Can laws make companies good citizens

It has often been argued that social costs occur because governments do not have adequate laws on the books to punish companies that create social costs. The follow-up is that passing such laws will eliminate social costs.

a. I agree with the statement b. I do not agree with this statement

Illustration 2.5: Assessing Social Costs

The ubiquity of social costs is made clear when we look at the three companies we are analyzing - Disney, Aracruz and Deutsche Bank. These companies, in spite of their many differences, have social costs to consider:

• Disney was built and continues to market itself as the ultimate family oriented company. When its only businesses were theme parks and animated movies, it faced relatively few conflicts. With its expansion into the movie business and television broadcasting, Disney has exposed itself to new problems. To provide an illustration, the Southern Baptist Convention voted in 1997 to boycott Disney theme parks and movies in response to the airing of "Ellen" a show on the ABC network, starring Ellen de Generes as a gay bookstore owner. It is because of this fear of a backlash that Disney maintains separate movie studios -Touchstone/Miramax for grown-up movies and Disney Studios for animated movies.

• Aracruz is at the center of the controversy about the deforestation of the rain forests in South America. In the later 1990s, Aracruz was accused by environmental groups of replacing old growth forests in Brazil with eucalyptus plantations and displacing native and indigenous peoples from these areas.22 • Deutsche Bank has been challenged for its role as banker for the Nazis during the holocaust. Its acquisition of Bankers Trust in 2000 was almost derailed by accusations that it had helped fund the construction of the concentration camp at Auschwitz during the Second World War. Both Deutsche Bank and Dresdner Bank were sued by survivors of the holocaust for profiting from gold and other assets stolen from concentration camp victims during World War II.23 For all three companies, these accusations are serious not only because they damage their reputations but can also create serious economic costs. All three aggressively defended themselves against the charges and spend a substantial number of pages in their annual reports detailing what they do to be good corporate citizens.

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