Is Corporate Responsibility Here to Stay?

| Wed Aug. 10, 2005 1:12 PM EDT

Businessweek has an interesting story about corporations that are trying to engage in "social responsibility" in order to stay competitive:

Take Sewell Avant. The 25-year-old senior procurement analyst graduated from the Georgia Institute of Technology in 2002. During college, he cleaned churches and did regular social projects with fraternity brothers. Now he's carrying on that tradition at Home Depot. He took a day off, without pay, to help mix concrete at the playground project in Marietta. His entire department will do more kiddie-park construction on a weekend in August. For Avant, volunteering adds meaning to his day-to-day job. "Employees are trying to marry their work and nonwork lives. If the company gives them a chance to do that, then they're happier," says C.B. Bhattacharya, associate professor of marketing at Boston University's School of Management.

That's why younger companies are baking the social responsibility concept into their culture -- and demanding investors accept the cost. Costco Wholesale Corp. has long offered generous compensation to its workers, to the scorn of Wall Street and the detriment of its stock price. In the 1980s, networking giant Cisco Systems Inc. opened its first office in East Palo Alto, Calif., a run-down neighborhood amid the prosperity of Silicon Valley. Cisco Chairman John Morgridge worked as "principal for the day" at a school next door. "We're in business to get results. This is just a different currency," says Tae Yoo, Cisco's vice-president for corporate affairs.

Interesting, though it seems unlikely that the "social responsibility" trend will spread too far. Not so long as Wall Street continues to punish any sort of behavior that deviates from profit-maximization. A few rogue CEOs here and there, like Costco's James Sinegal, will have the nerve—and ability—to buck the stock market, but they seem the exception rather than the rule. From a political point of view, meanwhile, some corporations may be getting antsy at the fact that most voters—including many conservative voters—increasingly distrust the power of large corporations, and that fear could spark an outburst of "social responsibility." But in truth, business interests have very little to fear from a political backlash—not so long as they have Congress by the thumbs.

And at most, consumer activists can only train their attention on a small subset of corporations at any given time; so the relatively few companies under fire, like Nike and, perhaps someday, Wal-Mart, may clean up their practices in order to sidle out of the spotlight, but I'm not sure that all adds up to a growing trend. That's not to disparage the companies that are becoming kinder and gentler; it's just to say that it seems very unlikely that corporations will do something that can conflict with their bottom line for largely haphazard reasons.

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