I’ve always cast a skeptical eye on companies touting their corporate social responsibility (CSR) programs.
Some CSR programs are blatantly self-serving, for example, when companies that cause serious environmental damage tout “Earth Day” clean-ups or one-day-a-year tree planting outings.
It makes you wonder.
Senior executives sometimes bend CSR programs to suit their personal politics, thus begging the question: is it fair for the CEO of a publicly-listed company to use shareholder money, client goodwill and employee time to further the CEO’s favorite cause, especially if that cause involves stands or goals other stakeholders may not support?
Would it be all right for instance for a Spanish Catholic CEO to funnel his Bolsa de Madrid-listed company’s CSR resources through an ultra-orthodox Catholic business organization like Opus Dei? Or for a Jewish American CEO to deploy his NASDAQ listed company’s resources in support of Israeli charities that help Jewish settlers in the West Bank or Gaza? Is this the kind of “giving” shareholders sign up for when they buy company stock? Is this what fund managers want?
Is a company the proper vehicle for charitable or other giving in any case? Arguably, a company’s best and highest use is to help its clients, make a profit and return that profit to its shareholders via dividends, share buy-backs and revenue and profit growth that increase shareholder value over the longterm (not to mention increasing value for clients, employees and partners).
A dividend check is a powerful thing. It gives shareholders both the right and the opportunity to decide what to do with the company’s profits.
In short, why should the CEO get to decide which foundations, charities or causes shareholder and other stakeholder money goes to? Aren’t stakeholders smart enough to make their own decisions? Shouldn’t shareholders hold onto the right to collect (and spend) the fruits of their investments as they see fit? If the CEO is himself a shareholder he can always cash out and open a private foundation — like Bill Gates and Warren Buffet did.
At the same time, companies are under increasing pressure to document CSR initiatives in their responses to requests for proposals. Not having a well-documented CSR program in place can count against a company in a bid. Personally, I think this is an evil trend.
Companies should not feel they have to strong-arm their employees to “volunteer” for anything. Neither should companies have the right (or the need) to spend shareholder money on the CEO’s favorite causes. Neither should a company’s environmental policy be the product of a public relations exercise designed to impress product selection committees.
So, what should a company do? Doing nothing is not an option, not any more. CSR, in some form, is here to stay.
At NetDimensions we have thought long and hard about this issue. After discussions with our shareholders, staff and board members, we have decided we are not going to open a foundation with a fancy logo or try to push our clients into partnerships with our favorite charities. They can do that on their own if they want.
As a global company committed to producing value for our stakeholders, we’re going to keep it simple: as a next step we are joining the United Nations Global Compact. By joining, we’ll be aligning our policies with those of thousands of excellent organizations from around the world, including companies like Bloomberg, General Mills, SAS Institute, Capgemini and L’oreal.
The 10 guiding principles of the United Nations Global Compact are:
- Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights; and
- Principle 2: make sure that they are not complicit in human rights abuses.
- Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining;
- Principle 4: the elimination of all forms of forced and compulsory labour;
- Principle 5: the effective abolition of child labour; and
- Principle 6: the elimination of discrimination in respect of employment and occupation.
- Principle 7: Businesses should support a precautionary approach to environmental challenges;
- Principle 8: undertake initiatives to promote greater environmental responsibility; and
- Principle 9: encourage the development and diffusion of environmentally friendly technologies.
- Principle 10: Businesses should work against corruption in all its forms, including extortion and bribery.
We’ll do more (look for the CSR section soon to come on our company website). But we think committing to these 10 principles is a good start.
Update 9 August 2012:
The Economist has now weighed in on the Corporate Social Responsibility issue.
Read it here.