Friday, June 2, 2017

"Even Bank Robbers Can Tithe"

One of the most striking lines in Provost Jeff Van Duzer's talk at the Nashville Institute of Faith and Work a few months ago was his statement that "even bank robbers can tithe."

See a somewhat similar version of that talk here.

Jeff Van Duzer's point seemed to be that you cannot be a truly socially responsible company simply by giving some money to good causes. I think he was exactly right. He went on to explain that socially responsible businesses should focus on creating good products and good jobs. 

This week I was thinking about Jeff Van Duzer's talk when I considered, for about the one hundredth time, how to define social enterprises.

Think about Ben & Jerry's, a company that comes up at almost every social enterprise conference. While I can think of some good that ice cream does, I wonder if Ben & Jerry's main products are, on the whole, socially beneficial. We have a serious, deadly obesity problem in the country, and Ben & Jerry's products seem to be contributing to this problem. Perhaps Ben & Jerry's ice cream is more healthy than most options or uses more natural ingredients (I am unsure if this is true), but are Ben & Jerry's core products a net benefit to society? Perhaps Ben & Jerry's tip the scale in the social direction by providing good jobs with good benefits. However, Ben & Jerry's is best known for their giving and advocacy, which any business (no matter how socially destructive) could do.

The same arguments could be made against Hershey and Mars Corp., both of which are also well known for their focus on social responsibility. Are there certain industries that social enterprises should avoid altogether? Or should social enterprises enter all industries and try to make them incrementally better?

As a consumer, I am becoming more convinced that providing good products should among the very highest priorities. High quality products and thoughtful customer service is becoming increasingly difficult to find.

Given that I have two young children, Melissa & Doug toys come to mind as a company that is doing it right. Their products are durable and well-designed. Their products are designed to encourage Free Play, Creativity, Imagination, Learning, Discovery. Little Tikes is an older, but similar, company. I have never heard Melissa & Doug or Little Tikes referred to as "social enterprises," but, in my opinion, both companies benefit society much more than many of the frequently mentioned "social enterprises." 

https://lawprofessors.typepad.com/business_law/2017/06/even-bank-robbers-can-tithe.html

Corporations, CSR, Current Affairs, Haskell Murray, Social Enterprise | Permalink

Comments

Thanks for posting. Interesting thoughts.

There is an old axiom to business, “find a need or void and fill it.” This is true regardless of the type of market. Demand drives markets. Seldom does a market (car of the future) create demand (ask Edsel Ford). If you raise the cigarette tax too high, you spawn both gray and black markets and border seepage. Never was alcohol more proliferate or highly consumed by all generations than during Prohibition (and I remember bootleg Coors into Tennessee in 1970s and 80s when there were no licensed distributors). Another area is the “illicit drug trade.” Although illegal (with exception for marijuana legalization at the State level), there exists a large number of distributors and producers to meet consumer demand (addiction) despite the US spending a trillion to fight illegal drugs. Conversely, you may be too young to have observed the stellar growth of Domino’s Pizza who developed a method of delivering hot pizza to the consumer’s door.

I believe you are correct that if a producer of a product or a service produces the very best product or service at a reasonable price point, that producer will generally fare well in the marketplace. When I think about “social enterprise,” I tend to think about Newman’s Own. It has been my experience that each product produced that I have consumed has been of high quality and at a reasonable price. I have never, until this posting, even looked into the charitable works of Newman’s Own. Clearly, Newman’s Own predated any formalized benefit entities. Instead, the charter provides that all “after tax” profits pass to the Newman’s Own Foundation that distributes those profits to various charities. It is “two step” but segregates the for-profit from the charitable mission.

You are also correct that product plus customer service makes a happy consumer. Certainly, whether a traditional for-profit or a social enterprise, neither (absent demand and monopoly) will succeed without those two ingredients. In fact, depending on the quality, service or lack thereof, that venture will most likely spawn its competition (somebody doing it better). Apple Computers (Jobs targeting “Big Blue”) almost destroyed IBM. IBM and PC’s in general upset Apple dominance (except for the arts community) for several decades by accepting the innovation of Windows (GUIs) which Xerox gave to Apple and which Gates subsequently pirated from Apple [and, the lack of a Jobs successor to his genius and ruthlessness has been obvious in the lack of new product innovation in recent years].

Additionally, it would seem to me that someone has got to define a “good job.” “Good job” is as slippery as trying to place a definition on “fair share of taxes.” It would seem that if one is without a job, any job would be a good job until a better opportunity presents itself. As more jobs are being replaced by automation and AI, will the jobs remaining then become “good jobs” when in retrospect they were not?

Ultimately, it is my feeling that the reality is “what benefits the consumer is far more important than what a company or small group perceives benefits society.” Further, that the vast majority of consumers (and I think Prof. Weldon often ponders this) take little or no notice of a business’ contributions to benefit society (fleeting at best).

It reminds me of the movie, “Mr. Mom” and the advertisement “Schooner Tuna, the Tuna with a Heart” (lowering prices during recession and raising prices with recovery). Most consumers are going to choose quality, price and service and any social benefit (product loyalty derived) is simply an incidental consideration.

No doubt, I would find it dubious to find a carbon fuel company, a tobacco company, a lumber company, a mining company or similarly situated business thinking that formation as a social enterprise would change any general public perception or inclination to consume. The fact is, their products are going to be purchased anyway (or incidentally – electric vehicles).

Posted by: Tom N | Jun 2, 2017 12:12:58 PM

Please keep posting these great reflections on what is and is not a social enterprise, social entrepreneurship, and the like. There is a real and continuing struggle, in my mind, in thinking about how to characterize various firms that "do good." Perhaps we should think about them on a continuum . . . .

Although all firms can give back to communities and causes, many do not--or at least not as a business principle. But you're right that a firm can be socially responsible and not be a social enterprise. I do think consumers are a key population, but I also think workers areas important piece of the puzzle. I would assert that benefits other than financial or in-kind giving to local and other identifiable communities also are important to assess. But one does not need to have all of this to be a social enterprise, methinks . . . . More to think about.

Posted by: joanheminway | Jun 4, 2017 3:21:16 PM

Giving someone a product at a price where they find it a value is "doing good." In reality, a corporation "giving back" is either (a) using it as a sub rosa marketing ploy, or (b) using firm money to subsidize a pet project of top management.

Better, IMO, for the company to pass on the money to shareholders. If they value what the business would have done with the money, they can choose to contribute it themselves. If they don't, then we know they'd prefer that the company not do it.

I often ask students to suppose that Wells Fargo decided that it would be a good thing to support the Metropolitan Opera, and so they skim one percent off your bank account and give it to the Met. I expect a lot of people would complain about that. Why is it different when the company reduces the value of the shareholder investment by giving money to the same cause? (That the firm is a different entity is, of course, the reason why the latter is legal and the former isn’t, but economically the two situations are exactly the same.)

If people want to let other people pick their charitable projects and voluntarily buy into a benefit corporation, great. But I’d prefer to have my investments make money so that I can contribute to my own charities, which are almost never the ones that the CEOs of large companies prefer.

Posted by: Frank Snyder | Jun 5, 2017 10:53:47 AM

Excellent comments from all. I am short on time, but I want to just respond to Frank briefly. I have given similar examples to my students in the past, but, in the long term, I am not sure the examples work that well. For example, it is hard to precisely measure the value of inspired workers or loyal customers. Yes, in the short term, you could choose to either give one dollar earned to the Opera or to your shareholders, but in the long term that dollar might be better "invested" in the Opera because it keeps your executive team engaged or results in a lead for a new big account. But it is very tricky because if you give only because of the possible financial return then it may come across as inauthentic and be less effective. In any event, I think social enterprises work best in closely held companies where the owners care more about the societal impact of the company than the bottom line (and our country is much better off for those sorts of companies, in my opinion).

Posted by: Haskell Murray | Jun 5, 2017 11:30:59 AM

As far as public companies go, if the firm is using "doing good" as a marketing ploy to enhance profits, I have no problem. (I know a good many law schools, for example, who tout their "public service" chiefly as a way to lure customers through the door.) And if the company is privately held and everyone bought into the idea that there's a "mission" other than serving customers and making money, great. My difficulties come in when special interests capture public companies and use profits to underwrite their private agendas. Sounds like we agree.

Posted by: Frank Snyder | Jun 5, 2017 6:10:28 PM

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