Aligning Corporate and Community Interests: From Abominable to Symbiotic

Abstract

Despite a longstanding recognition of the need for corporations to take into account the interests of the community in which it operates, the misalignment between corporate and community interests continues to persist. The BP oil spill in the Gulf of Mexico and Texaco’s contamination of Ecuador’s rainforest are just two examples highlighting this ongoing conflict.

Corporations’ failure to align their interests with that of the community is reminiscent of the practice of separating issues of business from issues of the community. Indeed one prominent scholar, Ferdinand Tönnies, views communities and businesses as such disparate entities that he finds the notion of a corporate-community “abominable”. Like Tönnies, corporations that continue to ignore or discount community issues are seemingly unable to view corporations and communities as complements.

Nevertheless, mutual benefits to both corporations and communities can arise through corporate consideration of community interests. For this reason, this article argues that corporations should adopt a proactive stance to community interests. In particular, it contends that corporations should leverage their core business capabilities to foster the sustainable interests of the community in consultation with the community. Moreover, drawing from social identity theory, it further argues that corporations should identify with their operating communities as a means of making their community investments meaningful. The result is a novel approach to corporate governance that views the relationship between corporations and community as symbiotic.

Keywords: Corporate goverance, corporate social responsibility, human rights, stakeholder theory, contractarianism, social identity theory

JEL Classification: K20, K22, K29, K42