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A Corporate Conundrum

Megan MacDonald | Thursday 4th June 2009

With the various corporate scandals of recent years, Corporate Social Responsibility remains a laughable farce to many. Though many companies are more active than they've ever been both in charitable giving and their attempts to make operations more human and earth friendly, they face an increasingly skeptical audience of spurned stockholders and unemployment-collecting job seekers. Now, a good many of the most irresponsible corporate offenders have had their companies bailed out by the feds, a process that is supposed to protect the economy from further harm and hopefully save what were once some of industry's greatest players.

So what happens to corporate social responsibility when it loses its corporate? Granted, the government only steps in as a financial backer of sorts - but the whole bailout process is each of these company's biggest opportunity yet to start acting responsibly. While the feds maintain they aren't interested in running companies, they are pressing them on the issue of executive pay (since many haven't taken it upon themselves) and the sheer magnitude of the loans and shares now held in the name of the government provide plenty of clout to do more, should it be needed.

Maybe it's a moot point - any company in as dire straights as AIG, GM or Fannie and Freddie isn't going to have much leeway to devote funds or make choices that may cost more up front simply because they're better for the community. But this strikes at the heart of what CSR is really about - it's not about having funds to give away, but about using what you have in the most responsible way possible. Those companies in the throws of government bailouts have done just the opposite, but in hitting the bottom they have a chance to turn their ship around. It will be interesting to see whether the government's new role in these companies' attempts to keep their heads above water can help infuse a new era of responsibility, or if the hands-off approach will allow for more of the same.

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Rodney North 5 June 2009

If this is indeed a moment for the bailout recipients to "start acting responsibly" I think it would largely be just because big changes are always easier to entertain and force through in times of turmoil and when there is a lot of turnover among executives, and owners, etc. That said I do acknowledge that a few of the egregious behaviors (like big bonuses tied to reckless business practices) might be reined in, at least temporarily.

However, I don't think I've heard much commentary about how now all the bailed-out firms need to fundamentally reorient themselves towards serving the greater good. There are calls for more fiduciary prudence and respect for shareholders' interests, but those same goals have for years been used to justify some of the least "socially responsible" practices.

Some may point out that GM & Chrysler are being asked to produce better milage cars, but that is mainly so they can be more competitive, not so they can do more to fight global warming.

Megan MacDonald 5 June 2009

Hi Elaine - it's true, and I think even those of us most enthusiastic about CSR sometimes focus too much on the 'social' and let companies off the hook on responsible management in general. I think your ideas for collaboration are key, and that businesses have to embrace CSR as a business strategy. At the same time, I think it was in part an excessive focus on pure business tactics that contributed to so many of the companies who are now in the bailout process. If we remove the 'social' it's as if we're acquiescing to Mintzberg's point on their being no room for morality. I know that's not what you're saying, It's just such a fine line to make the case for CSR or CR in a way that gets businesses on board, but doesn't let them off the hook from fundamentally changing their perception of what business is all about.

Megan MacDonald 5 June 2009

Thanks Dane. While I think due to an abundance of bureaucracy it's unfortunately true that many government agencies are inefficient and often wasteful. I will say that this was not my direct experience working in local government - where I worked in health care planning and was part of putting together multi-year budgets that went through rigorous analysis at the local and state level. However, that was in the County of Orange, home of what I believe was the country's largest public bankruptcy in history: http://jm.ly/ePESun . This goes to say that, after such horrendous mismanagement and irresponsibility, that government agency got their house in order. I hope those companies who've been bailed out can do the same - and I wish it didn't take such financial disasters for either public or private entities to do so.

Elaine Cohen 5 June 2009

hi, it is easy to say that Corporate Social Responsibility (I prefer to drop the Social, rather then the Corporate) has failed . i disagree. Aslong as we continue to think about csr as something simply "that is better for the community", its always going to be a nice-to-have when times are good and a delete-button when times are tough. CSR is a strategy that benefits business. To suceed in having a significant indirect impact it needs both government and third sector collaboration because the change we need is systemic and not within the capability of any one organisation, business, government or NGO. Governments may have thrown money at the crisis but they are embarrasingly at a loss as to how to create more responsible markets out of this fiasco. I suspect we will stabilize on a lower plane and the system will continue. If the sole result of all of this is that CEO's get smaller bonues, then we can be sure that underlying change will not be a notable outcome.

Dane Pflueger 4 June 2009

Very interesting post.

On an unfortunately pessimistic note, I think that it is surprising how socially and environmentally irresponsible many government bodies are. In the public sector, efficiency means lowest up-front cost and efficiency has been the name of the game for a while now. As a result, most government buildings and processes are an environmental nightmare. At the same time, the companies who defined the word efficiency are valuing intangibles, projecting far into the future, and making serious social and environmental investments. This is the case in the UK, where private companies like Wal Mart look more responsible than government bodies like the FCOS, but I suspect the US is the same.

Its really puzzling. I thought that government was the good guy and business was the bad guy, right?