Wanted: corporate citizenship manager. Politically correct, fluent in eco-speak, finger on both pulse and purse of stakeholders. Cuddliness a plus. Sincerity? At least the semblance.
Welcome to the world of grin doctors (spin + green = grin).
Just kidding. Investor Relations magazine has long preached environmental and social awareness as good corporate governance, reasoning that sustainability is intrinsic to sustainable earnings, and that environmental disasters and unhappy workers can’t be good for the bottom line. We have ventured to suggest that world change has to come from stakeholder democracy, not political democracy, because globalization is outstripping national interests. We applaud the renewed focus on corporate social responsibility.
Yet we can’t help but notice a backlash brewing, and not just in jibes at corporate social responsibility by the anti-PC lobby, in the ongoing worry that green stocks may underperform in the long-term, and in the suspicion that an altruistic corporation just might in fact be a wolf in sheep’s clothing.
There are much stronger arguments being tabled, too. David Henderson, former chief economist at the OECD, has published a paper for the London-based Institute of Economic Affairs called Misguided Virtue: False Notions of Corporate Social Responsibility. He proposes a most untrendy idea: that CSR is dangerous. First, because it supports ‘global salvationism’, which is the belief that the world is on the verge of self-destruction; governments are powerless to stop it; so the board of directors has to fix it. On the contrary, the environment isn’t doing too badly, poverty is yielding to capitalist industrialization, and social policy is still in the hands of government. Calling companies to the rescue undermines their profit-seeking nature. Besides, CSR costs companies a lot of money, and that raises prices, so society pays the price along with shareholders. Henderson goes on to show that the move towards global standards of corporate citizenship is also harmful.
Forcing developed world ideals on developing world companies can hurt their competitiveness.
Such views may seem distasteful when sustainability is still the flavor of the day. Indeed, there is great reputation value in being included in FTSE4Good, DJ Stoxx’s new sustainability indexes and the even more influential lists expected from Standard & Poor’s and MSCI.
And there is a rapidly growing pool of investment devoted to socially responsible companies, especially with pension giants like Calpers getting into it. On the other hand, you may be better off opting out of the fad and aiming instead for Investor Relations’ new Sindex(tm), which screens out costly do-gooders and screens in corporate sinners.
