A recent speech by HSBC Chairman Stephen Green praising corporate philanthropy “should have sparked moral outrage” among the publicly traded banking giant’s shareholders, an author argues in a Wall Street Journal opinion column.
Jamie Whyte, author of the book Crimes Against Logic, cites a speach earlier this month in which Mr. Green challenged the late economist Milton Friedman’s dictum that a firm’s only responsibility is to make a profit and said “there is a very real place” for corporate giving.
While such giving can be part of a firm’s marketing strategy and thus raise profits by increasing sales, Mr. Green “is promoting the kind of philanthropy that is tantamount to stealing shareholders’ money,” Mr. Whyte writes.
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0 Responses to Opinion: Corporate Philanthropy Is ‘Tantamount to Stealing’
81145291 - July 21, 2010 at 2:58 pm
Corporate social responsibility (CSR)- including corporate philanthropy – and profits are not mutually exclusive. In fact, many companies are starting to use their business acumen toward addressing critical social and environmental needs. For more reading on this topic, I suggest: Big Business, Big Responsibilities (Palgrave Macmillan 2010)–a new book coauthored by Dunstan Allison Hope of BSR, Andy Wales of SABMiller, and Matthew Gorman of BAA Ltd– that challenges popular perceptions about the role of global business in solving the world’s greatest problems, arguing that companies can take the lead in solving poverty, addressing climate change, and protecting human rights.
mlwyland - July 21, 2010 at 3:10 pm
It sounds like “81145291″ is agreeing with the author’s “markanthropy” assertion – corporate philanthropy is appropriate for the corporation when it is in the shareholders’ interest (i.e., benefit is clear).To me, it seems that enlightenment or revised definitions need to be made on both the corporate and nonprofit sides of the equation. Corporate good can be achieved through philanthropic efforts (e.g., supporting nonprofits that serve employees and families in need in such a way as to improve the economic climate, help employees be more productive, etc.). From nonprofits, it’s important to remember that corporations, like any donor, gives for *their* reasons, not ours. Corporations have different giving motivations from foundations, individuals, or governments.Both corporations and nonprofits seeking support benefit from broadening their perspectives based on enlightened self-interest and working to align missions. Nonprofits playing a guilt-based strategy (“you owe us for all that filthy money you make”) makes as little sense as corporations focusing on quarterly profits rather than longer-term growth as benchmarks of corporate success. Stewardship of the market *can* also be stewardship of the community – that’s where alignment is most likely to happen and be mutually beneficial to donor and recipient.
hackpiper - July 21, 2010 at 3:20 pm
Mr. Whyte unintentionally highlights the worm at the cultural core of the corporate apple. Given the obscene salaries, perks and bonuses lavished on high-falutin execs — utterly immoral, some might argue — it seems pathetically laughable to argue that CSR programmes are essentially a form of “stealing from stockholders.” That he would suggest such a thing, presumably with a straight face, shows how much of Milton Friedman’s Kool Aid he has imbibed. I don’t know what kind of 12-step programme could cure him of such a black heart, but the road to recovery might start with an understanding that “stockholder” is merely a subset of “stakeholders.”
salemhawk - July 22, 2010 at 2:10 am
Mr. Whyte’s opinion is flawed, because it relies solely on Mr. Friedman’s unacceptably narrow definition of corporate social responsibility. John Mackey of Whole Foods dissects Friedman’s view in a reason.com article (http://reason.com/archives/2005/10/01/rethinking-the-social-responsi). Mr. Mackey writes, “While Friedman believes that taking care of customers, employees, and business philanthropy are means to the end of increasing investor profits, I take the exact opposite view: Making high profits is the means to the end of fulfilling Whole Foods’ core business mission. We want to improve the health and well-being of everyone on the planet through higher-quality foods and better nutrition, and we can’t fulfill this mission unless we are highly profitable. High profits are necessary to fuel our growth across the United States and the world. Just as people cannot live without eating, so a business cannot live without profits. But most people don’t live to eat, and neither must a businesses live just to make profits.”
kevinthomas - July 22, 2010 at 9:10 am
First, CSR is often a thinly-disguised marketing initiative. Sort of like sponsoring Olympic figure-skating, or getting a sticker on a NASCAR vehicle – but with a positive lasting impact beyond the entertainment of the spectators. I doubt that anyone would argue that marketing is theft of shareholder resources.Second, these initiatives aren’t hidden. On the contrary, annual reports proudly proclaim the CSR efforts and outcomes. So if an investor buys stock in a company, then the investor knows (or should know) about the CSR efforts, and can buy stock in a different company if CSR spending is considered excessive. The same is true of unwise expansion of operations, corporate political contributions, executive salaries, or hiring binges. Given the liquidity of stocks, there’s little public policy reason to clamp down on CSR, at least for publicly-traded companies.
asmentko - July 22, 2010 at 9:23 am
Two thoughts: 1.) Insisting that firms are only responsible for creating a profit is as much as a theological proposition as it is an economic theory. In other words, if a corporation puts in writing that part of their mission is “to do no harm,” then they become responsible for following that mission. If another firm’s mission only says “create profit,” then that’s there only responsibility. To say that corporations are crooks for writing and pursuing a mission statement that includes anything other than “create profit,” is a dictum fit for an economic pope, not someone who believes in democracy or a free market. 2.) Mr. Whyte ignores the fact that there are many financial management firms that sell investment packages that specifically target socially responsible firms. For instance, TIAA-CREF has been successful in offering an option for their clients to invest their money only in businesses that meets three “Socially Responsible Investing” criteria. In summary, it sounds an awful lot like what Mr. Whyte is trying to say is that businesses are wrong for selling what people want to buy.
81145291 - July 22, 2010 at 3:09 pm
to mlwyland: While CSR can include philanthropy, donating money is not and should not be the only way that corporations address social and environmental issues. My point, and the point of the book i referenced is that innovative and CSR-driven companies can make decsions and producsts that respond to a social need. They can create internal policies that influence energy consumption and labor rights. In short, they can do business as usual while factoring in CSR. I don’t think that corporate philanthropy that is not related to a corporation’s business competency is all that effective.