Abstract
We propose that corporations should be subject to a legal obligation to identify and internalise their social costs or negative externalities. Our proposal reframes corporate social responsibility (CSR) as obligated internalisation of social costs, and relies on reflexive governance through mandated hybrid fora. We argue that our approach advances theory, as well as practice and policy, by building on and going beyond prior attempts to address social costs, such as prescriptive government regulation, Coasian bargaining and political CSR.
Highlights
Under the influence of competitive market forces and other incentives, corporations play a key role in the generation and distribution of social costs
Based on this understanding of reflexive governance and its link to political corporate social responsibility (CSR), we argue that corporations should be mandated to establish ‘hybrid fora’, which would bring together creators of, and those affected by, externalities in order to trace those social costs and identify mutually acceptable solutions to them
Given the significant challenges confronting Coasian bargaining, we proceed to highlight the recent developments and challenges in governing externalities through political CSR, and leverage these to advance our alternative model of obligated corporate internalisation of social costs
Summary
Under the influence of competitive market forces and other incentives, corporations play a key role in the generation and distribution of social costs. Our contribution goes a step further by proposing a legal obligation to engage with stakeholders to identify social costs and elaborate acceptable solutions to them Based on this understanding of reflexive governance and its link to political CSR, we argue that corporations should be mandated to establish ‘hybrid fora’, which would bring together creators of, and those affected by, externalities in order to trace those social costs and identify mutually acceptable solutions to them. The article proceeds with a critical account of the limitations of (1) instrumental regulation; (2) market-based solutions (Coasian bargaining); and (3) political CSR as approaches to dealing with the problems of social costs Thereafter, it presents our approach of governing externalities through obligated internalisation of social costs through hybrid fora and the corporate decision-making process. It highlights some of the contributions and implications of this approach
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