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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