More Than Money
Issue #23

Partners in Social Change

Table of Contents

“Change the World of Business and You Change The World”

by Steve Chase, Managing Editor

While economist Milton Friedman still argues that the "only responsibility of business is to increase its profits," a growing number of business people claim that this just isn't so. Indeed, some of today's most penetrating critiques of the single-minded pursuit of profit come from within the business community itself.

Arnold Hiatt as CEO of Stride Rite "created the nation's first in-house day-care center for employees and community residents, while also having one of America's most generous family-leave policies. It paid workers to tutor inner-city kids on company time... and gave away more than 10,000 sneakers to children in war-torn Mozambique."

What makes this new generation of "caring capitalists" different from previous generations is that they do not limit their social concern to being philanthropists later in life, as did Rockefeller or Carnegie. Instead, they apply their notions of social responsibility directly to the way they organize and conduct their businesses-- from choice of product, marketing strategies, production processes, labor relations, and corporate governance to community involvement.

Success stories abound. In his book Corporation Nation, sociologist Charles Derber recounts one of them-the changes wrought at Stride Rite, the children's shoe company, between 1967 and 1992 under Arnold Hiatt's leadership. With Hiatt as CEO, Stride Rite "created the nation's first in-house day-care center for employees and community residents, while also having one of America's most generous family-leave policies. It paid workers to tutor inner-city kids on company time... and gave away more than 10,000 sneakers to children in war-torn Mozambique." Furthermore, it opened production facilities and distribution centers in impoverished inner-city neighborhoods such as Roxbury in Boston.

The motivation for making changes like this are often a combination of social commitment and enlightened self-interest. As William Norris, the founder of Control Data Corporation, puts it, "You can't do business in a society that's burning." There is even an emerging body of research, notes Derber, "that supports the notion that a high-road corporate strategy in which companies work fairly with unions and treat the community and the environment respectfully can be profitable, and often more profitable than low-road strategies."

According to some observers, caring capitalists and the corporate responsibility movement will be the main agent for positive change in the next millennium. Business consultant John Elkington states that in the struggle for a socially responsible economy, "business, much more than governments or nongovernmental organizations, will be in the driving seat." In this view, socially responsible corporations are the vanguard of all efforts leading to shared prosperity, social justice, and environmental sustainability. Derber, however, cautions that such an attitude may lead to arrogance and failure, not to partnership and success. As he argues, "The corporation will always be a creature of the market, and it is neither realistic nor desirable to expect it to become the main guardian of the public interest. That is--and should be--the role of government, unions, grassroots social movements, and other civic institutions." His reasoning is simple: "Left to itself, business might choose child or prison labor as a rational profit-maximizing strategy. Even an employee-owned business might decide to spew pollution in far-away communities as a way to cut costs."

To make his case, Derber points to the Stride Rite experience as a telling example. In 1992, after years of investment in Roxbury, Stride Rite moved its factory to Kentucky where wages were lower and the state offered a 24 million dollar tax break. As one company official put it, "After the numbers were added up, it wasn't even a close decision." Stride Rite's cost-cutting restlessness has continued, causing significant disinvestment and unemployment in the United States and the resignation of Hiatt. Notes Derber, "Now almost all of Stride Rite's shoes are manufactured abroad, mostly by contractors in Indonesia and other Asian nations."

In an unregulated global marketplace with many competitors taking the low road, it is hard for socially responsible companies to always maintain high standards on their own. If such companies are to make deep and long-term changes in how business is conducted around the world, they need to work in partnership with civic bodies such as governments, unions, and grassroots groups. These, along with caring capitalists, are probably the key movers in the complex dance of cooperation and conflict that can lead us toward a more socially responsible economy. Each has a role. If caring capital ists are to fulfill their dreams, says Derber, they will need to cultivate these partnerships and, sometimes, even learn to play different roles themselves.

For example, after leaving Stride Rite, Hiatt went on to found Business for Social Responsibility, a dynamic nonprofit organization whose membership now includes major companies such as Levi Strauss, Johnson & Johnson, Motorola, Procter & Gamble, and Saturn as well as smaller companies such as Ben & Jerry's, Tom's of Maine, and Stonyfield Farms. BSR then sparked the formation of Students for Responsible Business which has chapters at numerous business schools across the country. Innovative venture capitalists and entrepreneurs have founded the Social Ventures Network to increase the technical and financial resources available to new socially responsible companies.

Reaching well beyond corporate circles, other business leaders have begun to make partnerships with what they call "social entrepreneurs," people who have the same exceptional levels of vision, creativity and determination that mark successful business people, but who devote their skills towards creating new solutions to social problems through nonprofits and grassroots organizations. One of the major programs that links business entrepreneurs to social entrepreneurs is the international group Ashoka. Ashoka links business people with innovative movers-and-shakers in Latin America, Asia, Africa, and Eastern Europe. Other business people have joined together to found Business Leaders for Sensible Priorities, which works in coalition with other citizen groups to shift some U.S. military spending toward meeting human needs.

All of these efforts point to the kind of movement that Derber promotes, a movement whose success "requires prime movers both within and without the corporation who can work together to craft a more thoroughly democratic system." As Derber puts it, "Only a larger social movement, in concert with current corporate advocates, can move a meaningful corporate-responsibility agenda from the fringes of the business world to its cutting edge."


Resources:

Ashoka: Innovators for the Public , 1700 North Moore Street, Arlington, VA 22209; 703-527-8300; www.ashoka.org

Business for Social Responsibility , 1683 Folsom St., San Francisco, CA 94103; 415-865-2500; www.bsr.org

Business Leaders for Sensible Priorities , 1350 Broadway, Suite 2210, New York, NY 10018-7802; 212-563-9245

Social Ventures Network , 1388 Sutter St., Suite 1010, San Francisco, CA 94109; 415-561-6501; www.svn.org

Students for Responsible Business , P.O. Box 29221 San Francisco, CA 94129-0221; 415-561-6510; www.srbnet.org


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