Editorial: Sticking to the knitting – charity is great, but businesses shouldn’t try to save the world
Companies improve the world by making money.
October 16, 2019 By Patrick Flannery
The Economist had an excellent opinion leader this summer (Aug. 24 to 30, “What companies are for”) discussing the rising trend toward big corporations taking positions on political and social issues.
The piece points to statements by the CEOs of companies like Walmart and JPMorgan Chase stating outright that their organizations have a broader responsibility than maximizing shareholder value; that they also have to serve their customers, staff, suppliers and communities.
The article brought to mind Nike’s recent ads featuring Colin Kapernick (the NFL quarterback ostrasized for his sideline protests over police shootings) and hijabs designed to wear while playing sports. Clearly, Nike has calculated that there is some benefit to be gained in being seen to be on a particular side of certain issues. The question of the sincerity of the positions I’ll leave for others to debate. We’re often told the next generation of consumers and workers wants to feel like the companies they are associated with stand for something, allowing them to feel good about their patronage beyond just getting value for their money. Some major corporations appear to have decided this effect is powerful enough for them to take sides even on controversial issues, risking alienating one group of potential customers in order to increase enthusiasm in another.
Even the broader question of whether corporations should take on social responsibilities beyond making money is not easily answered. It might seem obvious that donating to a Habitat for Humanity build or sponsoring a local hockey team is a good thing, and it probably is. But The Economist calls the larger concept of companies being seen as providers of social welfare “collective capitalism” and cautions that it carries risks, at least at a very macro level. It points to the examples of GM and AT&T that made alliances with unions and governments to hire more people, open more facilities and offer higher wages and benefits than a pure business case might have justified. Here in Canada we might think of Bombardier and SNC Lavalin as companies that became “too important to fail” based on the perceived social benefits to their communities.
These examples are pretty far above the pay grade of the average window and door company. But what happened to them as they took their eyes off the ball of shareholder value and started making decisions based on a self-perception as community organizations is instructive. Innovation stalled as the incentive to stay ahead of the competition was diluted. Flexibility was choked off as it became difficult or impossible to make the hard decisions, like cutting staff. Public resentment grew as they inevitably failed to meet the lofty standards of good behaviour and public benefit expected of governments.
I think things work better when organizations stick to what they are designed for. Companies are good at making money, not so good at designing laws and public policy. Leave that to governments, who at least can get thrown out periodically, and let the community benefits flow from your thriving business. But do sponsor the hockey team. Some of the parents in the stands might need new windows.
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