Until recently, the prevailing view was that the public and private spheres were separate and distinct, each with its own operating logic: the former as a space for political processes and matters of general interest, and the latter as a space for the pursuit of private interests and individual well-being social responsibility. In this scheme, the structure and functioning of private enterprise was largely unaffected by the demands of the public sphere, such as transparency, accountability, checks and balances, and recognition of rights, among others, unless it was a matter of labor claims that necessarily arose—and continue to arise—in the context of relations between employers and employees or bosses and workers, as they used to be called. If the working environment was more or less harmonious, the company did not have to respond to any other type of questions or claims other than those arising from relations between partners or between them and third parties in their business dealings.
This reality has changed significantly. The realization by corporate management, especially in larger companies, that they could not remain indifferent to the problems of their social environment gave rise to the notion of corporate social responsibility, which has served as the basis for initiatives in support of vulnerable sectors, the environment, and the communities adjacent to where companies operate. A mixture of altruism and the need to achieve social legitimacy for companies has served as motivation for actions of this type.
Later, a much more organic and operational approach was incorporated, namely the notion of corporate governance as the basis for a new type of business management that seeks, in response to the demands of relevant sectors inside and outside the company, to overcome opaque, overly centralized decision-making structures that lack checks and balances. The financial sector has been particularly impacted by this new school of thought because it is an activity based on raising funds from the public—other people’s money—to be used by others in the intermediation activity to grant loans or place those funds in certain financial instruments, whether public or private. Gradually, the idea took hold that it was necessary to regulate not only financial intermediation strictly speaking, but also the governance structure of the entities that carry out such intermediation, in order to ensure an increasingly responsible and appropriate exercise of an activity that is so sensitive not only for depositors but also for the economic system in general.
The notion of corporate governance is beginning to spread to other areas of economic activity, but still very slowly. However, it is to be expected that, over time, regulation of this aspect of business activity will also reach other sectors of the economy, or that these sectors will carry out incremental self-regulation with a view to transforming their traditional corporate governance structures. This has begun tentatively in large and complex companies, but it is to be expected that this dynamic of business transformation will also impact other types of companies or productive associations.
In more recent times, companies are beginning to be impacted by demands of a different kind that in other eras were exclusive to the public sphere. That is, companies today cannot remain oblivious to demands for equality, inclusion, non-discrimination, and respect for the dignity and rights of individuals, which implies not only adopting codes of conduct and formal policies, but also changing the institutional culture of companies so that these principles and values become a reality. Of course, similar processes are also impacting other areas such as schools, universities, social clubs, and entertainment centers, to name just a few examples. In other societies, these demands in the business environment have given rise to litigation processes that will sooner rather than later reach our midst if our companies do not prepare to respond to this new reality.
This is where constitutionalism and its relationship with private enterprise come into play. While it is true that constitutionalism in the liberal-democratic tradition was conceived to order the public sphere—popular participation in the exercise of sovereignty, the division of power, checks and balances, the recognition of individual rights, transparency, accountability, and the responsibility of rulers for their actions, among other aspects— it is no less true that many of the fundamental pillars of constitutionalism are hugely relevant to rethinking the ways in which corporate governance is structured, interpersonal relationships within companies, and the relationship between companies and their stakeholders and the community at large.
This does not imply distorting the role of private enterprise in a market economy based on private property, free enterprise, and competition—principles and rights recognized by the Constitution—but rather making the company a space that, while maintaining its raison d’être and its own character, harmonizes with the established values of constitutionalism in terms of respect for human dignity, equality, non-discrimination, and tolerance of differences in beliefs, sexual orientation, and ways of pursuing one’s own happiness without undermining the rights of others.
In a democratic and pluralistic society, the Constitution is the articulating axis of all its members in a context of diversity and heterogeneity. It expresses the “intersecting consensus” that John Rawls spoke of in view of the impossibility of a particular belief, ideological vision, or conception of “the good” imposing itself on others. In other words, all spheres and dimensions of society must be permeated by the Constitution—its principles, values, and norms—including private enterprise. The latter is called upon to draw on constitutional values in order to respond appropriately and pertinently to demands for change, both in terms of how it structures its internal governance and in terms of the expectations and demands of the many sectors that interact with it in a social context of rapid and, at times, radical transformation.
Published in Diario Libre on February 10, 2023