Robert Reich Takes On 'Supercapitalism' and You
Corporate responsibility analysts respond that focus should be on ‘how,’ not ‘why'
By Dennis Schaal
You phone Robert Reich, the former U.S. Labor Secretary, at the appointed hour and he asks you to hold on for “half a second” because he’s “in the middle of a sentence.” For two minutes, you hear him pecking away in the background on a computer keyboard, perhaps writing one of the three books he’s working on simultaneously these days. A public policy professor at the University of California at Berkeley, Reich says these manuscripts-in-progress will emerge in no particular order as an economics textbook, a collection of narratives on American public life, and a title on leadership and social change.
One such Reich-authored book, “Supercapitalism: The Transformation of Business, Democracy and Everyday Life,” published a few months ago, has drawn a lot of attention for its slant on corporate social responsibility (CSR), which Reich describes at one juncture in the book as being “as meaningful as cotton candy.”
The central theme of “Supercapitalism” is that hyper-competition among global corporations has spurred a hell-bent focus on extracting profits, and that all talk of companies being socially responsible basically is marketing pabulum and public relations fantasy.
And, what’s worse, corporate efforts to convince the public of their do-goodism tend to mislead citizens and mute democracy, which is declining under the blare and increasing clout of corporate arm-twisting and special-interest lobbying. The answer is citizen empowerment, argues Reich, an expert in all things Washington, and stronger regulations and laws.
“Corporations aren’t people,” Reich tells me over the phone. “They can’t be selfish. They can’t be moral, they can’t be immoral. They are responsible, if they are publicly held, to their shareholders. Hopefully, along the way toward maximizing shareholder returns they are also providing good deals for consumers.”
He continues: “I think it is fine if corporations make more profits by demonstrating that they are good citizens, but I have a genuine worry that all of this blather about corporate social responsibility is hoodwinking the public into thinking that corporations are really doing more than they are capable of doing given the intensity of competition.”
Wal-Mart is one of many companies in the book that get skewered—sort of.
Reich writes that Wal-Mart has shelled out millions of bucks, but just “a tiny fraction” of its annual revenues, on things like Hurricane Katrina relief and in promoting renewable energy initiatives in what he believes may turn out to be a temporary stance to blunt consumer campaigns against its hardline employment practices.
So you are arguing that Wal-Mart’s corporate responsibility motives are impure and the company is acting totally out of self-interest? I ask Reich. “I don’t think it is impure to do things out of self-interest,” Reich snaps back. “They [Wal-Mart] are doing things out of their shareholders’ interest. That doesn’t make them impure. That doesn’t make them blameworthy. That’s what companies are supposed to do.”
Despite Reich’s critical tones, several corporate responsibility analysts found ample common ground, as well as points of difference, with the U.C. Berkeley professor. Sometimes the point-counter point seems like a debate over semantical differences, questions of motivation, and emphasis. For instance, Reich says firms single-mindedly focus on the bottom line, and corporate responsibility advocates answer that companies need to implement policies on sustainable operations to make competitive gains.
Yes, corporations largely act out of self-interest, and it is mostly in that self-interest when they reduce costs through environmental efficiencies, and flaunt their corporate responsibility credentials when raising capital or recruiting talent.
In a post, “Why Robert Reich Is Wrong About Corporate Social Responsibility,” on the Harvard Business Online Conversation Starter blog, Mark Kramer writes: “To be sure, there are many companies that think of CSR in terms of ‘getting credit’ and incurring unnecessary costs, but that is not how leading companies frame their CSR strategies today. The world needs to reduce carbon emissions, regardless of who gets the credit or what motivates them. If a company can save – or make – money by reducing emissions, all the better; they’ll pursue the initiative more aggressively and stay with it longer than if they did so merely for cosmetic purposes.”
Kramer, a CSR Initiative Senior Fellow at Harvard’s John F. Kennedy School of Government, adds: “The companies that get out ahead of these trends not only save money, they gain a competitive advantage over their sleepier competitors. Rather than being a detriment in today’s global competition, factoring social considerations into corporate strategy is a necessity.”
Reich has no grudge, of course, against corporations doing positive things. He just thinks they are incidental and besides the point. “If it [Wal-Mart] is reducing costs, helping Wal-Mart’s bottom line and is also accomplishing something good for the public, that is wonderful,” he says. “We ought to celebrate that. To commend Wal-Mart for that in terms of Wal-Mart suddenly becoming more socially esponsible is stretching the term corporate social responsibility to mean almost anything that a corporation might do that is in the interests of shareholders but also has some positive results.”
John Davies, Vice President of Green Research at AMR Research, says the debate about “whether corporate responsibility is illusory or not may just be missing the point.”
“Consider Wal-Mart and the environment,” Davies says. “Yes, all of their efforts get promoted and get press. But it’s also true that they found money lying on the table when they started looking at operations with an environmental lens and perspective… So, while I might find general agreement with Reich’s position that the business of business isn’t corporate responsibility, I think that might be a moot point. I would contend that if companies didn’t use the socially responsible lens, they wouldn’t have found those cost reductions.”
Bob Langert, Vice President of CSR at McDonald’s, wrote of Reich’s book in McDonald’s Corporate Responsibility Blog, that “the intellectually inspired debates will continue for sure, but we need to remember that at the frontlines of companies like McDonald’s, CSR is a central driver of how we do business, and tangible impacts, for both our business and society, are a reality.”
Expanding on his blog post, Langert states: “I was saying by implication that let’s not debate the exact definition of CSR and sustainability, or why it is important, because we are beyond that. It is a matter of doing, not debating.”
Reich isn’t buying it.
“I’d say it’s baloney,” Reich says, referring to the notion that corporate responsibility is propelling companies’ operations.
Reich offers that in this era of heightened competition and shareholder scrutiny, CEOs have less discretion to contribute “to what might be considered good causes.”
“Undoubtedly, acts of corporate generosity or what we might call social responsibility can help a firm’s public image and that’s all to the good,” Reich says. “The problem is that the public is often led to believe that there is more to all of this than public relations.”
Reich adds: “Companies are going green these days. You can’t open a newspaper without seeing a corporate press release to that effect. I’ve spoken to a lot of people who say, ‘Why should we worry about global warming? The corporations are taking care of it.’ That is dangerous thinking.”
A veteran of three national administrations, Reich makes a valid point about corporate efforts to head off or limit more regulation.
After all, the more than three dozen corporations in the U.S. Climate Action Partnership didn’t call for a cap on greenhouse gas emissions because coalition members are getting warm and fuzzy and ready to join Greenpeace. Instead, they are pushing for a level playing field and trying to forestall stricter curbs.
“In my value system, I happen to believe that global warming is an imminent threat,” Reich says. “But, frankly, I don’t know whether a cap-and-trade system is better than a carbon tax or whether we ought to have a carbon auction. I don’t know whether the United States ought to reopen the Kyoto Protocol and exactly what our policy ought to be with regard to China and India and global warming. I have absolutely no confidence that a coalition of corporations knows any better than I do. I want a democracy that is responsive to the people, not necessarily responsive to corporations.”
Within the corporation, Reich claims he is “very sympathetic to” and “salutes” corporate responsibility officials who may have to battle more powerful elements. “Sometimes they are announcing that they are very much in favor of fuel efficiency or avoiding global warming” while another department may be “joining in litigation against regulations that promote fuel efficiency,” Reich says.
“It is very important that corporate personnel involved in anything that resembles corporate social responsibility get together with their government affairs people and make sure that the government affairs people are acting in ways that are consistent with their social responsibility efforts,” he says.
Reich adds: “My advice to them is, yes, get together with your government relations people. And, also don’t be a fig leaf for the company. Don’t simply succumb to dress all of this up for more than it is.”
The debate about how meaningful “it” is undoubtedly will continue.
But, Christopher McClean, a CSR and Corporate Governance Analyst for Forrester Research, puts the issue in its proper perspective.
“Many arguments against corporate social responsibility define such efforts [as being] outside of normal business practices,” McClean says. “However, companies that carefully manage their use of critical resources, enforce fair and ethical treatment of employees, and monitor their supply-chain partners for hazardous materials are demonstrating responsible behavior as well as good risk management.”
McClean concludes: “The corporations Reich mentions could have found dozens of ways to reduce costs and strengthen their brand. I would much rather see them responding to consumer and employee concerns by focusing on environmentally and socially responsible ways to boost the bottom line.”