Socialism is no longer the “ugly” word it used to be. With leading Democratic contender for the presidential election, saying being a big company is not “a right but a privilege” and companies who are not willing to invest some of their profits in social causes that make everyone’s life better should be forced to do so, CEOs of America’s biggest companies are quickly moving ahead of the freight in order to appease politicians and the public at large.
On August 29 of this year, the Business Roundtable, a group of some 200 CEOs of U.S. largest companies, had a meeting. The chair of the meeting, Jamie Demon, CEO of JPMorgan Chase, came out of the meeting claiming to have seen God, he had experienced a spiritual epiphany! Well, not quite. The group amended its mission statement to reflect specific values. Values they have long neglected, and such neglect contributed to income inequality, environmental degradation, gender discrimination, paid inequity between men and women, and old fashion racism. At least, at last, big business wants to do good, so they said. The question I ask can a company do good and well at the same time? Can we trust big business to live up to their promise of social responsibility?
Business schools from Arizona State to Yale University teach their students that public companies exist only for shareholders’ primacy. Economist Milton Friedman’s philosophy had been just that: to increase shareholder value at any cost. Stakeholders and society be damned. The focus has always been about profit. The more, the better. As income inequality increases, the political climate and public mood have changed, and society demands that big businesses do more to address some of these social problems. Where governments are unable or unwilling to solve them, many believe that big businesses, by virtue of their power and financial strength can direct investment responsibly based on environmental, social and governance (ESG) considerations.
The Business Roundtable’s mission statement lists the following as their new raison d’etre:
(1) increasing shareholders’ value,
(2) The interest of stakeholders,
(3) offer good value to customers,
(4) support workers training and are inclusive in matters of gender and race,
(5) deal fairly and ethically with all suppliers,
(6) SUPPORT THE COMMUNITIES in which they work, and
(7) PROTECT THE ENVIRONMENT.
With this bold new mission, one would expect CEOs like JAMIE DIAMON of JP Morgan Chase, GINNI ROMETTY of IBM, and ALEX GORSKY of Johnson & Johnson and others to make a personal commitment to work diligently towards addressing the issue of income inequality. From abandoning using the tax loopholes that allow them and their companies to pay fewer taxes each year; to refrain from lobbying against legislation designed to address income inequality. Big business seems to be more about lip service than social good. None of them has made such a commitment.
Nevertheless, one business leader MARC BENIOFF, the CEO of Salesforce, recently penned an Op-Ed published in the New York Times that is worth repeating here. It is not enough for business leaders to engage in activism and philanthropy. Business leaders need to do more argued BENIOFF. They need to embrace a broader vision of their responsibilities, and that broader vision must include support for legislation such as the Equal Pay Act that would guarantee equal pay for women. Women still earn .80 cents for every dollar earned by a man. Supporting increasing tax on high income, and a special tax on wealth as proposed by Elizabeth Warren and Bernie Sanders. Such tax would allow the government to collect trillions of dollars that could be used for education, healthcare, and housing.
Big business, he argued, contributes to carbon emissions that threaten the planet and the future of our children. They can take tangible actions to decrease their carbon footprint and invest in renewable energy and green technology. Climate change is the world’s biggest challenge. Just talking about it without investing in solutions helps no one.
Big tech has been steadfastly against regulations. Rather than opposing legislation, “tech leaders should support a comprehensive privacy law,” said BERNIEOFF that gives users the right to decide when and how their data can be used, and who benefits from the use of such data. This year alone, Facebook stands to earn 58.2 billion dollars, nearly all of that money comes from the use of users’ data. It would be socially responsible business to allow users to benefit financially from their data. Such redistribution of wealth would an excellent positive step towards addressing income inequality.
Whether big business is serious about a social purpose is yet to be determined. But the writing is on the wall. Either they will embrace a broader vision and responsibility, or they will be forced to do it. And for those who said that doing good is incompatible with the purpose of business don’t understand that companies have moral obligations and responsibilities that go beyond making profits for shareholders. Once this idea becomes acceptable to all, we will be better off as a community. Big business with a social conscience needs not to be an oxymoron because research has shown that businesses who do good always do well. Finally, the government ought to make it a requirement that all public companies adopt a social purpose beyond shareholder profit. Those who fail to adhere to the purpose should be penalized or have their charter revoked.