Corporate Social Responsibility · Corporate Social Responsibility CIs good citizenship good for the bottom line? orporations across the country are embracing efforts to improve society

Corporate Social ResponsibilityIs good citizenship good for the bottom line?

Corporations across the country are embracing efforts

to improve society. Unlike traditional efforts by

businesses to appear socially responsible, the cur-

rent movement emphasizes profit and long-term

company success along with good works. Firms such as Whole

Foods and Nike strive to make good citizenship a recognized part

of their brand. General Electric, Coca-Cola and other more tradi-

tional corporations also support corporate social responsibility

(CSR), motivated by advocacy group pressures, threatened

government regulations and demands from employees, customers

and investors. Some conservatives oppose CSR activities, arguing a

company’s only legitimate purpose is to enhance shareholder value.

Some critics from the left label CSR a public relations ploy and

say the government should expand corporations’ legal responsibility

to employees, the public and the environment.

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THE ISSUES ......................651

CHRONOLOGY ..................659

BACKGROUND ..................661

CURRENT SITUATION ..........663

AT ISSUE ..........................665

OUTLOOK ........................667

BIBLIOGRAPHY ..................670

THE NEXT STEP ................671

THISREPORT

Dave Matthews, with violinist Boyd Tinsley,announces his band is joining ice cream maker Ben & Jerry’s and SaveOurEnvironment.org in urging Americans to fight global warming by

reducing their carbon dioxide emissions.

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CQ Researcher • Aug. 3, 2007 • www.cqresearcher.comVolume 17, Number 28 • Pages 649-672

RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR

EXCELLENCE ◆ AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD

650 CQ Researcher

THE ISSUES

651 • Do businesses have aresponsibility to societybeyond turning profits?• Is social responsibilitygood for the bottom line?• Does corporate socialresponsibility (CSR) reallyimprove society?

BACKGROUND

661 ‘Company Towns’Early companies providedhousing for workers inisolated areas.

662 Violence and TurmoilLabor and managementwere locked in conflict inthe early 20th century.

663 Postwar StimuliU.S. efforts to rebuild Europe spurred corporatephilanthropy.

CURRENT SITUATION

663 New ApproachToday’s corporations emphasize profits alongwith good works.

664 Response to GlobalizationConsumers are demandingsolutions to global warmingand other problems.

OUTLOOK

667 Government Regulation?Conservatives worry CSRstandards could be required.

SIDEBARS AND GRAPHICS

652 Strong Support for Corporate CitizenshipVirtually all big U.S. firmssay social responsibility isvital to the bottom line.

654 Environmentalists Shape$45 Billion Energy DealActivists’ role is called “aturning point in the fightagainst global warming.”

656 Socially Responsible Investing on the RiseInvestments reached nearly$2.3 trillion in 2005.

657 Socially Responsible Investing Pays OffResults over a long periodbeat S&P 500.

659 ChronologyKey events since 1881.

660 Doing Business at the ‘Base of the Pyramid’SC Johnson is selling cleaningsupplies in Africa “a squirt ata time.”

665 At IssueDoes corporate social re-sponsibility endanger U.S.prosperity?

FOR FURTHER RESEARCH

669 For More InformationOrganizations to contact.

670 BibliographySelected sources used.

671 The Next StepAdditional articles.

671 Citing CQ ResearcherSample bibliography formats.

CORPORATE SOCIAL RESPONSIBILITY

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Corporate Social Responsibility

THE ISSUESS cenes from a rapidly

growing corporatetrend in the U.S.:

• In Washington, D.C., thechief executives of 10major U.S. corporations— including Alcoa,DuPont and GeneralElectric — gather at theNational Press Club tourge the federal gov-ernment to require com-panies to reduce theiremissions of greenhousegases. “The science ofglobal warming is clear,”Duke Energy’s JamesRogers tells reporters atthe executives’ Jan. 22news conference. “Weknow enough to actnow. We must actnow.” 1

• Across the country inBeaverton, Ore., Nike re-leases an audit that de-tails ways its Third Worldsuppliers mistreat theirfactory workers andpledges to improveworking conditions. “Ourgreatest responsibility as a globalcompany is to play a role in bring-ing about positive systemicchange for workers within ourown supply chain, and in the in-dustry overall,” the sports appar-el company declares. 2

• In New York, The ConferenceBoard, a mainstay of the globalbusiness establishment, createsthe Center for Corporate Citizen-ship and Sustainability. Fortunemagazine adds a companion toits well-known list of the world’s500 largest corporations: a rank-ing of companies by “how wellthey conform to socially respon-

sible business practices.” And thecompany behind the most famousmeasure of economic performance— the Dow Jones Industrial Av-erage — creates the Dow JonesSustainability Indexes, to track thefinancial performance of compa-nies that practice social and en-vironmental responsibility.

Corporate social responsibility (CSR)— along with such variants as cor-porate citizenship and sustainability —is the new business mantra.

Adam Smith and Milton Friedmanmust be spinning in their graves.

Self-interest, not good intentions, cre-ates the “wealth of nations,” argued

Smith, the great Scottish philoso-pher of the free market.

“It is not from the benev-olence of the butcher, the brew-er, or the baker, that we ex-pect our dinner,” he wrote in1776, “but from their regardto their own self-interest. 3 Bypursuing his own interest [anindividual] frequently promotesthat of the society more ef-fectually than when he reallyintends to promote it.” 4

Friedman, a Noble Prize-winning economist andSmith’s modern Americansuccessor, specifically re-jected the notion of corpo-rate social responsibility ina still widely quoted 1970New York Times Magazinepiece titled “The Social Re-sponsibility of Business is toIncrease its Profits.” 5

Conservative scholars andpolitical activists frequently citeSmith and Friedman today. Butit’s nearly impossible to finda senior corporate executivewho doesn’t extol his com-pany’s commitment to beingsocially responsible.

“I’m a businessman and afree market libertarian, but I

believe that the enlightened corporationshould try to create value for all of itsconstituencies,” said John Mackey,founder and CEO of Whole Foods Mar-ket. “At Whole Foods, we measure oursuccess by how much value we cancreate for all six of our most importantstakeholders: customers, team members[employees], investors, vendors, com-munities and the environment.” 6

From the time Mackey and hisgirlfriend opened a small natural-foods store in Austin, Texas, in 1978,his business has been about morethan profit. But the heads of moretraditional corporations also speakMackey’s language.

BY TOM PRICE

Court

esy

Coca

-Cola

Coca-Cola representatives and villagers in rural Kenyacelebrate the soft-drink company’s installation of a new

well. Traditional U.S. corporations like Coke andGeneral Electric are becoming environmental and social

activists in response to advocacy group and consumerpressure and possible government regulations.

Corporations say activism builds profits, but critics say it’s a public relations ploy of limited value

and not in shareholders’ best interests.

652 CQ Researcher

“The Coca-Cola Company must beboth a great business and a great cor-porate citizen,” Coke Chairman andCEO E. Neville Isdell said. 7 Gener-al Electric “must be a great compa-ny with the capability, reach and re-sources to make a difference,” GEchief Jeffrey R. Immelt said. “But wemust also be a good company, be-cause true impact means definingsuccess in ways that go well beyondthe bottom line.” 8

Such comments led Gib Hedstrom,The Conference Board’s conference pro-gram director, to declare that “the de-bate is over. Leading companies are mak-ing a business out of solving the world’stoughest problems. Citizenship is estab-lishing itself as the requisite mindset fordoing business in the 21st century.” 9

Corporate philanthropy is nothingnew. Companies have been donatingto charities, establishing philanthropicfoundations and implementing com-

munity improvement projects since atleast the 19th century. What’s differ-ent is the way an overwhelming num-ber of executives are accepting a corecorporate duty to the welfare of “stake-holders” beyond those who own com-pany stock — and also the way theyare integrating that concept into theircompanies’ day-to-day operations as abusiness opportunity. Their goal is todevise business strategies that improvesociety, protect the environment andincrease profits over the long term —the so-called triple bottom line of“people, planet, profit.”

A 2005 survey of 1,189 U.S. busi-nesses by the Boston College Centerfor Corporate Citizenship and the U.S.Chamber of Commerce found that vir-tually all (98 percent) large companiesmake corporate citizenship a priority.When smaller companies are added,the figure drops to 81 percent. Andtwo-thirds of large businesses (44 per-

cent overall) incorporate citizenshipinto their business strategy. 10 (Seegraph, at left.)

The strong commitment reflects fac-tors such as advocacy group pressures,fear of (or efforts to shape) governmentregulations, recruitment and retentionof top-notch employees and efforts tomake their companies more attractiveto investors and customers.

For instance, after being attackedfor buying products from Third Worldsweatshops, Nike began to publish itssupply-chain information — and toengage in other good-citizen activities.Pushed by the Rainforest Action Net-work, Citicorp, JPMorgan Chase andGoldman Sachs agreed to consider theenvironmental consequences of theirloans and investments.

The Environmental Defense advo-cacy group has served as a consultantto FedEx, Wal-Mart, DuPont and othercorporations trying to improve theirenvironmental records.

Concluding that government regu-lation of greenhouse gas emissions isinevitable, 30 major corporationsformed the United States Climate Ac-tion Partnership to campaign for rulesthat are “environmentally effective, eco-nomically sustainable and fair.” 11

Because an African-American em-ployees association at General Electriccared deeply about poverty and dis-ease in Africa, GE applied its businesscapabilities to help build health facil-ities there. 12 Needing a highly skilledworkforce, Intel spends more than $100million a year to improve science andmathematics education in more than50 countries. 13 And because its work-ers demand quality schools for theirchildren, Intel works to improve theschool districts around its facilities,says Intel Corporate Government AffairsDirector Richard Hall.

Corporate good citizenship haslong been a key marketing compo-nent for companies such as WholeFoods and Ben & Jerry’s ice cream.Now companies such as GE and even


Strong Support for Corporate Citizenship

In a 2005 survey of 1,189 U.S. businesses, 98 percent of large companies — and 81 percent of all companies — said corporate citizenship is a priority. Moreover, 84 percent of large companies report that being socially responsible has increased profits.

Source: Barbara Dyer, et al., “The State of Corporate Citizenship in the U.S.,” Boston College Center for Corporate Citizenship, 2005

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Wal-Mart are adver-tising their efforts toimprove society.

In addition tohoping the strategywill lure shoppersinto their stores, thecompanies want toincrease their shareof the nearly $2.3trillion invested bysocially consciousstockholders in theUnited States. (Seeg raph , p . 656 . )Those investments— which representone-tenth of al lprofessionally man-aged investments —grew slightly fasterthan all profession-ally managed assets between 1995through 2005, according to the So-cial Investment Forum, the trade as-sociation for socially responsible in-vestment firms. 14 (See graph, p. 653.)

Businesses also are finding that socialresponsibility can cut costs. FedEx’s newfuel-efficient hybrid trucks reduce fuelexpenses by more than a third whileshrinking smog-causing emissions by two-thirds and nearly eliminating particulateemissions, the company reported. 15

Costco, which offers more-gener-ous employee benefits than other low-price retailers, enjoys half the workerturnover of Wal-Mart and the retail in-dustry as a whole. Recruiting andtraining new employees is a costly ex-pense that Costco minimizes. JohnBowen, an investment manager inCoronado, Calif., said that “happy em-ployees make for happy customers,which in the long run is ultimately re-flected in the share price.” 16 To mea-sure corporations’ reputations, Com-munications Consulting Worldwidesurveyed media reports and rankings— such as lists of best-managed com-panies and best places to work. TheNew York firm concluded that if Wal-

Mart’s reputation rose to match high-er-rated Target’s, its stock would climb8.4 percent, or $16 billion. 17

“People want to work for compa-nies that are socially responsible andthat create avenues for them to be aswell,” says Nathan Garvis, Target’s vicepresident for government affairs.

Companies also realize that “ahealthy community is a great place tooperate a business, to hire people, tolocate a store, a great place for peopleto come and shop,” Garvis says. “Thehealth of the community is an under-girding platform for economic success.”

Some scholars and business exec-utives point to one other influence onthe rising popularity of corporate so-cial responsibility: An increasing num-ber of senior executives grew up amidthe social turmoil of the 1960s and’70s, and they bring values theylearned then into their boardroomsand executive offices.

“A generation of people in searchof deeper meaning in their lives is nowtaking over the corporate suites,” saidAndrew Savitz, former lead partner inPricewaterhouseCoopers’ sustainabilitybusiness services practice. 18

Asked how he’s dif-ferent from his legendaryGE predecessor JackWelch, the 51-year-old Im-melt likes to say that he’s20 years younger. Thatgets a laugh, but it’s alsoa serious answer, ac-cording to Robert Cor-coran, GE’s vice presidentfor corporate citizenship.

“He said, ‘Let me ex-plain this,’ ” Corcoran re-calls, describing an Im-melt meeting with agroup of employees short-ly after he assumed thecompany’s top post. “ ‘Igrew up and went to highschool and college in the’60s and ’70s. I grew upwith civil rights marches,

the Vietnam War, women’s liberation,Earth Day, sex, drugs and rock-and-roll.Those issues shaped how I think aboutand view the world. That’s a differentset of experiences from someone whogrew up 20 years before.’ ”

These experiences, Corcoran contin-ues, “give this generation of leaders aview of the role of business in the worldthat’s different from what someone mighthave gotten in the ’50s or the ’40s.”

As activists, executives and investorsconsider the social role of business inthe 21st century, here are some of thequestions they’re debating:

Do businesses have a responsibilityto society beyond turning profits?

While nearly all major Americanbusinesses embrace corporate socialresponsibility, conservative criticslaunch continual — often vehement— attacks on the practice. They callit a violation of the free-market prin-ciples that created and sustain pros-perity. They also label it a dangeroustransfer to corporations and activistgroups of power over social issuesthat properly belongs to individualsand elected public officials.

Workers assemble shoes at a Nike factory near Ho Chi Minh City,Vietnam, in 2000. After being attacked for using Third World

sweatshops, Nike launched a campaign to improve working conditionsin its suppliers’ factories. “Our greatest responsibility as a global

company is to play a role in bringing about positive systemic change for workers within our own supply chain, and

in the industry overall,” the company says.

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“A company’s responsibility is toits shareholders,” says John Hood,president and chairman of the JohnLocke Foundation, a conservative thinktank in North Carolina. “If managershave a different end than maximizingshareholder value, they’re violating theirresponsibility.”

When profit maximization is thegoal, Hood says, shareholders have aclear measure of managers’ perfor-mance. “When you move away fromprofit maximization and get into thesemore nebulous corporate social re-

sponsibility objectives,” he adds, “thatputs us at sea without a rudder.”

Corporate executives and activistswho promote corporate social responsi-bility are attempting to “privatize regula-tory power” and levy “a hidden tax oncorporate shareholders,” says Nick Nichols,a senior fellow at the Center for Defenseof Free Enterprise who teaches crisiscommunications at Johns Hopkins Uni-versity. (See “At Issue,” p. 665.)

“Power is shifting away from elect-ed officials and regulators toward non-government organizations” that influ-

ence corporate policies, Nichols ar-gues. “CSR is an effort by socialists toaccomplish in the boardroom whatthey have failed to accomplish at theballot box — corporate socialism.”

Wal-Mart’s adoption of corporate so-cial responsibility policies and cooper-ation with advocacy groups “pose asignificant risk to free markets and lim-ited government,” said Tom Borelli, afounder and portfolio manager of theFree Enterprise Action Fund, a mutualfund for conservative shareholder activists.“CSR supporters want the company to


When two investment firms set their sights on ac-quiring Texas’ largest electric company, they re-cruited a pair of surprising partners to their takeover

team — the Natural Resources Defense Council and Environ-mental Defense, two leading advocacy organizations.

The resulting $45 billion takeover proposal in February byKohlberg Kravis Roberts & Co. and Texas Pacific Group was thelargest private buyout bid in history. But it captured even moreattention because of what the environmental groups extractedfrom KKR and TPG, as the takeover firms are commonly called.

If they successfully acquire TXU Corp., KKR and TPG havepledged a long list of changes, including:

• Shrink from 11 to three the number of new coal-fired powerplants TXU plans to build in Texas.

• Scrap plans to build new coal plants in Pennsylvania andVirginia.

• Reopen several mothballed natural gas plants, which pol-lute less than coal.

• Explore the possibility of building a plant that burns coalcleanly.

• Cut carbon dioxide emissions to 1990 levels by 2020.• More than double TXU’s use of wind power.• Promote consumer use of solar power.• Double spending to promote energy efficiency among its

customers.• Create a sustainable energy advisory board that includes

representatives from national environmental groups.• Tie executive compensation to climate-change goals.• Cut some electric rates.• Support federal legislation to mandate reductions in car-

bon dioxide emissions. 1

James Marston, who led Environmental Defense’s campaignagainst the proposed TXU power plants and participated in the

negotiations with KKR and TPG, called the bid “a turning pointin the fight against global warming.” 2 TXU’s size would en-able it to reshape the power industry in Texas and influencethe state’s federal lawmakers to support climate-change legis-lation, he predicted. 3

“It’s one thing for companies in California to take the leadin reducing pollution,” Marston said. “But this is Texas.” 4

“To say TXU is just another company,” agreed David Hawkins,who represented the Natural Resources Defense Council in thenegotiations, “is like saying Muhammad Ali was just anotherboxer.” 5

TPG Partner William Reilly, who was key to bringing thebidders together with the environmentalists, said the success ofthose talks “has led us to expect a future that will be collab-orative and history-making.” 6

Daniel Esty, director of Yale University’s Center for Businessand Environment, said the bid demonstrates the “revolution”occurring in contemporary corporate responsibility.

“KKR and TPG most certainly have not gone soft,” Esty said.“The masters of the universe have not given in to greenmailin a fit of political correctness. To the contrary, they are super-sophisticated business people who have learned that successin the marketplace now depends on getting corporate envi-ronmental strategy right.” 7

The takeover certainly would launch a dramatic makeoverof TXU, which has battled environmental groups over its plant-construction plans and other issues. It has been described asleading the power industry in its advocacy of coal. 8 The 11plants would have added another 78 million tons of carbondioxide annually, more than doubling TXU’s current 55 mil-lion. 9 The three plants still in the bidders’ plans would in-crease emissions by nearly 20 percent. 10

KKR and TPG first told TXU of their designs on the com-

Environmentalists Shape $45 Billion Energy DealActivists’ role in TXU takeover “a turning point in the fight against global warming”


increase its overhead by paying high-er wages, providing health care for allits workers, and guaranteeing workers’rights by having its employees union-ized,” Borelli said, calling such pro-posals “the incremental path to social-ism.” Referring to the classic paean toindividual freedom and laissez-faire cap-italism, Borelli said Wal-Mart should“use its marketing muscle to sell AynRand’s timeless novel Atlas Shruggedinto millions of homes.” 19

According to George Mason Uni-versity economics Professor Russell

Roberts, the popularity of corporatesocial responsibility shows that “mostpeople don’t understand how capital-ism works — the role that profits playedin creating higher standards of livingover the last century.

“The implication is a corporationshould act something like a nonprof-it, should not try to make as muchmoney as possible, should pay notwhat the market will bear to its em-ployees but a fair wage. I think that’snot a particularly healthy attitude forcompanies to have.

“When you’re a publicly held com-pany, you’re not spending your ownmoney. You’re spending the moneyof shareholders who have entrusted itto you.”

GE’s Corcoran agrees that “we takeother people’s money and have an ab-solute responsibility to use that wisely,invest that in products and people andmarketing strategies that will grow theeconomic value of the shareholders’ in-vestment.” But, he adds, “the individualwho opposes every dollar a companygives away to charity or Katrina relief

pany in November 2006. InFebruary, Reilly called En-vironmental Defense Presi-dent Fred Krupp and askedfor a confidential discussion.Reilly, the first PresidentBush’s Environmental Pro-tection Agency director,wanted help preparing a bidthat environmental groupscould support. Ironically,TXU Chairman John Wilderearlier had rejected a Krupp request to talk about the power-plant plans.

The two equity firms believed TXU’s stock was undervaluedbecause of its dependence on coal. And they already were tryingto develop a more promising business plan with their lead finan-cial adviser, Goldman Sachs, which itself works with environmentalgroups and transports its executives in hybrid limousines.

Marston and Hawkins were assigned to represent theirgroups in talks with Reilly and other representatives of the eq-uity firms. After a week and a half of phone conversation,Marston flew to San Francisco for the final session, whichbegan at breakfast in San Francisco’s luxurious Mandarin Ori-ental Hotel. With Hawkins participating by telephone the talksfinally wrapped up at TPG’s offices overlooking San Francis-co Bay at 1 a.m. on Feb. 22. Only then did the KKR and TPGrepresentatives fly to Austin to tell Texas government officialsof their plans. On Feb 25, TXU’s board approved the sale. Itstill must be submitted to a shareholder vote. 11

Not everyone is satisfied with the outcome. Some worrythat TXU’s coal-plant cutbacks would cause an electricity short-age within just a few years and lead to rate hikes. Others plan

to keep opposing the threeplants that TXU still plans tobuild. They also worry the newowners might not keep theirpromises, which are not legal-ly binding.

“Promises are only promis-es,” said Tim Morstad, advoca-cy director for AARP-Texas. 12

1 “TXU to Set New Direction As Pri-vate Company,” Kohlberg Kravis

Roberts & Co., Feb. 26, 2007, www.kkr.com/news/press_releases/2007/02-26-07.html; “The Facts on the TXU Buyout,” Environmental Defense, March6, 2007, www.environmentaldefense.org/article.cfm?contentID=6027; TomFowler, “Power Crisis Tune Changes Quickly,” The Houston Chronicle, Feb.28, 2007, p. 1; Elizabeth Souder, “Buyers May Go National with TXU,” TheDallas Morning News, June 25, 2007, p. 1.2 Felicity Barringer and Andrew Ross Sorkin, “Utility to Limit New CoalPlants in Big Buyout,” The New York Times, Feb. 25, 2007, p. A1.3 Steven Mufson and David Cho, “Energy Firm Accepts $45 Billion Takeover,”The Washington Post, Feb. 26, 2007.4 Janet Wilson and Peter Pae, “Utility sale is boon for green activists,” LosAngeles Times, Feb. 26, 2007, p. A10.5 Ibid.6 Ibid.7 Daniel C. Esty, “When Being Green Puts You in the Black,” The Wash-ington Post, March 4, 2007, p. B1.8 Andrew Ross Sorkin and Clifford Krauss, “At $45 Billion, New Contenderfor Top Buyout,” The New York Times, Feb. 24, 2007, p. A1.9 David Koenig, The Associated Press, “TXU Board OKs Buyout Offer,” TheHouston Chronicle, Feb. 26, 2007, p. 1.10 Mufson and Cho, op. cit.11 Andrew Ross Sorkin, “A Buyout Deal That Has Many Shades of Green,” TheNew York Times, Feb. 26, 2007; Mufson and Cho, op. cit.; Heather Green, “HowGreen Green-Lighted the TXU Deal,” Business Week Online, Feb. 26, 2007.12 Tom Fowler, “Consumer Groups Want Details from TXU,” The HoustonChronicle, July 17, 2007, Business Section, p. 1.

TXU Mining’s Big Brown site, near Fairfield, Texas,provides coal for a nearby coal-fired power plant.

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or helping to address issues of the en-vironment — and thinks every dollarthey give away is a dollar that doesn’tgo back to shareholders — has a verynarrow and dangerous and ill-informedinterpretation” of a corporation’s duties.

Profits are not Whole Foods’ prima-ry purpose but rather the “means to theend of fulfilling [the company’s] corebusiness mission,” Mackey said. “Wewant to improve the health and well-being of everyone on the planet throughhigher-quality foods and better nutrition,and we can’t fulfill this mission unlesswe are highly profitable. Just as peoplecannot live without eating, so a businesscannot live without profits. But most peo-ple don’t live to eat, and neither must abusiness live just to make profits.” 20

Andrew Shallit, shareholder advocacydirector for Boston-based Green Centu-ry Capital Management, defines the mar-ket as including “shareholder activists, thecommunities that are affected by a cor-poration and ultimately all the people inthe world making their demands forwhat they need for a better life.”

Green Century’s mutual funds investin companies that have a positive im-pact on the world after all their costs aretaken into account, Shallit says. That isthe proper way to assess a company’sresponsibility in the market, he argues.

“Is the company having a net neg-ative effect and making a profit basedon the fact that these costs are hid-den — the pollution is going into theriver and someone else is having topay for that?” he asks. “Or is it in truthadding to the overall health andwealth of the world?”

Corporate social responsibility sup-porters note that corporations could notexist without the laws and regulationsthat enable them to do business. This“license to operate” comes with specif-ic legal requirements and an “unwrittenbargain with the societies in which theyoperate,” said Allen White, senior ad-viser to Business for Social Responsi-bility, a nonprofit association that helpscompanies develop and implement so-cial responsibility policies. 21

“Governments grant corporations thelicense to operate because it is in thepublic interest to do so,” White said,and most companies acknowledge theirobligation to take the public’s needsinto account.

In their statements of corporate pur-pose, White said, companies commonlyinclude intentions to serve sharehold-ers, employees, customers and societyat large. A late 2005 global survey ofbusiness executives found more than80 percent agreeing that “generating

high returns for investors should beaccompanied by broader contributionsto the public good,” according to theMcKinsey & Co. consulting firm,which conducted the poll. Only one-in-six said that “high returns shouldbe a corporation’s sole focus.” 22

British investment manager DavidPitt-Watson said widespread stock own-ership — through mutual funds andpension plans — creates “enormousoverlap” in corporations’ responsibil-ity to shareholders and society. The“ultimate shareholder” has become“millions of people” with such in-vestments, said Pitt-Watson, directorand former chief executive of HermesFocus Asset Management, GreatBritain’s largest shareholder-activistfund. “As a result, social and privateinterests go together.” 23

Is social responsibility good forthe bottom line?

For the Coca-Cola Co., a predictedglobal water crisis is “a strategic threatto our business,” because water is thecompany’s most important raw material,says Jeff Seabright, Coke’s vice presidentfor environment and water. “Climatechange is going to stress this even fur-ther,” he adds. As result, he says, Cokeadvances its business interests by con-serving water at its plants, helping com-munities manage their watersheds betterand reducing the company’s contributionto global warming.

Wal-Mart follows advice from envi-ronmental organizations to reduce itswaste of materials and energy, thenhelps its suppliers do the same, saysMarc Major of Blu Skye Sustainability,a Wal-Mart consultant in Healdsburg,Calif. After that, Major continues, thegiant retailer tells the suppliers: “Youcut your energy bills, so you can cutthe cost of the products you sell to us.”

Good schools are needed to sup-ply a qualified workforce, says Weyer-haeuser Co. Foundation President KarenJohnson. The forest products companymakes education a key component of


Socially Responsible Investing on the Rise

Investments that take into account the well-being of society and the environment more than tripled — to nearly $2.3 trillion — from 1995 to 2005.

Source: “2005 Report on Socially Responsible Investing Trends in the United States,” Social Investment Forum, Jan. 24, 2006

Socially Responsible Investing in the U.S., 1995-2005

0.0

0.5

1.0

1.5

2.0

$2.5

200520032001199919971995

$639 billion

$1.18 trillion

$2.16 trillion

$2.32 trillion

$2.16 trillion

$2.29 trillion

($ trillions)

Dig

italS

tock


its philanthropy, awarding college schol-arships to employees’ children andhelping to improve school districts nearits operations.

But critics complain that companiessquander shareholders’ assets in cor-porate social responsibility programs.

“The modern corporation, by its veryexistence, has become a responsible in-stitution at the task it is assigned to do,which is to organize people to createa product at an affordable price [and]to create wealth,” argued Fred SmithJr., president of the Competitive Enter-prise Institute, which promotes freemarkets. “To divert the corporationfrom that task will weaken the wealth-creation progress that we have seenover the last two centuries, and it woulddo nothing to achieve these myriad ofother goals, because only you and I —only individuals — can pursue the myr-iad values that a moral society has.” 24

Supporters of corporate social re-sponsibility contend that it actually isgood for the bottom line, as demon-strated by the experiences of Coke,Wal-Mart, Weyerhaeuser and manyother companies.

Responding to environmentalists’calls to cut waste also cuts costs, theysay. Companies need a healthy, well-educated workforce. They need safeand healthy communities in which tolocate their retail establishments. Com-panies that are recognized as goodcorporate citizens attract investors andconsumers — especially upscale con-sumers — and recruit and retain em-ployees more effectively. Activist groupsare less likely to attack those compa-nies, advocates say, and corporate so-cial responsibility policies can ward offgovernment regulation. As companiesmake their products and seek cus-tomers all over the world, they reapbenefits by helping to improve condi-tions in disadvantaged communities.

“Our business will succeed in com-munities that thrive,” says Coke Cor-porate Responsibility Director KarenFlanders, sounding a theme repeated

by many corporate executives.Critics also charge that if corporate

responsibility is good for the bottom line,then it’s just smart management and isnothing really new. But supporters saya fundamental change is under way.Companies are discovering new waysto be profitable as a byproduct of seek-ing to be responsible. Responding to at-tacks from advocacy groups, companiesare forging relationships with unlikelypartners and becoming more effectivebusinesses as a result.

“Company executives will say weused to think we had all the info andperspective we needed internally, andnow we realize we need to talk to adiverse group of actors outside thecompany,” says Business for SocialResponsibility President Aron Cramer.

“You see a lot more dialogue withnon-governmental organizations, the en-vironmental community, the human-rights community, community organiza-tions, academic experts, experts frominternational organizations and multilat-eral organizations,” Cramer continues.“And that really enriches a company’sdecision making.”

Hannah Jones, Nike’s vice presidentfor corporate responsibility, says re-sponsibility “can be a vehicle for in-novation and growth.” Company ex-ecutives challenged Nike productdesigners to incorporate environmen-tal concerns into their work, Jones ex-plains, and “it’s led to innovation thatled us to make better shoes.”

Nike’s signature “air” soles actuallycontained the greenhouse gases sul-fur hexafluoride and polyfluorenephenylene. While looking for a wayto use a benign gas, Jones says, de-signers discovered how to extend anitrogen-filled air bag for the fulllength of the shoe — something theyhad not been able to do before.

Corporate responsibility also hasbecome “a huge piece of recruitment,retention and motivation” of employ-ees, Jones says. “It’s interesting towatch [prospective employees] in in-terviews, asking about CR and theirability to be engaged in CR throughtheir work.”

But David Vogel, a business andpolitical science professor at the Uni-versity of California at Berkeley, thinks

Socially Responsible Investing Pays Off

Companies in the Domini 400 Social Index — which tracks environmentally and socially responsible firms — are performing better over the long term than companies in the S&P 500, although their short-term returns are lower.

* As of May 31, 2007

Source: “KLD Reports May 2007 Index Returns,” KLD Indexes, June 7, 2007

Annualized Returns of Domini 400 and S&P 500 Indexes(since inception of Domini 400 on May 1, 1990)

0

3

6

9

12

15%

17-year *Ten-yearThree-year

Domini 400 S&P 500

10.58%13.03%

7.78% 7.78%

12.28% 11.71%

658 CQ Researcher

“the business benefits from CSR areoften exaggerated.”

Most studies have shown the impactto be “fairly modest, either positive ornegative,” says Vogel, author of TheMarket for Virtue: The Potential andLimits of Corporate Responsibility. Con-servation can cut costs, he concedes.He’s seen “some examples” of corpo-rate responsibility helping companiesdeal with governments and advocacygroups. “A lot of circumstantial evidence”indicates it can help recruitment, moraleand retention, but he thinks it boostssales only for some “niche market com-panies that sell expensive products,” suchas Whole Foods and Ben & Jerry’s.

KLD Research & Analytics, an in-vestment research firm, created sixstock market indexes designed tocompare the financial performance ofcompanies that have good social re-sponsibility records against traditionalindexes, such as the Standard & Poor’s500 and the Russell 3000. Since theindexes were established, between 1990and 2006, two have outperformed thetraditional indexes and four have not.

Advocates say corporate responsi-bility delivers the most benefit over thelong term, and KLD’s oldest index —the Domini 400 Social Index, createdin 1990, outperformed the S&P 500.(See graph, p. 657.) So did the GlobalClimate 500, which was created in 2005.

All the KLD indexes trailed their tra-ditional counterparts in May, primarilybecause the environment-friendly in-dexes contained few energy stocks,which were soaring at the time. 25

Does corporate social responsi-bility really improve society?

Companies proclaim that their so-cial responsibility activities protect theenvironment and improve people’s livesaround the world.

Impoverished Africans get treatmentfor HIV/AIDS because major pharma-ceutical companies supply drugs at lowcosts, for instance. Disadvantaged stu-dents become employable because Mi-

crosoft supports training programs in in-formation technology. Under-equippedlaw-enforcement agencies track downmurderers because Target lets them usesophisticated forensics laboratories it cre-ated to deal with crime in its 1,400 stores.

Critics beg to differ. While theremay be isolated examples of effectiveprograms, they say, for the most part,corporate responsibility doesn’t work.

“Is CSR mostly for show?” AtlanticMonthly Senior Editor Clive Cook askedrhetorically in The Economist, whenhe was deputy editor there. “The shortanswer must be yes.

“For most conventionally organizedpublic companies — which means al-most all of the big ones — CSR is littlemore than a cosmetic treatment. Thehuman face that CSR applies to capital-ism goes on each morning, gets in-creasingly smeared by day and washesoff at night. Under pressure, big multi-nationals ask their critics to judge themby CSR criteria, and then, as the criticscharge, mostly fail to follow through.” 26

Businesses aren’t qualified formany of the social and environmentaltasks they’re assigning themselves,according to T. J. Rodgers, presidentand CEO of Cypress SemiconductorCorp. and an outspoken critic ofcorporate social responsibility.

“We specialize in doing differenttasks, and people who specialize arebetter at what they do,” Rodgers says.“There’s no reason to think compa-nies are competent at philanthropy.

“Suppose a convent of nuns de-cided that high-efficiency automobileswere required to lower greenhousegases, and they decided they weregoing to make a 100-miles-per-gallonautomobile at a convent. We’d saythat’s pretty stupid. Why don’t you stayin the nun business and let the car-makers make cars?”

Communities are better off whenindividuals, not corporations, decidewhich social improvement projects tosupport, George Mason University’sRoberts argues.

“I make a lot of donations to char-ity,” Roberts says. “I want to make thedecision [on how] to spend my money.Why is it that a shareholder would wantto invest in a company that gives em-ployees paid time off to go out andbuild houses, rather than give directlyto Habitat for Humanity, for instance?

“If corporations gave the money backto employees in higher wages, to cus-tomers in lower prices, to shareholdersin higher dividends, then those indi-viduals would decide what makes thecommunity healthier,” he continues.

The John Locke Foundation’s Hoodcriticizes companies that require sup-pliers to offer better pay and benefitsthan markets require in poor countries.

“If people are willing in Bangladeshor Malaysia to take jobs at wage ratesthat appear to us to be astronomical-ly low, they may know something wedon’t about what their alternative is,”Hood says. “Maybe the only optionthat person has is to work in the fieldin much less pleasant conditions withmuch less certainty about the future.”

David Baron, a professor of politi-cal economy and strategy at StanfordUniversity, agrees that companies shouldbe “maximizing their market value —subject to certain ethical duties.” Thedilemma, he adds, is “what constitutesan ethical duty.”

Giving drugs to poor HIV/AIDS pa-tients “is obviously socially good,” hesays. “The question is who should beresponsible for making them available.Should it be the rich countries that buythe drugs and give it to the poor coun-tries, or should it be the manufacturersthemselves?”

Sometimes businesses are best ableto address a problem, insists Scott John-son, vice president for global envi-ronment and safety concerns at SCJohnson, manufacturer of iconic house-hold items such as Pledge, Fantastikand Windex.

“When things need to be done ona global basis, business has far more


Continued on p. 660


ChronologyEarly 1800sCompanies provide for needsof workers in isolated areas.

•

Late 1800s-Early 1900sIndustrial barons AndrewCarnegie and John D. Rockefellergive much of their personalwealth to philanthropic causes.

1881Carnegie begins to build free publiclibraries.

1890Rockefeller finances University ofChicago.

1900Carnegie Institute of Technologyestablished.

1910Carnegie Endowment for Interna-tional Peace created.

1911Fire at Triangle shirtwaist factory inNew York City kills more than 140workers, calling attention to sweat-shops and child labor.

1913Rockefeller Foundation established.

•

1915-1940Labor unrest and economiccollapse press corporations toaddress public needs.

1916Executives from major U.S. corpo-

rations establish National IndustrialConference Board, now The Con-ference Board “to find solutions tocommon problems.”

1919World War I veterans return to do-mestic workplaces and begin de-manding higher wages, betterworking conditions and stiffer gov-ernment regulation of corporations.

1929Stock market crash marks start ofGreat Depression, causing public re-spect for business to crash as well.

1933Inauguration of President FranklinD. Roosevelt and beginning ofNew Deal bring increased govern-ment regulation of business, alongwith tax breaks to encourage cor-porate philanthropy.

1934General Electric President GerardSwope says corporate Americamust “take the lead” in addressingsocial problems.

•

1940-1960U.S. corporations accept needto help fight World War II andrespond to the war’s destructionafterwards. Corporate philan-thropy grows.

•

1960s-1970sSocial action movements —civil rights, women’s rights,consumerism, environmentalism,antiwar — challenge traditionalcorporate practices and spurnew government regulation ofbusiness.

1965Equal Employment OpportunityCommission begins operations.

1970Environmental Protection Agencyand Occupational Safety andHealth Administration created.

1972Consumer Product Safety Commis-sion created.

•

1980s-2000sCompanies tie grant making totheir core business through“strategic philanthropy.” Grow-ing number view corporate so-cial responsibility as beneficialto bottom line.

1992Executives from 50 socially orient-ed companies found Business forSocial Responsibility to advocategood corporate citizenship.

1994British consulting firm SustainAbilitycoins phrase “triple bottom line,”contending corporations’ long-termsuccess requires attention to societyand environment as well to share-holders.

2005Business Roundtable launches“S.E.E. Change” initiative to en-courage companies to adopt policies that improve society, environment and economy.

2007Conference Board establishes Centerfor Corporate Citizenship and Sus-tainability. . . . Equity firms consultenvironmental advocacy groups be-fore launching the largest privatebuyout bid in history, for TXU Corp.

660 CQ Researcher

capability to cross borders with programslike our greenhouse gas reduction goalsthan just about any other organization,”he says. “Political organizations are bound-ed within their localities, but businessescan move where we do business.”

Heerad Sabeti, co-founder of a NorthCarolina company that makes homedecorations, rejects the argument thathe should maximize profits, then makecontributions to charity.

“We want social responsibility to becompletely embedded in everythingwe do” at TransForms, he said. “Whatgood does [contributing to charity] doif I’m using plastic for my packagingand helping to contribute to job loss-es by manufacturing in China?” 27

Mathew Nelson, head of corporatefoundation services at the Council on

Foundations, says many social respon-sibility programs do work. When hewas community relations manager atAmeriprise Financial headquarters inMinneapolis, for instance, the compa-ny funded career and college centersat local high schools and encouragedemployees to volunteer at the centers.

“The employees were helping thekids to know what it was like in thereal world and helping them in mak-ing decisions about what careers to gointo, as well as being adult mentors,which lots of research has shown iskey to the success of youths,” Nelsonexplains.

Microsoft co-founder Bill Gates sup-ports both sides in the debate. Hiscompany practices social responsibility,and he has donated billions of dollarsof his own money to charity. But he

doesn’t practice socially responsibleinvesting.

After the Los Angeles Times revealedthe Bill & Melinda Gates Foundation ownsstock in companies whose business prac-tices conflict with the foundation’s pur-poses, foundation Chief Operating Offi-cer Cheryl Scott explained the Gateses’investment philosophy.

Acknowledging that “shareholderactivism is one factor that can influ-ence corporate behavior,” Scott saidthe Gateses “have chosen not to getinvolved in ranking companies basedupon factors such as their lendingpolicies or environmental record.”

Focusing on programs enables thefoundation “to have the greatest im-pact for the most people,” she said.The Gateses “also believe there wouldbe much room for error and confusion


Continued from p. 658

I n three slums of Nairobi, Kenya, young people walk doorto door offering to clean homes and eradicate pests withSC Johnson products.

The budding entrepreneurs are part of the home-productsmanufacturer’s efforts to earn profits and do good at the “baseof the [economic] pyramid.”

While there would not appear to be much business in com-munities where families survive on less than $4 a day, the man-ufacturer of Raid, Fantastik and other well-known brands hasconcluded these potential consumers have much to contributeto the company’s long-term growth.

“Historically, large companies focus at the tip of the pyra-mid,” where 10 percent of the world’s population consumes85 percent of the planet’s resources, Cornell University Man-agement Professor Stuart Hart says. “But the tip of the pyra-mid is running out of gas,” while enormous potential marketssit untapped throughout the rest of the world.

Some 4.5 billion people reside in the economic pyramid’sbase, Hart explains, and another 1.4 million in the area be-tween the top and the bottom. In addition, these poor popu-lations are growing faster than those in the developed world,creating what Hart calls “trickle-up opportunity.”

A company can’t simply start marketing to the poor of Nairobithe way it sells to the middle class in Peoria, however.

Traditionally, Hart says, companies try to sell their productsto the poor by finding less expensive means of production,

using smaller packages, cutting prices, extending distribution toplaces previously not served and perhaps working with non-profit organizations to deliver needed goods to people whohad been unable to get them. He calls this strategy “BOP (baseof pyramid) 1.0.”

BOP 2.0 “has to be about creating new livelihood andwealth, not just selling products to poor people — not just ex-traction,” he says. This requires “engaging the poor, buildinglocal capacity, building mutual value.”

SC Johnson supports base-of-the-pyramid research at Cor-nell by Hart and research associate Duncan Dukes and agreesthe potential market is “too big to ignore,” says Scott Johnson,the company’s vice president for global environment and safe-ty concerns. “Millions of poor people live near SC Johnson op-erations around the world, but we have no business with them.”So the company agreed to test the scholars’ theories.

The process entailed what the scholars term “deep listen-ing” to the community to identify potential markets, and form-ing partnerships with potential local entrepreneurs who wouldsell the company’s products there. The goal was to “createsomething not possible by the multinational corporation or thelocal community by itself,” Hart explains. SC Johnson wouldincrease sales as the local entrepreneurs created businesses thatbuoyed the local economy.

Realizing that families earning a few dollars a day wouldbe reluctant to purchase products that retail for several dollars

Doing Business at the ‘Base of the Pyramid’SC Johnson sells cleaning supplies in Africa “a squirt at a time”


in [assessing companies’ social re-sponsibility], and that divesting fromthese companies would not have aneffect commensurate with the resourceswe would divert to this activity.”

The foundation does avoid invest-ing in companies whose actions are“egregious,” such as tobacco compa-nies, Scott said. 28

BACKGROUND‘Company Towns’

F rom the early 19th to the early20th centuries, companies with op-

erations in isolated areas practicedsomething resembling contemporarycorporate social responsibility, build-ing housing for employees and storeswhere workers could buy necessities.Some businesses added parks and othercommunity amenities. 29

These “company towns” weren’t al-ways so good for the workers, how-ever. Corporations used the towns andcompany facilities to keep employeesin line — evicting strikers, for exam-ple. Companies also sometimes bannedcompeting merchants and chargedmonopoly prices at the company stores.

When railroads began spreadingacross the country, they contributedto local YMCAs so their itinerant em-ployees would have places to stay.Sears, Roebuck & Co. helped teachfarmers better agricultural practices in

the belief that more prosperous farmfamilies would buy more from Sears’mail-order catalogs.

In the late 19th and early 20thcenturies, Andrew Carnegie andJohn D. Rockefeller, the kings of steeland oil, gave much of their wealthto humanitarian causes and estab-lished institutions that are among themost important nonprofits on Earthtoday.

Carnegie gave away $350 million— 90 percent of his wealth — andin the process created the PeacePalace at The Hague, where the WorldCourt now sits; the Carnegie Corpo-ration to support education and re-search; the Carnegie Endowment forInternational Peace; the Carnegie In-stitute of Technology, and some 3,000libraries around the world.

a can, the company and theyoung entrepreneurs decid-ed to use SC Johnson prod-ucts in a service business.The company trained theyoung people in such skillsas pest management, ac-counting and marketing,then sent them out on door-to-door sales calls.

They now offer clean-ing and pest-control ser-vices to homes and busi-nesses, using SC Johnson merchandise such as Windex glasscleaner, Toilet Duck bathroom cleansers and Baygon insect-control products. Nairobi’s poor can afford to buy those prod-ucts “by the squirt,” Johnson says, and get healthier homesand workplaces as a result.

The new tactic represented a fundamental change for boththe company and the community, Duke notes. SC Johnson was“moving from a product focus to a service focus” in “a placewhere there’s no service provided to homes.”

Success will require patience and flexibility, Duke says, traitsthat may come easier to privately owned SC Johnson than toa publicly held corporation with shareholders focused on quar-terly returns.

“We take the long view ondecisions,” Johnson explains. Atthe base of the pyramid, “there’snot going to be a short-term suc-cess,” and the company can livewith that. “We believe the longview is simultaneously what’sbest for our business and for theplaces where we do business.”

While “it’s too early to tell”the long-term prospects for theNairobi project, Johnson says,the company already is report-

ing success working with small retailers who sell to the poorin Nigeria.

There, SC Johnson employs motorcycle riders to deliver itsproducts to kiosks, roadside hawkers and “others usually notserved effectively by other distributors,” the company report-ed. The process is creating “an important new route to mar-ket,” the company said. The 52 motorcycles operating aroundthe country at the end of last year “have already recouped thecapital invested and significantly improved our distribution inkey Nigerian markets.” 1

1 “Doing Our Part,” SC Johnson, 2007, www.scjohnson.com/community/2007_Public_Report.asp.

Cleaning products are delivered by 52 motorcycle riders to small retailers in Nigeria normally

left out of the delivery chain.

SC J

ohnso

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662 CQ Researcher

“The man who dies rich,” he said,“dies disgraced.” 30

Rocke fe l l e r, who endorsedCarnegie’s philanthropic “Gospel ofWealth,” created the Rockefeller Foun-dation, which has given away morethan $14 billion. Among his other lega-cies: the University of Chicago and theRockefeller Institute for Medical Re-search, now known as RockefellerUniversity.

The industrialists’ un-precedented philan-thropy was “a very pos-itive development,”according to Mal Warwick,an adviser to nonprof-its and co-founder ofBusiness for Social Re-sponsibility. But “it wasa far cry from corporatesocial responsibility.”Their philanthropy waspersonal, he notes, andtheir corporations werefar from socially re-sponsible.

“Andrew Carnegiegave away hundreds ofmillions of dollars andbuilt thousands of li-braries and deservesmuch credit for that,”Warwick says. “As acorporate leader, [how-ever], his name hasgone down in infamyfor his exploitative prac-tices and the violencehe directed againstworkers who defiedhis overseers.

“Rockefeller was certainly aparagon of virtue in many respects. Iwould not want to detract one bit fromhis legacy of philanthropy. But, as abusinessman, he was ruthless, treatedhis competition like dirt, was no friendof his employees and was behind someof the violence directed against work-ers who were rebelling against the di-rection of his companies.”

Violence and Turmoil

A t about the same time Carnegieand Rockefeller were giving away

their fortunes, some active businessexecutives were delving into corpo-rate responsibility. Public confidencein American business was plunging,

they realized. Muckraking journalistswere exposing hazardous industrialworking conditions. Labor and man-agement were locked in heated con-flicts, some of which turned violent.

Responding to this turmoil in 1916,a group of executives from major cor-porations founded the National Indus-trial Conference Board, now simplyThe Conference Board. The board was

created to be “a respected, not-for-prof-it, nonpartisan organization that wouldbring leaders together to find solutionsto common problems and objectivelyexamine major issues having an im-pact on business and society.” 31

Pure corporate philanthropy becamewidespread during World War I as com-panies contributed to local CommunityChests, the forerunners of United Way.

Executives liked the simplicityof making one contributionto an organization thoughtto understand the top needsof the community.

The ferment that spawnedThe Conference Board con-tinued after the war, withgrowing labor militancy anddemands for stiffer govern-ment regulation of corpora-tions. Major companies —such as GE, Eastman Kodak,National Cash Register, Stan-dard Oil and Goodyear Tire& Rubber — portrayed them-selves as socially responsi-ble, with promises of high-er wages and better workingconditions. They hoped tomeet public demands with-out succumbing to regula-tion or unionization.

Goodyear became par-ticularly notable for ad-dressing the needs of itsemployees. “Goodyear hasall about her the humanquality,” P. W. Lichfield,president and/or CEO from1926 to 1956, said. “And ithas been to this human

quality, fully as much as to her busi-ness methods, that Goodyear owes hermeteoric rise in the ranks of Ameri-can industry.” 32

Presaging criticisms of contemporarycorporate social responsibility, someother corporate executives labeledLichfield a socialist and a Marxist.

The 1929 stock market crash andsubsequent Great Depression deepened


Industrialist Andrew Carnegie (above) and oil baron John D.Rockefeller gave away much of their wealth to humanitariancauses in the late 19th and early 20th centuries, establishing

major philanthropies still influential today. “The man who dies rich dies disgraced,” Carnegie once said.

AP P

hoto


public antagonism toward business andspurred corporations to make more ef-forts to appear socially responsible. Mostcorporate executives worried about thegrowth of government power duringthe New Deal, and some feared thevery survival of capitalism was at stake.

“Organized industry should take thelead,” GE President Gerard Swope said,“recognizing its responsibility to itsemployees, to the public and to itsshareholders, rather than that democ-ratic society should act through itsgovernment.” 33

“If the corporate system is to sur-vive,” New Deal architects Adolf Berleand Gardiner Means argued, “corpora-tions must balance a variety of claimsby various groups in the communityand assign to each a portion of the in-come stream on the basis of publicpolicy rather than private cupidity.” 34

The New Deal also encouraged morebusiness philanthropy by creating taxdeductions for corporate giving.

Postwar Stimuli

T he U.S. government’s leadershipin rebuilding Europe following

World War II prompted American busi-ness executives to recognize “a col-lective need and obligation to engagein reconstruction of the country andthe world,” according to Lenny Men-donca, chairman of McKinsey & Com-pany’s Global Institute. 35 The post-war economic boom encouragedmore corporate philanthropy and thegrowth of corporate foundations.

The multiple social action move-ments of the 1960s and ’70s — civilrights, women’s rights, consumerism,environmentalism, antiwar — challengedtraditional corporate practices. Between1965 and ’73, four new federal agen-cies began regulating business conduct— the Occupational Safety and HealthAdministration, the Equal EmploymentOpportunity Commission, the ConsumerProduct Safety Commission and the En-

vironmental Protection Agency. Com-panies responded by contributing moreto social welfare organizations, increasingtheir political activity and launchingmarketing campaigns designed tomake them appear more socially re-sponsible.

“The more distant the self-interest,the more altruistic the corporate phil-anthropy seemed,” Sylvia Clark andKate Dewey wrote in a report for theCouncil on Foundations. “Consequently,causes contrary to the corporation’s in-terest often were supported.” 36

Melding company interests with broad-er community needs, much corporatephilanthropy in the 1980s focused onquality of life. “In order to recruit andretain employees and customers,” Clarkand Dewey wrote, “corporations strivedto ensure that communities were at-tractive places to live and work.” 37

During the 1990s, a growing num-ber of corporations began to practice“strategic philanthropy,” by which theytied grant making to the company’s corebusiness and offered the company’s skillsto help nonprofits perform their workmore effectively. Strategic philanthropywas “steering corporate America into amore powerful and direct social role,”Craig Smith, a consultant to The Con-ference Board, wrote at the time. It hadthe potential to “make corporate culturemore benevolent,” he said. 38

Milestones on the road fromstrategic philanthropy to contempo-rary corporate social responsibilityincluded:

• Creation in 1992 of Business forSocial Responsibility, to advocategood corporate citizenship andadvise businesses on how toachieve it. Founders included ex-ecutives from 50 socially orientedcompanies, including Ben & Jerry’sice cream, Patagonia apparel andTom’s of Maine personal-careproducts. 39

• Coining the phrase “triple bottomline” in 1994 by SustainAbility, aBritish consulting firm that spe-

cializes in corporate responsibilityand sustainable development. Thephrase encapsulates the firm’s con-tention that companies need toconsider their impact on societyand the environment, as well asreturn to shareholders, if they areto prosper over the long term. Thephrase “people, planet, profit”now is widely accepted by majorcorporations. 40

• The Business Roundtable’s launch-ing in 2005 of the S.E.E. Changeinitiative to “leverage the powerof business as a force for good.”The initiative encourages compa-nies to adopt policies that im-prove society, the environment andthe economy (S.E.E.). 41

• The Conference Board’s establish-ment in early 2007 of the Centerfor Corporate Citizenship and Sus-tainability. The center’s mission isto help companies make citizen-ship and sustainability “integral, corebusiness strategies, targeting busi-ness opportunities that provide max-imum economic, environmental andsocietal benefit to all.” 42

CURRENTSITUATION

New Approach

S everal factors distinguish contem-porary corporate social responsi-

bility from its predecessors. One is itsemphasis on enhancing society, theenvironment and shareholder value si-multaneously. Another is the over-whelming number of large companiesthat are integrating the concept intotheir core business strategy. A third isthe contention by advocates that it isnot just the morally right thing to do

664 CQ Researcher


but is necessary for long-term busi-ness success.

“It used to be about how muchmoney you give to something,” ex-plains Larry Burton, executive directorof the Business Roundtable.

Now, according to Marian Hopkins,the Roundtable’s director of public pol-icy, “it’s not charity or humanitarian aid.It’s a business proposition that makessense, a strategic way of looking atthings and behaving. It’s about beingsmart as a company.”

As Business forSocial ResponsibilityPresident Cramerputs it: “Corporatesocial responsibilityis about how acompany earns itsmoney, not how itgives it away afterit’s earned it.”

Among the cor-porate CEOs whocomprise the Round-table, the watchwordis “sustainability,”Burton and Hop-kins say.

Environmentalistsoriginated the con-cept, advocating con-duct by individuals,businesses and gov-ernments that wouldsustain life on theplanet. For corporateexecutives it nowmeans sustaining theenvironment, societyand their businesses.

“It’s about today,the quarter, the year,the future,” Burtonsays. According toHopkins, “It’s about doing what youneed to do today without compromis-ing future generations doing what theyneed to do.”

This requires long-term thinkingthat’s compatible with protecting the

environment and building healthy so-cieties that last. It leads to corporatesupport for education, health care, com-munity improvement projects, eco-nomic development in poor nations,and even for stiffening some envi-ronmental-protection laws.

“There’s a growing understanding atthe top of the major corporations thathumanity has been a poor steward ofour planet, that we are facing resourcesshortages,” says Business for Social

Responsibility co-founder Warwick. “Weare coming up against the time whenit will be impossible for companies toobtain all the materials they need ifthey keep operating in the way theyalways have — particularly if they

waste such basic resources as water,energy and minerals.”

Response to Globalization

B urton notes the growing corpo-rate support for action on global

warming, which he terms “the ultimatesustainability question.”

Globalization, tech-nology and the increas-ing importance of busi-nesses — especially largebusinesses — contributeto a growing public de-mand for corporate re-sponsibility.

“We’ve experiencedrapid globalization andthe r i se o f marke teconomies in every partof the world,” Cramerexplains. Because of theInternet and other ad-vanced information tech-nology, “we live in amuch more transparentworld, so the actions acompany takes can beseen and understood bya global community.”

An activist, share-holder advocacy directorShallit points out, “canvery easily go to China,to a computer dump,where you have chil-dren working with ham-mers and acid baths try-ing to recover lead fromour old computer mon-itors. The activist takes apicture of a monitor that

has a Dell logo, and puts it on a Website and sends it in an e-mail toMichael Dell. That has an immediateimpact in a way that would not bepossible” before the Internet.

Continued on p. 666

Like many big U.S. corporations, Intel now issues an annual corporatesocial responsibility report. The company spends more than $100 million a year to improve science and mathematics

education in more than 50 countries.

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At Issue:Does corporate social responsibility endanger U.S. prosperity?Yes

yesNICK NICHOLSCRISIS COMMUNICATIONS INSTRUCTORJOHNS HOPKINS UNIVERSITY

WRITTEN FOR CQ RESEARCHER, JULY 2007

t he financial well-being of 91 million Americans is tied to thefortunes of publicly traded corporations because half of Amer-ican households own stock. It does not take an economics

guru to conclude that diverting corporate assets away from activitiesthat improve earnings endangers American prosperity.

Corporate executives are responsible for obeying laws andregulations. The corporate social responsibility (CSR) move-ment, however, is all about spending company resources(a.k.a. other people’s money) on social and environmentalprograms that are not mandated by law. Every buck that isshanghaied from corporate coffers represents a hidden levy onshareholders, undermining their prosperity.

Why would business titans embrace corporate socialism?Some have chosen appeasement in response to activist grouppressure. Others have been duped by public relations snake-oilpeddlers who claim that jumping on the CSR bandwagon willprotect a company from public attacks if something goes wrong.

Look at what happened to British Petroleum (BP) after oneof its refineries blew up and its Alaska pipeline started leak-ing. The poster child for corporate do-gooders was publiclyskewered for mismanagement. All those millions that BP spentposing for holy pictures with the likes of Greenpeace paidzero dividends in the court of public opinion as investorswatched share values plummet.

A quick Google search suggests that thousands of companiesare joining the march toward corporate social responsibility.One critic claims that Nike spends about $10 million a year juststaffing its CSR program.

While no one knows how many shareholder dollars arebeing spent each year on CSR, I suspect the bottom linewould impress even the Congressional Budget Office. Thinkof CSR as the redistribution of prosperity away from those whohave invested their savings in the stock market and towardthose people or things that the unelected non-government or-ganizations of the world consider worthy.

For those on Capitol Hill who think it is about time corpora-tions got a dose of social responsibility, think again. The CSRmovement is not only about redistributing the wealth but alsoabout redistributing political power — away from legislators andregulators and toward non-government organizations that are un-accountable to the public and rarely accountable to government.

You may think it is cute that corporate executives are frolick-ing with activist groups, but I suspect you will think differentlywhen those same groups determine that you are irrelevant.No

ARON CRAMERPRESIDENT AND CEO, BUSINESS FOR SOCIALRESPONSIBILITY

WRITTEN FOR CQ RESEARCHER, JULY 2007

c orporate social responsibility (CSR) has been embracedby many of the most respected companies in America.CSR means the integration of environmental and social

impacts into a company’s strategies and operations.Contrary to what some critics might claim, CSR has little to

do with altruism and a great deal to do with enlightened self-interest. This is why companies like General Electric and Wal-Mart have embraced CSR as a way of building and maintain-ing their business strategies. This is why more than 1,000multinational companies now produce public CSR reports.

Why is this agenda critical, not only for the U.S. businesscommunity but also the American and global economy?

First, there is money to be made from looking at the social andenvironmental dimensions of business. As GE has made abundant-ly clear, “Green is Green,” as the company has grown its revenuesthrough environmentally beneficial technologies. As natural re-sources become more scarce, efficiency becomes more important.

Second, in a global economy, companies do not have theluxury of ignoring the way “Brand America” is perceived inthe world. As survey after survey indicates that America’s rep-utation is declining in the world, American business takesnote. Doing business the right way helps to ensure that Amer-ican companies are — and are seen to be — good neighborsin an increasingly complex world.

Third, CSR is an essential tool for operating in our globalworld. As Clyde Prestowitz famously put it in the title of hisrecent book, there are “three billion new capitalists” in China,India and Russia. They view the world differently from manyin the United States, Europe and Japan. CSR helps to buildbusiness strategies that generate products and services for thehalf of the world’s population found in those countries.

Finally, CSR helps companies succeed in our increasinglynetworked and transparent environment. In the You Tubeworld, anyone can shape a company’s reputation — for goodor ill. Companies that embrace external dialogue are poised tosucceed; those that ignore it do so at their peril.

Some may claim that CSR wastes corporate assets on mattersunrelated to core business purpose. This argument is based on adistorted view of CSR. It also begs a more fundamental ques-tion: Do opponents of CSR suggest that business should proceedwithout regard to ethics, social impact or the environment?

There is a reason why America’s leading businesses haveembraced CSR. It delivers value for their companies, their em-ployees, their consumers and their communities.

CSR is simply good business.

666 CQ Researcher

Executives feelthe need to protectthe i r companiesagainst a public thatis worried aboutglobalization’s im-pact on jobs, re-pulsed by workingand environmentalconditions in devel-oping countries andfearful of climatechange, the Univer-sity of California’sVogel says.

Companies alsodrive each other tocorporate responsi-bility.

“Wal-Mart throwsa huge shadowacross the worldwhen it asks for ac-tion,” notes DanielEsty, director of YaleUniversity’s Center for Business andEnvironment. “When Wal-Mart is yourcustomer and says it’s time to move,you better get moving.”

The giant retailer’s efforts to pro-tect the environment are driving itssuppliers to switch to more envi-ronmentally friendly packaging, tomake more environmentally friendlyproducts and to ship their productsin a more environmentally friendlymanner.

“When [Wal-Mart CEO] Lee Scottsaid you’ve got to reduce emissionswhen you deliver to our stores, thatgot the bottlers’ attention,” Coca-ColaCorporate Responsibility Director Flan-ders says.

Indeed, when Home Depot this yearannounced plans for an “Eco Options”marketing campaign, manufacturerssubmitted more than 60,000 productsfor inclusion. Unfortunately, many werenot all that eco friendly (plastic-handledpaintbrushes were pitched because theysaved trees, wood-handled ones be-

cause they didn’t use the dreaded plas-tic). Still, the home-improvement re-tailer found 2,500 items to promote,including solar-powered landscapelighting and low-polluting paint. 43

Suppliers also are seeking profitsby convincing their customers to besocially responsible.

“There is opportunity to sell solutions,”Esty says, suggesting that a suppliercan “help a customer develop an en-vironmental plan that the supplier cancontribute to.

“If you’re GE selling jet engines, fueleconomy means a lot to airlines. Thereare very few companies that don’t facesome environmental pressures.”

Last year, BT Americas, British Tele-com’s operation in the Western Hemi-sphere, joined the list of corporationswith an executive in charge of CSR.Part of the newly created job is facili-tating the company’s social responsi-bility policies, such as using green en-ergy, following certain personnel rulesand offering pro-bono telecommunica-

tions consulting to non-profits. New CSR Direc-tor Kevin Moss also“works with customersto help them identifyand implement CSRthrough our products.”

Examples includeholding audio- and tele-conferences to avoidlong-distance travel andusing information tech-nology to enable em-ployee telecommuting.Cutting travel reducesthe customers’ contribu-tion to greenhouse gasemissions, Moss pointsout. Telecommuting “canincrease diversity bymaking the workplacemore accessible to work-ing parents and handi-capped workers.” Hav-ing a dispersed workforce “makes your orga-

nization less susceptible to disaster,”Moss says, “and home workers call insick less often.”

Nike calls the triple bottom line“ROI squared — return on investmentsquared,” says Vice President for Cor-porate Responsibility Jones. The com-pany is infusing “corporate responsi-bility thinking across the businessmodel,” she says. Executives’ perfor-mance reviews contain corporate re-sponsibility targets.

On May 31 the company announcedbusiness targets for 2011 that includeimproving labor conditions in its sup-pliers’ factories, shrinking CO2 emis-sions throughout its operations, re-ducing waste in its products andpackaging, increasing its use of envi-ronmentally friendly raw materials andproviding financial support to youthsports programs.

Cutting waste means cutting costs,Jones says, and “that’s where the chieffinancial officer and I become bestfriends.”


Continued from p. 664

General Electric Chairman Jeffrey Immelt listens to students read atIsaac Sheppard Elementary School in Philadelphia, where GE issued a$250,000 grant to improve city schools. “True impact means defining

success in ways that go well beyond the bottom line,” he says.

AP P

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OUTLOOKGovernment Regulation?

E ven most critics concede that cor-porate social responsibility is likely

to be around for the long term. Busi-ness executives, activists and scholarsexpect companies to become more ef-fective at it and for more companies tojoin the movement. Some activists hope— and conservatives fear — that Con-gress will require companies to meetcertain corporate responsibility standards.

“Corporations will still employ thelanguage of social responsibility to seekcompetitive advantage and to protectthemselves from political risk,” the JohnLocke Foundation’s Hood says. “That isa basic behavior in modern corporatelife. We shouldn’t expect it to go away.”

Cypress Semiconductor’s Rodgers spec-ulates companies “will drift slowly towardmore involvement” as the country be-comes wealthier. “As we get richer —which we are because we’re competitive— there’s more money in total for us tospend, and that means there’s more moneyto spend on good causes.”

Hopkins of the Business Round-table expects companies “will get alot smarter, better at assessing oppor-tunities and risks and doing smartstrategic planning.”

Nike’s Jones predicts the public willcontinually raise its expectations forresponsible corporate behavior. At thesame time, she adds, “you’ll increas-ingly see brands differentiating them-selves from the competition throughcorporate responsibility.”

Companies will move beyond “mit-igating problems” toward “makingpositive contributions,” according toG.E.’s Corcoran.

Scott Johnson of SC Johnson and Tar-get’s Garvis anticipate more creativity.

“Companies will be looking for newways to do it,” Johnson explains. They

will become adept at “understandingneed gaps and filling them,” he says.

“It’s not just about giving moneyaway any more,” Garvis says. “It’s aboutgiving your skill sets away, or yourcreativity.”

A widespread goal and expectationis that companies will integrate socialresponsibility throughout their basicbusiness operations.

“In 10 years you may not even betalking about it, because it will just bebusiness,” Corcoran says.

Johnson looks to the time whencorporate responsibility is part of everyexecutive’s job description and per-formance evaluation.

Saying corporations have done a goodjob promoting diversity and equal op-portunity in American workplaces, TheCouncil on Foundations’ Nelson foreseesan effort to extend that globally.

“Instead of having the perspectivethat this job has been outsourced toIndia, a company would be able to valuetheir Indian colleagues and recognizethat there are people all over the worldwho are helping the corporation suc-ceed,” he explains. “The next challengeis going to be shifting the conversationfrom ‘Oh my gosh, my job’s being out-sourced’ to ‘What a gift it is to be ableto partner with all these people over theworld, and we ultimately have a betterproduct as a result.’ ”

Another challenge will be figuringout how to measure the result of cor-porate responsibility activities, accord-ing to Laysha Ward, Target’s vice pres-ident for community relations.

“It is an emerging school of activity,”Garvis says. “Much of what we’re talk-ing about is qualitative and not proneto easy measurement, but we know thereare elements of value there. As this be-comes a more and more important area,there’s going to be more activity aroundcapturing what that value is.”

At Yale’s Center for Business and En-vironment Esty spots an “emerging con-cept of extended producer responsibili-ty.” That means “you have to watch your

supply chain and you have to watchwhat your consumers do with yourproducts.” It’s happening today whencompanies hold suppliers to environ-mental and workplace standards whileoffering recycling services to customers.

The Target executives also foreseecloser relations between corporationsand nonprofit organizations. Compa-nies will offer training to nonprofitpersonnel and will help the organiza-tions adopt better business practices,Garvis and Ward predict.

Some activists and business execu-tives foresee new forms of businessesand nonprofit organizations springing up.

“There should be another kind ofbusiness incorporated into the theoryof capitalism — business to do good,”said Muhammad Yunus, founder ofthe Grameen Bank, which makes tinybusiness loans to the poor. “I call them‘social businesses.’ If we had thisstructural theory that there is a profit-maximizing business, and social busi-nesses, some people would say, ‘I’lldo both. I’ll make money, and I will dosocial business.’ ” 44

Yunus’ bank, which began operationsin Bangladesh, is an example of a so-cial business, he said. So is a new com-pany he created with French food pro-ducer Danone to make yogurt that isspecially formulated for malnourished chil-dren. The company’s business plan callsfor it to earn enough money to coverexpenses, but it will not pay dividends.

Tweaking the Grameen model, BenPowell and Ricardo Terán Jr. formedthe Agora Venture Fund in 2006 to in-vest in socially responsible small busi-nesses in developing nations. They wantthe fund to turn a profit, but they’vealso created a nonprofit affiliate to pro-vide training and consulting services tothose small companies. 45

In another twist on the model, PeterDrasher and Dawn Edwards estab-lished AltruShare Securities in 2006 asa for-profit brokerage firm that will in-vest two-thirds of its profits in disad-vantaged communities. 46

668 CQ Researcher


Jones expects government to re-quire some actions that companiescurrently take voluntarily through theircorporate responsibility programs. Busi-nesses are likely to face new disclo-sure requirements, she says. She alsoanticipates mandated curbs on green-house gas emissions.

Deborah Doane, chair of the Cor-porate Responsibility Coalition in GreatBritain, hopes for a fundamental rewrit-ing of the purpose of corporations.

Despite corporate social responsi-bility activities, she argued, “there isoften a wide chasm between what’sgood for a company and what’s goodfor society as a whole.

“Other strategies — from direct reg-ulation of corporate behavior to amore radical overhaul of the corporateinstitution — may be more likely todeliver the outcomes we seek.”

Her group has proposed legislationthat would “see company directors hav-ing multiple duties of care — both totheir shareholders and to other stake-holders, including communities, em-ployees and the environment.” 47

In the United States, an organizationcalled the Great Transition Initiative hasdrafted a proposed new statement ofpurpose for corporations. It says thepurpose of the corporation is to, amongother things, “harness private intereststo serve the public interest” and “ac-

crue fair returns for shareholders, butnot at the expense of the legitimate in-terests of other stakeholders.” 48

Nichols at the Center for Defenseof Free Enterprise expects “there willbe significant efforts on the part ofvarious governments to regulate CSRin the next five to 10 years.” He pre-dicts the efforts will backfire on cor-porate responsibility advocates.

“There will be a significant back-lash, because one of the premises ofCSR is that it’s all voluntary and pre-dictable,” he says. “As a result, you’relikely to see corporations walking awayfrom this trend.”

Notes1 H. Josef Hebert, “CEOs Ask Bush to BackClimate Protection,” The Associated Press,Jan. 22, 2007. “Major Businesses and Envi-ronmental Leaders Unite to Call for Swift Ac-tion on Global Climate Change,” U.S. ClimateAction Partnership, Jan. 22, 2007, www.us-cap.org/media/release.pdf. For background,see the following CQ Researchers: MarciaClemmitt, “Climate Change,” Jan. 29, 2006,pp. 73-96; Mary Cooper, “Global WarmingTreaty,” Jan. 26, 2001, pp. 41-64; Tom Price,“The New Environmentalism,” Dec. 1, 2006,pp. 985-1008; and Colin Woordard, “CurbingClimate Change,” CQ Global Researcher, Feb-ruary 2007, pp. 27-50.2 www.nike.com/nikebiz/nikeresponsibili-ty/#workers-factories/main.

3 Adam Smith, Wealth of Nations, The Har-vard Classics, 1909-14, Book 1, p. 3,www.bartleby.com/10/102.html.4 Ibid., Book 4, p. 9, www.bartleby.com/10/402.html.5 Milton Friedman, “The Social Responsibilityof Business is to Increase its Profits,” The NewYork Times Magazine, Sept. 13, 1970, p. 17.6 “Rethinking the Social Responsibility ofBusiness,” Reason, October 2005, www.rea-son.com/news/show/32239.html.7 “Corporate Responsibility Review,” The Coca-Cola Co., July 2006, p. 9, www.thecoca-colacompany.com/ourcompany/pdf/corporate_re-sponsibility_review.pdf.8 “2006 Citizenship Report,” General ElectricCo., 2006, www.gemoneybank.de/docs/577335_GE_2006_citizen_06rep.pdf.9 Program for Conference Board’s 2007“Leadership Conference on Global CorporateCitizenship,” www.conference-board.org/pdf_free/agendas/b09007.pdf.10 Barbara Dyer, Stephen Jordan, Steven A.Rochlin and Sapna Shah, “The State of Cor-porate Citizenship in the U.S.,” Boston Col-lege Center for Corporate Citizenship, 2005.11 “About USCAP,” United States Climate ActionPartnership, www.us-cap.org/about/index.asp.12 Mark Kramer and John Kania, “Changingthe Game: Leading Corporations Switch fromDefense to Offense in Solving Global Prob-lems,” Stanford Social Innovation Review,spring 2006, p. 28.13 “Intel Education Initiative,” www.intel.com/education/index.htm.14 “2005 Report on Socially Responsible In-vesting Trends in the United States,” SocialInvestment Forum, Jan. 24, 2006, www.so-cialinvest.org/areas/research/trends/sri_trends_report_2005.pdf.15 “About FedEx Hybrid Electric Vehicle,”www.fedex.com/us/about/responsibility/envi-ronment/hybridelectricvehicle.html?link=4.16 Ann Zimmerman, “Costco’s Dilemma: IsTreating Employees Well Unacceptable for aPublicly Traded Corporation?” The Wall StreetJournal, March 26, 2004.17 Pete Engardio, Kerry Capell, John Careyand Kenji Hall, “Beyond The Green Corpo-ration,” Business Week, Jan. 28, 2007; PeteEngardio and Michael Arndt, “What PriceReputation?” Business Week, July 9 and 17,2007. For background, see Brian Hansen,“Big-Box Stores,” CQ Researcher, Sept. 10,2004, pp. 733-756.18 Andrew Savitz, The Triple Bottom Line (2006),p. 66.

About the AuthorTom Price, a contributing writer for CQ Researcher, is a Washington-based

freelance journalist. Previously he was a correspondent inthe Cox Newspapers Washington Bureau and chief poli-tics writer for the Dayton Daily News and The JournalHerald. He is author, with Tony Hall, of Changing TheFace of Hunger: One Man’s Story of How Liberals, Con-servatives, Democrats, Republicans and People of Faith AreJoining Forces to Help the Hungry, the Poor, and the Op-pressed. He also writes two Washington guidebooks,Washington, D.C., for Dummies, and the Irreverent Guideto Washington, D.C. His work has appeared in The NewYork Times, Time, Rolling Stone and other periodicals. He

earned a bachelor of science in journalism at Ohio University.


19 Tom Borelli, “Wal-Mart’s Public Policy Dilem-ma: Turn Right or Left?” Townhall.com, June16, 2007, www.townhall.com/columnists/Tom-Borelli/2007/06/16/wal-mart%e2%80%99s_pub-lic_policy_dilemma_turn_right_or_left.20 “Rethinking the Social Responsibility ofBusiness,” op. cit.21 Allen L. White, “Is It Time to Rewrite theSocial Contract?” Business for Social Responsi-bility, April 2007, www.bsr.org/meta/awhite_new-social-contract.pdf.22 “The McKinsey Global Survey of Business Ex-ecutives: Business and Society,” The McKinseyQuarterly, January 2006, www.mckinseyquarter-ly.com/article_page.aspx?L2=39&L3=29&ar=1741&pagenum=1.23 Margaret Steen, “What Does Corporate So-cial Responsibility Mean to You?” StanfordBusiness, May 2007, www.gsb.stanford.edu/news/bmag/sbsm0705/feature_csr.html.24 Fred L. Smith Jr., “The Irresponsibility ofCorporate Social Responsibility,” speech tothe Acton Institute for the Study of Religionand Liberty, Feb. 15, 2007, www.cei.org/gen-con/023,05890.cfm.25 “KLD Reports May 2007 Index Returns,”KLD Research & Analytics, June 7, 2007,www.kld.com/newsletter/archive/press/pdf/200705_Index_Performance.pdf.26 Clive Crook, “The Good Company,” TheEconomist, Jan. 22, 2005.27 Stephanie Strom, “Make Money, Save theWorld,” The New York Times, May 6, 2007,Section 3, p. 1.28 Cheryl Scott, “Our Investment Philosophy,”Bill & Melinda Gates Foundation, Jan. 11,2007, www.gatesfoundation.org/AboutUs/An-nouncements/Announce-070109.htm.29 This historical section draws from the fol-lowing sources: Kathy Koch, “The New Cor-porate Philanthropy,” CQ Researcher, Feb. 27,1998, pp. 169-192; Sylvia Clark and KateDewey, Organizing Corporate Contributions:Options and Strategies, Council on Founda-tions, 1996; “History of The Conference Board,”www.conference-board.org/aboutus/history.cfm;Steen, op. cit.; Joel Bakan, The Corporation:Pathological Pursuit of Profit and Power; Pen-guin Books Canada, March 2004; LawrenceBoyd, “The Company Town,” Economic His-tory Encyclopedia, 2003, www.eh.net/encyclo-pedia/article/boyd.company.town; “AndrewCarnegie,” PBS, www.pbs.org/wgbh/amex/carnegie/filmmore/transcript/index.html; “TheRockefeller Foundation: A History,” RockefellerFoundation, www.rockfound.org/ about_us/his-tory/timeline.shtml.

30 “Andrew Carnegie,” op. cit.31 “History of The Conference Board,” op. cit.32 Bakan, op. cit.33 Ibid.34 Ibid.35 Steen, op. cit.36 Clark and Dewey, op. cit.37 Ibid.38 Koch, op. cit.39 “BSR History,” Business for Social Responsi-bility, www.bsr.org/Meta/about/BSRHistory.cfm.40 “History,” Sustainability, www.sustainabili-ty.com/about/history.asp.41 “The Center’s Mission,” The ConferenceBoard, www.conference-board.org/knowl-edge/citizenshipcenter/mission.cfm.42 “Business Roundtable Launches S.E.E.Change Initiative to Spur SustainableGrowth,” Business Roundtable, Sept. 21,2005, www.businessroundtable.org//news-room/document.aspx?qs=5926BF807822B0F1A

D1438F22FB51711FCF50C8.43 Clifford Krauss, “Can They Really Call theChainsaw Eco-Friendly?” The New York Times,June 25, 2007. p. 1.44 Andres Oppenheimer, “Nobel Winner’s‘Social Businesses’: a Good Idea?” The MiamiHerald, March 25, 2007, p. 16.45 Jim Wyss, “A New, Socially ResponsibleForm of Microinvesting Is Being Tested inNicaragua,” The Miami Herald, March 12,2007, p. G13.46 Strom, op. cit.; Jeff Chernoff, “New Broker-age Firm Donating Profits to Charities,” Pensions& Investments, Oct. 2, 2006.47 Deborah Doane, “The Myth of CSR,” Stan-ford Social Innovation Review, fall 2005, www.ssire-view.org/articles/entry/the_myth_of_csr.48 Allen L. White, “Transforming the Corpo-ration,” Tellus Institute, 2006, p. 12, www.gtini-tiative.org/documents/PDFFINALS/5Corpora-tions.pdf.

FOR MORE INFORMATIONBoston College Center for Corporate Citizenship, 55 Lee Road, Chestnut Hill,MA 02467; (617) 552-4545; www.bcccc.net. Researches corporate citizenship.

Business for Social Responsibility, 111 Sutter St., 12th Floor, San Francisco, CA94104; (415) 984-3200; www.bsr.org. Advocates good corporate citizenship.

Business Roundtable, 1717 Rhode Island Ave., N.W., Suite 800, Washington, DC20036; (202) 872-1260; www.businessroundtable.org. Organization of corporationchief executive officers that promotes corporate attention to society, environmentand economy through its S.E.E. Change initiative.

Competitive Enterprise Institute, 1001 Connecticut Ave., N.W., Suite 1250,Washington, DC 20036; (202) 331-1010; www.cei.org. Think tank devoted to freeenterprise and limited government; opposes CSR initiatives.

The Conference Board, 845 Third Ave., New York, NY 10022; (212) 759-0900;www.conference-board.org. Association of major businesses that advises companieson social responsibility through its Center for Corporate Citizenship and Sustainability.

Social Investment Forum, 1612 K St., N.W., Suite 650, Washington, DC 20006;(202) 872-5319; www.socialinvest.org. Trade association for the socially responsibleinvesting industry.

SustainAbility, 20-22 Bedford Row, London WC1R 4EB, United Kingdom; 44-20-7269-6900; www.sustainability.com. Consulting firm that coined the phrase “triplebottom line,” for businesses’ responsibility to “people, planet and profit.”

U.S. Climate Action Partnership, C/O Meridian Institute, 1920 L St., N.W., Suite500, Washington, DC 20036; www.us-cap.org. Alliance of major corporations and en-vironmental organizations that lobbies for government action against global warming.

Wal-Mart Watch, 1730 M St., N.W., Suite 601, Washington, DC 20036; (202) 557-7440; www.walmartwatch.com. Advocacy group that pressures Wal-Mart on labor,environmental and community-impact issues.

Yale University Center for Business and Environment, 230 Prospect St., NewHaven, CT 06511; (203) 432-3736; http://research.yale.edu/cbey. Carries out researchand education on business solutions to environmental problems.

FOR MORE INFORMATION

670 CQ Researcher

Books

Esty, Daniel, and Andrew Winston, Green to Gold: HowSmart Companies Use Environmental Strategy to Inno-vate, Create Value, and Build Competitive Advantage,Yale University Press, 2006.If companies build environmental thinking into their core

business strategies, they can cut costs and generate new rev-enues, according to Esty, director of Yale’s Center for Busi-ness and Environment, and business consultant Winston.

Hart, Stuart, Capitalism at the Crossroads: Aligning Busi-ness, Earth, and Humanity, 2nd Edition, Wharton SchoolPublishing, 2007.Drawing examples from some 20 case studies, a Cornell

University management professor argues the right businessstrategy can reduce poverty and generate profits.

Hollender, Jeffrey, What Matters Most: How a Small Groupof Pioneers Is Teaching Social Responsibility to Big Busi-ness, and Why Big Business Is Listening, Basic Books, 2003.The president of Seventh Generation — maker of envi-

ronmentally friendly products — provides an insider’s lookat running a socially responsible business.

Savitz, Andrew W., and Karl Weber, The Triple BottomLine: How Today’s Best-Run Companies Are AchievingEconomic, Social and Environmental Success — andHow You Can Too, Jossey-Bass, 2006.A business consultant (Savitz) and a writer discuss how

companies can profit from responding to social needs.

Smith, Adam, The Wealth of Nations, Bantam Classics, 2003.First published in 1776, philosopher Smith’s famous book

is still quoted as the classic defense of free markets.

Articles

“Corporate Social Responsibility,” The Economist, Jan. 22,2005.A collection of essays looks at CSR, often skeptically.

Engardio, Pete, et al., “Beyond The Green Corporation,”Business Week, Jan. 28, 2007.The authors take a global survey of corporate responsibility.

Friedman, Milton, “The Social Responsibility of Businessis to Increase its Profits,” The New York Times Magazine,Sept. 13, 1970, p. 17.This classic argument against corporate social responsibility

by the conservative Nobel Prize-winning economist is stillquoted and debated today.

Greenhouse, Steven, “How Costco Became the Anti-Wal-Mart,” The New York Times, July, 17, 2005.The low-cost retailer thrives while treating its employees

better than Wal-Mart.

Mackey, John, T. J. Rodgers and Milton Friedman, “Re-thinking the Social Responsibility of Business,” Reason,October 2005, www.reason.com/news/show/32239.html.A leading proponent (Whole Foods chief Mackey) and two

leading critics (economist Friedman and businessman Rodgers)debate the merits of corporate social responsibility.

Strom, Stephanie, “Make Money, Save the World,” TheNew York Times, May 6, 2007, p. 3-1.The author discovers an “emerging convergence” between

businesses that do good and nonprofits that adopt businesstactics to support their activities.

Reports and Studies

“The McKinsey Global Survey of Business Executives: Busi-ness and Society,” The McKinsey Quarterly, January 2006,www.mckinseyquarterly.com/article_page.aspx?L2=39&L3=29&ar=1741&pagenum=1.A poll finds overwhelming acceptance of responsibility for

more than making profits.

General Electric Co., “2006 Citizenship Report,” 2006,www.gemoneybank.de/docs/577335_GE_2006_citizen_06rep.pdf.Reflecting a growing trend, GE publishes a social respon-

sibility report in addition to the traditional annual report.

Price, Tom, “Activists in the Boardroom: How AdvocacyGroups Seek to Shape Corporate Behavior,” Foundationfor Public Affairs, 2006.The author examines how companies use corporate social re-

sponsibility to both cooperate with and fend off advocacy groups.

Social Investment Forum, “2005 Report on Socially ResponsibleInvesting Trends in the United States,” Jan. 24, 2006, www.so-cialinvest.org/areas/research/trends/sri_trends_report_2005.pdf.A biennial report surveys investors who care about more

than the bottom line. Its next report is due in January 2008.

White, Allen L., “Is It Time to Rewrite the Social Con-tract?” Business for Social Responsibility, April 2007,www.bsr.org/meta/awhite_new-social-contract.pdf.A business-responsibility advocate concludes that the traditional

definition of a corporation’s purpose is “unsuitable to meet21st-century challenges.”

Selected Sources

Bibliography


Corporate Efforts

“Can Business Be Cool?” The Economist, June 10, 2006,p. 59.The annual executive conference of Rupert Murdoch’s News

Corp. will feature speeches by leading environmentalists, in-cluding former Vice President Al Gore.

Ellin, Abby, “M.B.A.’s With Three Bottom Lines: People,Planet and Profit,” The New York Times, Jan. 8, 2006,p. A22.Many traditional M.B.A. programs have begun making the

marriage of commerce and social responsibility their guidingprinciple.

Iwata, Edward, “How Barbie Is Making Business a LittleBetter,” USA Today, March 27, 2006, p. 1B.Corporations such as Home Depot, Mattel and Nike are

using their power to improve horrendous workplace conditionsaround the world.

Piller, Charles, “Gates Foundation to Reassess Investments,”Los Angeles Times, Jan. 11, 2007, p. A1.The Bill & Melinda Gates Foundation announced it will

review its investments to determine whether they are sociallyresponsible, which may lead others to do the same.

Effectiveness

“Business and AIDS Private Sector Has an ImportantRole in Combating Epidemic,” editorial, Financial Times,Dec. 1, 2006, p. 16.Companies can help alleviate the AIDS epidemic by funding

programs for prevention and support.

“The Final Cut,” The Economist, June 2, 2007, p. 28.Businesses can be effective in combating climate change

but will require help from governments.

Rifkin, Glenn, “Making a Profit and a Difference,” TheNew York Times, Oct. 5, 2006, p. C5.An urban developer in Michigan is realizing that his con-

struction of “green” buildings reduces energy use by as muchas 50 percent.

Profitability

Kher, Unmesh, “Getting Smart at Being Good,” Time,Dec. 19, 2005, p. A1.Advocates of corporate social responsibility argue that to

make it successful financially, a do-good plan must have aconnection to the mission of the business.

Pearlstein, Steven, “Social Responsibility Doesn’t Much

Sway the Balance Sheet,” The Washington Post, Oct. 5,2005, p. D1.Many critics argue that good corporate citizenship is neither

necessary nor sufficient for business success.

Sewell, Dan, “Corporations See Benefits in Long-TermCharity Efforts,” The Associated Press, March 30, 2006.Many major U.S. companies with international interests are

experiencing long-term business benefits in charitable projectsundertaken in developing nations.

Responsibility Debate

Asmus, Peter, “Test of a Company’s Social Pledges: HelpingWorkers Volunteer,” The Christian Science Monitor, Oct. 19,2006, p. 9.Forget the debates about a company’s true intentions re-

garding corporate social responsibility; the levels of volunteeractivity show how responsible a company really is.

Karter, Trish, and Milton J. Little Jr., “Is Writing a CheckEnough?” The Boston Globe, Nov. 30, 2006, p. A15.The values that drive giving also need to be reflected in day-

to-day decision making, company culture and relationships withstakeholders.

Mellgren, Doug, “Nobel Laureate Yunus Urges Leadersto Rethink Systems that Keep People Poor,” The Asso-ciated Press, March 30, 2007.At a conference on corporate responsibility, Nobel Peace

Prize-laureate Mohammad Yunus urged companies and coun-tries to rethink the systems and economic theories that keepmillions in poverty.

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