THE CSR MYTH
Oct 10 - 16, 2011
Corporate Social Responsibility (CSR) is measured by the business ethics forming core of a particular economic model and the operational behavior and objectives of those at the helm of corporate bodies.
What we come across these days are sporadic acts of philanthropy not CSR. After all, the corporate objectives revolve around the single goal of profit maximization. This goal is in direct conflict with the concept of CSR which demands consistent reinvestment in the society where the corporate body exists and operates. When our banking sector is publicized to have generously contributed to earthquake and flood relief funds in Pakistan, the uninitiated might turn euphoric about the "godly acts" of those responsible for much of our economic and social agonies.
Steve Tappin and Andrew Cave have divided, in their co-authored book The New Secrets of CEOs, the contemporary corporate governance styles into five main categories: Commercial Executors; Financial Value Drivers; Corporate Entrepreneurs; Corporate Ambassadors; and Corporate Missionaries. The last two categories are relatively close to the CSR concept. John Browne, the CEO of British Petroleum (BP) during 1995-2007, once said: "For me it was at the heart of the purpose of the firm. It was about whether I could help shape the business and influence the markets that it would operate in, such as Russia or the entire alternative energy sector. It was about why energy is important in terms of giving as many people as possible the light, heat, and mobility they wanted."
Steve Tappin and Andrew Cave write about John Browne's achievements: "The result was that in 12 years he turned BP into the third largest western oil company by market capitalization. While driving BP's core business, he also exhibited the global vision and eye for social impact required of a true corporate ambassador by launching massive sustainability push by BP: Beyond Petroleum. No wonder he was voted Britain's most admired leader for four years in succession from 1999-2002.î
We all know about the corporate governance style our CEOs and MDs exhibit. The US and the Western world CEOs are known to religiously adhere to the "profit maximization" objective. While this objective is in direct clash with the CSR objective, it at least makes companies stay profitable, thereby minimizing the possibilities of shocks that ensue from economic degeneration.
Our public sector executives have presented to the nation such gifts as PIA, Railways, Steel Mills, WAPDA, and other loss-making monsters. In the private sector, KESC - the pain in the neck of the people of Karachi - is a classic example of private-sector corporate failure. Financially as miserable as the said public sector organizations, KESC also carries the stigma of a social corruptor.
If the management of a utility corporation, operating from the high ground of monopoly and enjoying the luxury of subsidies, fails to adhere to the core objective of providing electricity to as many people as possible, the only conclusion that could be drawn is that the welfare of a mega city has been unscrupulously sold out to street thugs. KESC has not only shortchanged its consumers, it has also caused social pains to its own employees through ill-conceived retrenchment and outsourcing programs. When Jack Welch of General Electric and John Browne of BP cut costs through downsizing, they are fully aware that the job market will quickly absorb the severed employees, and that too perhaps on better terms.
The KESC CEO, crudely emulating corporate world stalwarts, failed to realize that his act would add to the social woes of the country already overburdened with unemployment.
The idea of CSR is essentially linked to the concept of philanthropy - an attitude to give away selflessly. Those who receive favors hardly ask questions or strive to see beyond the intrinsic value of what they are getting. The global corporate culture has undergone momentous transition during recent times. The power of big corporations and their top-earner CEOs has increased manifolds. Gone are the days when shareholders influenced the decision making of companies. Today, the omnipotent CEO, not the board of directors, sets the course of business operations that are essentially aimed at maximizing corporate profits.
As absolute power corrupts absolutely, the corrupt breed of CEOs became engaged in siphoning off company profits to their individual bank accounts through legal means of salaries, bonuses, perks etc. The original CSR concept took the back seat. Whatever philanthropic and give-away activities took place directly contributed to the CEO's image-building. No one questioned the ruthless power of free market economy that played the major role in manifold augmentation of corporate profits. The giveaways were overly publicized hardly allowing anyone to think of the social crimes such corporations and their CEOs had openly committed while amassing corporate wealth, a tiny portion of which those giveaways represented. John Perkins, the renegade US economist and author of Hoodwinked, sums up this situation in the following words: "It is impossible, of course, to comprehend philanthropists' true motives, which range from assuaging their own feelings of guilt, to duping the public into believing in their inherent sense of compassion, to genuinely desiring to do good. However, from a purely economic perspective, philanthropy is inefficient. A person who has accumulated billions of dollars and in doing so has caused others to lose their jobs, closed the doors of small businesses, or ravaged the environment, and then donates a small percentage of his fortune to correcting those problems or to the arts, would have served the world far better by making fewer profits while increasing employment, supporting small businesses, and insisting that his executives practice good environmental stewardship."
Our banking sector too, taking lead from its Wall Street gurus has miserably failed in its responsibilities to the society it has been operating in. A few millions donated for social causes every now and then have not shielded them from the corporate social failure blame. Ostensibly in a sound financial shape, the Pakistani banks carry the burden of an operational history that assigns them to the lowest rung of social ladder. They are known to have pushed the private sector out of Pakistan business by ignoring it in the quest of satisfying a corrupt government. They are also known to have misused their depositors' money by buying cheap and selling at much higher prices. Interestingly, their gurus at the Wall Street are having tough times after 2007-08 global crisis. Recently, a protest against Wall Street financial mismanagement and corporate greed that led to a wobbly US economy has brewed. Having started on September 17, the protest is gaining in momentum and spreading from New York to other cities.
Named Occupy Wall Street, the campaign is attracting protesters in great numbers. According to Chris Hawley article, the protesters are chanting: "How to fix the deficit: End the war, tax the rich". Incidentally, protests against "load shedding" have become the way of life in Pakistan, recently. May be, our protesters enhance the range of their demands by reminding the government of its economic as well as social responsibilities. The chanting may take the form: Provide cheap energy to all; End corruption and high budget deficits; End the Afghan war, tax the rich and the feudal."