached a record $900 billion while four other U.S. firms — Alphabet, Microsoft, Amazon and Facebook — exceed $500 billion. Over half of world’s largest economic units are companies.
Photo courtesy of Paul Falardeau.