The Fourth Responsibility

This past weekend I was fortunate to attend the reunion of my Graduate Alma Mater, Notre Dame. It was a delight to listen to Lou Holtz’s self deprecating humor (“My wife and I have been married 98 years; 49 each!”) and meet up with classmates. I was also fortunate to attend a conference titled, “Capitalism and Social Responsibility.”

Among the speakers was Dan Hesse, ’75 grad of Notre Dame and CEO of Sprint Nextel. Dan outlined what he considers to be the basic responsibilities of a for profit corporation: the first three are to be Profitable, Legal and Ethical. He then added the fourth responsibility: Philanthropy.

From a business perspective, it is not hard to understand the first responsibility, to be profitable. Many of us know that this is often difficult to achieve these days. But, I believe that Dan was speaking beyond the business community to point out that without profitability, jobs are not sustained, people are not paid and the community suffers. It is therefore the responsibility of the company to be profitable not just for the owners and shareholders, but for all of those involved in the company.

The second responsibility that Dan brought up is legality. It stands to reason that a company ought to operate in a legal fashion. Another conference speaker noted that often laws take time to catch up to the real world, and that the result of not operating in a legal fashion has brought upon business a large mass of regulation, some of which does not really solve the problems that the law was created to fix. However, if companies cannot operate in a legal fashion, they will get the regulations. I would add my own feeling that in addition to creating laws and regulation, government must also create policy that encourages business to act in a legal fashion.

The third responsibility of a company is to be ethical. Dan Hesse’s emphasis here was on going beyond the legal to that which lives up to the ethical expectations of the society that the company works in. Here Hesse seems to be emphasizing that there is more to a company’s existence doing business legally. I believe that there are some that would not agree with this, saying that a company’s business is to create value for the shareholder in a legal manner. I would be interested in hearing what others think about these ideas.

This brings us to the fourth responsibility, that of philanthropy. The central idea here is that a company ought to voluntarily give back to the community in some way or other, as a responsible member of that community. Hesse stressed the word Voluntary; this is not mandated by any body or agency; but what the company does as a good corporate citizen. The community can be defined in a very expansive way to include local philanthropy as well as good works done abroad. Hesse also stressed the vital link between the first responsibility and the fourth, without profits a company cannot fulfill the fourth responsibility.

I would be very interested in seeing how you feel about the Fourth Responsibility.

4 thoughts on “The Fourth Responsibility

  1. What great timing for your post given today, a noted journalist retired early because of her ethics (third responsibility). Without the demonstration of positive core values (ethics), individuals are less likely to participate in the Fourth Responsibility because they believe their donations will not be handled well or even appreciated.

    I agree that ethics goes beyond what is legal. What I see in reading your major points is a inverted pyramid with the top being the first responsibility and moving downward to the fourth one.

  2. Kevin – thanks for sharing this. I’ll posit that by assigning the responsibility to act legally and ethically to the corporation, we create the structure that many people need to support good behavior. If people were internally motivated to act ethically and legally, corporations wouldn’t need codes of conduct. I believe that whenever people join together to achieve their goals, it is easy to succumb to “group-think” and let legal and ethical concerns slide.

    On the 4th responsibility, I think it’s up to the corporation to choose its method of philanthropy, but that the philanthropy is required, because without the community, the corporation would not exist. They support each other; the corporation in its donation of time/materials/money, the community in its donation of people/local resources/infrastructure.

  3. I think that the fourth responsibility is spot on.

    As a former partner at Arthur Andersen all personnel were encouraged to give 10% of their earnings as well as participate in local charities. Additionally, all partners were monitored on this metric, and was taken into consideration in your future compensation.

  4. John Sanguinetti

    Kevin,

    Great thoughts!

    I’m remineded of my Southern heritage. The people I have known or have heard stories about who were the most admired and resptected in their community were the ones who acted very ehtically, were very genreous with their time and money and had impeccable reputations. What is good for an individual is good for the corporation and is thus good for its business. The fourth resonsibility completes the cycle. Philantrophy generates good will, and very likely directly or indirectly generates additional revenues and profit contribution.

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