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Political CSR—European Social Market Economy and US Shareholder Capitalism

Professor Andreas Scherer is the Chair of Foundations of Business Administration and Theories of the Firm at the University of Zurich. He has published widely on business ethics and corporate responsibility. His article ‘The New Political Role of Business in a Globalized World: A Review of a New Perspective on CSR and its Implications for the Firm, Governance, and Democracy’ (2011, co-authored with Guido Palazzo) is among the foundational treatments of Political CSR.

Political CSR (PCSR) starts with the message that, in the face of complex, heterogeneous challenges around the world, we cannot rely solely on states to put the right laws and regulations in place. Businesses must help to fill this regulatory gap—in a responsible way. Indeed, companies have already started doing so, with mixed results. This raises the question of who decides what constitutes “good regulations” for people and planet. So far, companies have taken these decisions themselves. Their self-authorization has led to a deficit in legitimacy since businesses are neither elected nor controlled by the public. CPR and PCSR try to find answers as to how this legitimacy gap can be filled.

Many companies have already given themselves guiding purposes, but these are rarely subject to external scrutiny. To be perceived as legitimate, companies must be re-embedded in processes of political authorization. A functioning media landscape is one important factor in this, another is corporate governance. In Europe, stakeholder capitalism is already widely established. For instance, most companies include employee representatives on their boards, and have shown a willingness to enter into dialogue with a diverse range of stakeholders. In the United States, by contrast, power still largely rests with the corporate leadership in the hope that they will take the right decisions. Bringing democracy into more board rooms accordingly remains a concern for advocates of political responsibility.

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