Talking about business ethics is like drinking bourbon. It starts out as a conversational lubricant and can lead to interesting exchanges of ideas. But if you keep going, mostly you’ll end up just shooting your mouth off, without saying anything at all interesting and possibly getting into a pointless fight.
So I’m returning to the subject with some trepidation. Nonetheless, a point raised by a number of correspondents in response to “Development team ethics, Part I — The Abyss,” deserves attention. So pour another shot and settle back.
The article pointed out that publicly held corporations aren’t just human beings only bigger. In particular, corporations, unlike human beings, aren’t presumptively moral … they are, instead, presumptively amoral. It’s a point required by the shareholder-value theory of the corporation, which insists that maximizing the return on shareholder investments is the measure of “good” for the enterprise.
“So how,” my correspondents asked, “do you explain corporate philanthropy?”
Great question, which as every KJR subscriber knows is ManagementSpeak for “I don’t have a great answer,” (you can decide in a few minutes if you think I have an acceptable one). It is, in any event, a point that deserves exploration because understanding how this can happen illuminates important dimensions of corporate decision-making.
Let’s start with an unexpected box office hit from back in 1971 — The Hellstrom Chronicle. It introduced audiences to the notion that a colony of social insects is best understood as single organism that comes in the form of thousands of individual bodies.
This perspective is neither more right nor more wrong than the lots-of-critters perspective. It’s complementary — lots of important research has been conducted on the behavior and neurophysiology of individual bees, ants, and termites, as well as on the behavior of colonies as single entities.
Publicly held corporations have important parallels to social insect colonies (You! The one making a snide comment about corporations turning everyone into faceless drones! Take a time-out, if for no other reason than that you don’t understand that drones don’t do any of the colony’s work and are the ones who are different from each other.)
Sorry … where was I. Oh, yes. Parallels. Like social insect colonies, corporations have emergent properties … behaviors best explained by treating them as whole organisms. They have other properties that are better explained by describing them as collections of individual human beings acting as an independent agents.
Understanding when each model is applicable can be quite useful in your role as business leader, wanting to set direction instead of being helplessly dragged along by the corporation as creature.
And so, as a dreadfully oversimplified generality, here’s how it works:
Business leaders have two different kinds of conversation about what the business should do. One starts with shareholder value and how to maximize it, or some other formulation built around what’s good for the company. Examples: “What can we do to: Sell more product, increase marketshare, increase mindshare, increase walletshare, increase revenue, cut costs, increase profits?” and so on. When these are the questions being asked, the corporation is behaving as a single entity and its employees at all levels are best viewed as components of that entity.
The other kind of conversation starts with someone … usually, someone in a position of influence (part of the central nervous system if we want to push the metaphor) … deciding something (perhaps a cause or philanthropic effort, but also possibly a dicey but intriguing pet project) is important to them personally. Then they ask how they can direct some of the company’s resources to support it.
The dynamics of what follows is fascinating in that in one way or another it involves changing decision-makers’ perspective as to their relationship with the company, from being its agents (and therefore responsible for its well-being) to its influencers (where the corporation is something to manipulate for their purposes). Planning has to do with who will have to say yes, what their philanthropic impulses are, and … and this is crucial … how the good works will help the company’s brand, image, and promotional efforts.
In other words, how to help the company’s decision-makers rationalize the decision in the context of the corporation-as-organism perspective.
It’s a sad fact that while human beings invented the corporation, most of us, most of the time, act as its servants.
Understanding how corporate philanthropy happens can help us shift the balance just a bit, so that occasionally we can be in charge of our creations instead.
Short answer is that corporations are amoral, not immoral. As such, they give to charity AND con people into taking loans they can’t afford, defraud people and pollute, sometimes several at once. They generate behaviors and consequences more like weather patterns than like people’s behaviors.
It is up to people–board, management, and other employees–to make sure those behaviors have a bias, ideally a strong one, towards doing what is good for people, the company, and society and doing it in both the short and long terms.
By the way, this is true of all corporations including governments, not just publicly held corporations.
I like the concept that corporate philanthropy is a method to maximize shareholder value by helping to promote the company’s brand, image, and promotional efforts. You hit it on that one.
I disagree that all (or even most) corporate philanthropy reflects someone in a position of influence trying to promote a cause that’s important to them personally. If that’s the case, how do you explain matching gifts? When I donate to a legitimate charitable organization (within limits), the company I work for matches my donation, dollar-for-dollar. The company has matched gifts for cancer research, social services, natural disaster relief, and even to a small local animal rescue agency, among many others. So I am the one promoting a cause and in a very limited sense becoming an influencer.
I think your other statement is much closer to the truth: companies give to charities to enhance their image and thereby increase sales, mindshare, etc. It’s as legitimate an expense as advertising or public relations. In fact, in a sense it’s both.
Brilliant once again, Bob.
How about a parallel to individual human development:
At the lowest level it is all about hardscrabble survival, just trying to find food, clothing, shelter, sex (not necessarily in that order). This is the corporation in ‘maximize shareholder value’ mode.
After the basics have been mastered, some leisure time is available which may lead to non-essential activities — education, music, art. This is the corporation in a higher-mission mode.
Some corporations never make the transition, just as some individuals don’t seem to make it. And it is interesting that it seems necessary that the corporation be successful in basic-mode before it can do anything in the higher mode. One more: most corporations are a mix of the two levels, again like most individuals.
This is part of the message in Victor Frankl’s book ‘Man’s search for Meaning’, which I am sure you have read.
Keep the good ideas coming, Bob.
If I understand correctly, you’re saying that if a company consistently acts in a particular way, such behavior is a function of its leadership, management, and decision-making processes. We refer to the company’s behavior, but that’s just a shorthand way of summing up the result of all of the above. Individuals can, within the contraints of their company, influence the decisions reached, and therefore, the “company’s” behavior.
A well-managed company, with clear vision and focus, with good decision making processes, relying on data and not “gut” will tend to act in a particular way.
A poorly-managed company, with muddled vision, no focus, lots of infighting, and bad metrics will tend to act in a different way.
Likewise, a company in which ethical behavior is punished and short term gain is rewarded will tend to act in ways most people consider unethical.
But in each case, it’s not the company that is acting – it’s the people within the company. We simply perceive it as corporate behavior because we’re on the outside, at least one step removed from the specific decisions and actions of the individuals.
“Understanding how corporate philanthropy happens can help us shift the balance just a bit, so that occasionally we can be in charge of our creations instead.”
If what I’ve said above is correct, then it suggests that each individual in the company influences what the ultimate corporate behavior is. The degree to which our creations are in control is determined by the extent to which we abrogate our own responsibilies and allow others within the company to control the decisions reached.
Sounds a lot like politics (not necessarily a dirty word).
Not exactly. In most situations, in most companies, the individuals who make up the company consider it their responsibility to act as the company’s agents, on its behalf, for its well-being … defined in terms of profits, revenue, marketshare, shareholder value and so on.
When this is the decision-making mode — when the humans consider their responsibility to act on behalf of the company instead of making sure the company acts on behalf of various categories of human being, it’s a “Hellstrom Enterprise” whose humans are subordinate to their creation.
That’s how I look at the situation, at least.
Does philanthropy really benefit the bottom line, i.e. is the increase in public image, etc, generate financial returns? If there is real benefit, then the company as an organism shouldn’t need an individual to push his charity, but the organization should be actively determining which contributions will generate maximum returns. If there is no actual benefit, then your analysis is correct. Have there been any studies on this?
I normally consider matching contributions to be an employee benefit, and a tax deductible one at that. It’s part of making a business a great place to work, and probably not overly expensive.
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