Has my title intrigued you enough to continue reading?

So one of the topics that has become  something of a reoccurring theme in the first couple of weeks of our class is the responsibilities of firms.  We have been trying to answer questions such as what should be the top priority of companies?  Are they only supposed to be focused on revenues and profits?  Or do they owe something more?  Do companies exist for something more than just the bottom line?  I think that over the past decade or so, we have seen a strong trend which indicates that, in fact, there is something more.  I was scanning over some of the recent articles from a Jordi Comas approved blog, The Business Ethics Blog, when I saw a post entitled, How Can Business ‘Give Back’ to Society?.  Since this seemed to fit in with one of the themes for the class, I decided to check it out.  The post linked to an article in the Vancouver Sun about the CEO of Canadian Pacific Railway (CP).  Yes, I too was unfamiliar with the company, but after a quick search on Wolfram Alpha, I found that they had revenues of over $5 Billion and around 16,000 employees.  In other words, this is no mom and pop shop.  Getting back to the article, its main focus was on how Fred Green, the CEO of the railway, was on the hot seat.  CP had seen its operating ratio increase by over 6% in the past year, which in case you don’t know, is not a good thing.  Yet despite shareholders calling for his job, Green maintains that a company has more responsibilities than just generating profits.  Green told the Sun, “[So] it is absolutely critical that in our drive to productivity, which is essential, that we keep ourselves in balance in regards to the social licence we earned and must earn and re-earn every day”.

I thought it was pretty commendable for a man who may soon lose his job to stick to his, and his companies, morals so steadfastly.  Furthermore, his concept of a “social license” brings up a very interesting concept.  It is one that Chris McDonald back on The Business Ethics Blog took some time on which to elaborate.  His post mainly dealt with different ways for which a company can maintain its social license.  He suggests things such as making charitable contributions or avoiding loopholes in the U.S. tax code.

My interest in the article and blog post mainly deals with the concept of a social license.  I think it is truly interesting that a CEO would say something like this.  It’s hard to imagine a similar situation occurring just 20 years ago.   I also think that it is becoming increasingly more common.  When looking back at the debate over what the responsibilities of a company are, it is clear that the general public is starting to require some sort of social license.  Companies are beginning to not only tout their impressive financial statistics, but also the their societally conscious ones.  Firms such as Apple inc. dedicate large portions of their websites to their respective initiatives, while for others such as TOMS Shoes, it is at the core of their mission.  While it may be more costly for a company to do things the “right” way, or to put the extra effort that may not be legally required of it, I believe that only good can come out of this movement.  As we all know, sometimes when firms focus on solely profits, it can lead to bad things.

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5 responses »

  1. KCasty says:

    Really interesting blog that you discovered, Zach, and one that is very applicable to class! While I agree with you that companies are more likely to advertise their “social consciousness” to the public, I do wonder whether this is because the companies are actually more morally and environmentally conscious, or if they are merely putting on a show because they know that is what the public wants to see… thoughts?

  2. Paul Martin says:

    Kelly makes an interesting point that companies that promote social consciousness might just be doing so as a smoke and mirrors show. I was curious about Zach’s comment that he believes social conscious within firms is becoming ever increasingly popular. I’m somewhat of the opposite belief. I feel as if firms used to be socially conscious (all the way dating back to Rockefeller who was famous for being incredibly philanthropic), and are becoming increasingly stingy and profit driven. Any current social conscious I feel is driven by recent scandals such as Enron or the BP oil crisis, and that is all a facade as Kelly was alluding to.

  3. Zach says:

    To address your point Kelly, I think you may be conflating the ideas of being moral and being socially conscious. The process of determining whether or not a company is socially conscious is fairly straightforward. I believe that if a company is involved with philanthropic organizations, helps out in the community, follows ethical rules that are not mandated by law, or does other things that would fit under that umbrella, then they would be deemed as such. Now whether or not these companies are “truly” moral because of what they do is a completely different question. I think the answer is that it depends. It depends on what you consider to be moral. From a utilitarian stand point, it is the consequence of the action that determines its morality, not the driving force behind it. So, while some of these companies may be doing it just for show, that doesn’t necessarily mean that it isn’t truly moral.

    As for your comment Paul, I was thinking about the social license concept more in terms of other causes besides philanthropy, although that is certainly an area that would be included. I wasn’t able to find any hard facts, but the notion that philanthropic efforts are directly tied to overall profits makes sense. I wouldn’t be surprised to see philanthropy go down if a company struggled, or during a depression, like the one we are just beginning to get out of now. Also, there is no doubt that Rockefeller was an extremely generous man, but I’m not sure the same can be said for his company, Standard Oil. But besides philanthropy, I think firms are certainly putting more effort into other good causes, or at least advertising these efforts more prominently.

  4. manderson12 says:

    It does seem that the recent scandals have changed companies’ strategy to become more sustainable. I don’t think it is necessary to question whether or not it is morally driven though. As long as they support the goodwill of society, only good things may happen. If a few companies take the lead and gain loyal support from the public because of their social endeavors, it will only force competitors to follow, creating a more civil economy that is still competitive. Their philanthropic work is still beneficial to society, whether or not they are putting on a façade.

  5. […] Best Title Award had two winners: Zach (License and registration, please) and Ian (Imagine taking a class the size of […]

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