A Sector Too Far

Remarkably unilluminating piece in the New York Times Sunday about the so-called fourth sector, consisting of businesses trying to do social good.  It confused at least two distinct forms of enterprise: the for-profit business owned by charities, and the for-profit business whose equity owners are normal human beings who recognize a corporate responsibility with more than the single dimension of increasing shareholder value.  As Professor Gary Herrigel at the University of Chicago has pointed out, the view that corporations are responsible solely to their shareholders rather than to a more diverse group of stakeholders including employees, customers and society at large is a peculiarly American one.  It’s not really necessary for Americans to reinvent this particular wheel: if the goal is to operate corporations that treat their employees and communities with respect, European companies already abound in relevant best practices.

That’s quite a separate topic from creating a capital market which will enable charities to grow in response to increased need for their services; or establishing corporate structures which will enable charities to support themselves with business enterprises without losing their charitable focus.  Describing this welter of difficulties as a "fourth sector" does nothing to help clarify who is responsible for the well-being of our fellow citizens, and how that responsibility should be discharged. 


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