Tuesday, January 19, 2010

The Social Responsibility of Corporations

There is no shortage of MBA professors who decry the corporate use of profits, no matter how insignificant, as contributions to the welfare of society or protection of the planet. They cling to the belief that profits are the province of shareholders, and that shareholders alone should decide where and how their money is to be spent. This view of capitalism is easily embraced by fundamentalists who view Change the way the Amish view the Consumer Electronics Show, and it is as defunct as a teetotaler at the Tailhook convention.

The rhetorical question usually posed is, "why should corporate entities assist society at all? Don't they exist strictly to generate shareholder wealth?" Actually, first and foremost, corporations exist to absolve management and shareholders from the fallout of products like asbestos, Vioxx, and the July Fourth Spectacular known as the Ford Pinto. Any wealth that is ultimately distributed to shareholders is an afterthought; that is, after management thought of taking its cut first.

The real question is, "why should corporations be exempt from the societal evolution that has taken us on a journey from being short-lived sole proprietors trying to poke a rat with a sharpened stick to a global web of connections and exchanges, separated at most by only six degrees of relatedness?" Organisms and organizations alike either evolve or they die, and capitalism is on the cusp of the next wave, the understanding that it is a part of a changing society and must act as a responsible citizen or it will be regulated into oblivion. This is the super-heated core of the partisan divide in our country right now. The fundamentalists want neither responsibility nor regulation, but a choice will have to be made. Regulation can only set off a complex game of hide-and-seek or pass-the-buck, with all manner of deleterious yet unintended consequences. Responsible behavior requires that you simply walk toward the light in spite of your damaged ego and inflamed mortal desires.

Social welfare can be broadly divided into two jukebox selections: 1) Nickelback, and 2) George Harrison. If Everyone Cared is when you either dive onto a hand grenade to save your buddies, jump onto a subway platform to rescue a complete stranger, clean up an oil-soaked bird, or donate funds to provide food, shelter, and security to strangers in need. Compassion is the guiding principle; the only difference between these events is the amount of danger you experience in the assist. But why help strangers at all, let alone risk your own life in the process? Joseph Campbell, renowned professor of mythology, told Bill Moyers in a 1987 interview that the heroic moment is achieved because the rescuer realizes that we are all from the same source - to save the life of a stranger is to save your own life, and by extension, the lives of all humankind. By "source," Campbell was not referring to genetic material, that ever-weakening tractor beam emitted by our simian ancestors, but to that miracle known as the spark of life, eternal self, soul, or the vibrational energy of a "string," depending on metaphysicality of your viewpoint. Simultaneously, we are each unique and yet bound together like custom embroidery in the same silk jacket that says "When I Die I'll Go to Heaven, Because I Spent My Time In Hell Getting An MBA." Certain individuals throughout history understood this (Jesus, Gandhi, and Mary Baker Eddy, to name a few), people clearly ahead of their time.

Nowadays, these acts of individual heroism are becoming more commonplace, indicating a shift from "every man for himself" toward "we are the world and the world is us." This is not to disparage the power of competition in the marketplace, but to reinforce the notion that competition should be based on turning your customers into a horde of Grateful Dead fans while you are holding tickets to the "Jerry Garcia - Back from the Dead" tour instead of invoking the negative BusinessSpeak of psuedo-military or sports conquest. Stop reading Sun Tzu, because unlike gladiatorial competition, exceeding customer expectations is not a zero-sum game; all can do it in their own way.

Further, corporations, recognized by the U.S. Supreme Court as having the full protective rights of individuals, should also bear the responsibilities of citizenship as well. As the preamble of the U.S. Constitution reminds us:

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

There are those who argue that forming a more perfect union, establishing justice, and promoting the general welfare, which scholars interpret the founders' meaning to signify health and happiness, is taken care of through taxation. But taxes don't support branding; this tag line just doesn't work: "Acme Corporation - Making Your World Better Because We Pay Taxes." Besides, fiscal responsibility demands that each company dictate where and how its social capital is spent instead of by politicians with personal agendas and backroom tradeoffs.

A quick trip around the constellation of opinion pundits inhabiting mass media would indicate that humans are generally pleased with living in the savage past. But this hypocrisy is only natural because evolutionary change inspires vociferous resistance from the previous generation, an impedance that is 100% correlated with cash. The Salem witch trials were a reaction of the Puritan ethos losing power to a frontier lifestyle. Joseph McCarthy's HUAC hearings were a reaction to the progressive movement of the entertainment industry. Glen Beck is a reaction of the moneyed elite losing ground to a zeitgeist that proclaims, "citizens should have equal access to good health, education, and opportunity," which would be a realization of the values found in the Preamble. Screaming like lambs to the slaughter, fundamentalists cannot stop the future and the future will surely silence them. Anyone for some fava beans with their mutton?

Tomorrow's ground has already been broken and construction is progressing. Recognizing and acting on their duties as privileged citizens, The Body Shop, Ben & Jerry's, and Patagonia - all labeled as left-wing crypto-pinko corporations - started the surge. Today, Kroger, Bristol-Myers-Squibb, Best Buy, and even WalMart are on the list of the most philanthropic companies (by percentage of revenue no less!). From rare to de rigueur, more and more companies are diving onto the tracks to save perfect strangers. Even if they couldn't find an altruistic bone with a CAT scan, it's what their customers expect of them and it's good business. After all, a life saved today will become a loyal customer tomorrow.

Helping someone to exist demonstrates an advanced understanding of the human condition, but it only maintains the status quo. Put another quarter in the jukebox; Got My Mind Set On You is when you teach someone to read, give them a book, and then watch them advance quantum theory by a generation. It is the means to break the inter-generational cycle of ignorance and its foundation is the belief that everyone should be enabled to realize their potential.

There was a street hustler in Cleveland who would have found a cure for cancer, but a bus hit her before she received a chance. There was a boy living at the Cabrini-Green housing development in Chicago who was shot before he could win the Nobel Prize in Economics. This is not some parallel universe, but the here-now reality. Poverty, with its concomitant lack of opportunity and increased violence, is not just misery for those wearing its cloak - it is a waste of valuable productive resources. For those of you still wandering the halls while looking for the Department of Eugenics, please read carefully. Intelligence and productivity are not correlated with race, ethnicity, gender, age, sexual orientation, or the least of all, inbred wealth. This idea is reflected by the paraphrased words of Justice Sandra Day O'Connor in her opinion regarding Grutter v. Bollinger:

"In order to cultivate a set of leaders with legitimacy in the eyes of the citizenry, it is necessary that the path to leadership be visibly open to talented and qualified individuals of every race and ethnicity. All members of our heterogeneous society must have confidence in the openness and integrity of the educational institutions that provide this training ... Access to education must be inclusive of talented and qualified individuals of every race and ethnicity, so that all members of our heterogeneous society may participate in the educational institutions that provide the training and education necessary to succeed in America."

Corporations have an obligation to cultivate those resources and apply them to achieve new products, markets, and maximum profitability; when the person succeeds, so does the firm. Many companies now have scholarship funds, realizing that wisely spending cash on educating the inner city youth, the legal immigrant, the rural poor, or the once-middle class is not a charitable donation. It is a capital investment with a long-term time horizon. As with any investment, the payback is a risk. Some will achieve their potential in low-level service jobs and the internal rate of return may come in under the cost of capital, but that's not such a bad thing. A bad thing would be to invest billions in collaterized debt obligations, lose the whole bundle, and crash the economy.

This is not just some squabble over ideological differences. This is a battle for the future of our species and our planet. For either bad or good, corporations will play a critical role. I propose that corporate citizens must use a portion of their resources to defend humanity, not destroy it. It's only good business.


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