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Being a Good Corporate Citizen

Most corporations today tout explicit giving programs, targeting social or community causes. These are often called "Corporate Social Responsibility programs" or "CSR initiatives." In fact, many CEOs make CSR a prominent part of their annual reports and stress their companies' commitments as good corporate citizens, taking on causes related to healthcare, poverty, global warming, and education. Given the prevalence of CSR initiatives, how SHOULD managers think about CSR from a management perspective?

Several years ago a poster child for CSR was The Body Shop. From 1984 to 1991 the English cosmetics firm posted a 20-fold increase in profits for its growing franchise operation. What made The Body Shop famous was its owner and her zeal for a number of social causes that became attached to the company brand. Anita Roddick plunged ahead in causes like "Save the Whales" and many others. The company adopted a motto of "doing well by doing good" and traded on this image.

CSR agendas, however, have some common pitfalls.

Pitfall 1: Over-promoting CSR. Many so-called CSR activities are simply good business decisions and accrue benefits to the firm. For example, giving employees a certain number of days off each year for charitable activity can create goodwill among employees, increasing commitment towards the real work (or aid in recruitment and retention). Often CSR directly benefits the company, such as green initiatives that lead to lower costs due to new efficiencies, or giving away drug surpluses that lead to tax write-offs. And many ethical and legal activities, sometimes considered CSR, are necessary for long-term viability cooking the books always leads to a downfall (e.g., WorldCom, Enron). For-profit entities promoting sacrifice through CSR can be viewed with cynicism by external groups and questioned by shareholders.

Pitfall 2: No clear boundaries of giving. Social programs are often intractable and difficult to assess in terms of success. Reprioritizing business outcomes because of excessive CSR demands is a good way to confuse business goals. Executives should seek to set clear limits on resource commitment to CSR; realistic boundaries make it more probable that the CSR activity does not dry up based on economic downturns or inevitable needs of the real business. In the end, companies have bottom line priorities that must be met first.

Pitfall 3: Acting as proxy for individuals. While corporate CSR programs can be a valuable resource for any number of non-profit social organizations, the bulk of giving still comes from individual philanthropy. In fact, individuals not companies are best to choose social causes. Warren Buffett is a prolific philanthropist, but he makes a clear demarcation between corporate and individual philanthropy. To the degree company executives succeed in business, employees and other stakeholders will benefit from the wealth created.

Roddick's excessive CSR agenda eroded the focus and viability of her company after it peaked in 1991. At one point the company's CFO was sent to Wales to set up windmills to decrease electricity consumption of the corporate office. Roddick reflected on the conflict her personal values created, "I realized I did not necessarily have the right to speak for The Body Shop on every issue... I accepted that principle and completely ignored it."1

In fact, The Body Shop faced strategic challenges as competitors started selling their own green products. Managers inside the firm became confused by a social and political agenda that did nothing to address competitor moves. Company franchisees were unable to maintain margins and growth stagnated in clumsy attempts to expand in foreign markets. The company fell victim to the CSR pitfalls.

CSR decisions are usually made at a corporate level. For managers down the chain, here are a few recommendations in dealing with CSR initiatives:

  • Don't let personal values distract from providing focus and direction to employees. The best way to give back to the community is to achieve great business results.

  • CSR mandates that are distracting may be limiting factors. There may be good (long-term) corporate reasons for the initiatives. And, the manager's job is still to get results, so they must plan around mandates that threaten performance towards those results.

  • If HR wants to introduce a new initiative, schedule them to present late Friday afternoon. Don't undermine the CSR activity, but don't' make it more important than the work.

  • You may have to stand up for your people if an initiative attempts to coerce individual choices (pressure to "volunteer" to the United Way, etc.).

1The Body Shop International, by C.A. Bartlett, Harvard Business School Case (1995).

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