Comments

Companies had better take a stance if they want to win the competition for customers and employees. These days, it takes more than just goods or services to create the strategic edge needed to market your wares or recruit top talent. Too many competitors make the products you manufacture, provide the services you offer, or meet the social needs you fill. Now, customers “buy” the people making the merchandise or performing the services. Applicants look for employers who respect the way they live, and also share their personal values. Increasingly, both customers and job candidates migrate toward the whole organization—its products, its people, its culture, and its professed values. Some companies get it, and they find themselves listed on Fortune’s list of the “100 Best Companies to Work For.” Others don’t get it, and find themselves scrambling like Microsoft had to.

Posted by George Brymer at May 13, 2005 12:43 PM

As a customer, the quality of the product or service I am buying interests me the most. As an investor, the profitability and potential of the company interest me the most. As an employee, knowing that my job is secure interests me the most. In fact, in my view, the most important comittment any company can make to any community is to provide steady, well paying jobs.

What Fortune says I take with a grain of salt. What noisy interest groups say is the latest popular fad interests me even less. This at any rate is my opinion.

Posted by Noel Guinane at May 13, 2005 1:23 PM

I posted about this a few times in comments on Robert Scoble's blog and on my own personal blog (http://searchingforthemoon.blogspot.com).

I think that corporations whether small or large have a significent social responsibility. But even more importantly, corporations have to be consistent and transparent in their positions - when a corporation such as Microsoft claims one set of standards for internal behavior, but then shifts from those positions to a very different one in its external engagement - the message which is sent is one of great distrust, lack of leadership, and inconsistancy. Whether you are an employee, potential employee, business partner, customer or even a shareholder this is not what you (well at least I) seek in businesses. Consistency and transperancy allow me no matter what my relationship with the firm is to understand and make decisions based on clear choices - I want to trust that while a firm is doing and stating one thing it is not simultanously working at cross purposes someplace else.

I also think that as a society and as business people we are misunderstanding the structure of businesses and the relative importance of different stakeholders. Literature and the popular press typically focuses on the "shareholders" - often to the exclusion of all other stakeholders in a corporation. However especially in a firm such as Microsoft (with billions in cash/near cash assets and significent cash flow) shareholders actually should in many ways play only a minimal role in Microsoft's business actions.

Why do I say this?

One, corporations care about their share price (the corporation as a whole, we'll talk about individuals with stock or stock options in a moment) primarily only if the corporation is planning selling additional shares on the open market. Less often corporations may have financial instruments pegged to share price (bank covenents, listing agreements with markets) so corporations do care about some minimum per-share price. When a corporation is planning on using shares to purchase another party then the share price may matter, though again corporations often have many options to finance purchases.

For a corporation such as Microsoft they have cash on hand and if anything are a net purchaser of shares on the open market (to fulfill options issued to employees). Should they require financing, they have bond and bank recourses which they would use prior to the step of issuing new shares.

The power of shareholders at many firms is often overstated. Many firms, Microsoft included, have majority blocks of shares in the hands of a few parties (founders, large mutual funds, pension funds etc) These blocks frequently have sufficient votes to handle all but the most exceptional of occasions. Further, most shareholders sell shares of corporations they no longer believe instead of casting votes to encourage change.

The exception to this is employees and others who have restricted shares or who are holding options. They have a strong, personal interest in specific pricepoints for the shares and may (as in the case of shares held in 401k plans or restricted stocks) be limited in their opportunities to sell shares to express disagreement.

In short, I would argue that for corporations who do not expect to sell additional shares on the open market and do not expect to make significent acquisitions with stock, that they should take a longer horizon view.

As part of this they may as many firms are look at ways to also shift executives and employees away from short term, quarter over quarter share price connections and also tie their interests to long term success (cash bonuses, profit sharing, options and vesting tied to business performance etc).

Firms should also look directly at those stakeholders who will no matter the share price have a direct and immediate impact on the business - namely first the firm's employees and secondly the firm's customers, partners and suppliers.

If the firm can take steps and stands which will enhance opportunities and ease challenges faced by customers and by employees (i.e. in the recent Microsoft case making personal sexuality not a reason for discrimination in housing for example) then the firm will benefit by having more focused employees and more generally by lowering the challenges faced by customers.

At least that's my view.

Shannon

Posted by Shannon Clark at May 13, 2005 9:04 PM

People should take a stand also - the Hollywood community has been lax in taking Jennifer Lopez to task for loving to wear fur garments. I mean my gosh like it is a big sacrifice to earn multi millions from public support, and then not wear fur?

Just shows the crowd in tinseltown doesn't walk their talk - I boycott [and my sphere of influence] Lopez and her twin brother / husband Marc Anthony because of their fur fashion fascism [FFF].

Posted by Sean at May 14, 2005 6:56 PM

Things are heading more in this direction whether people like it or not. Tom has embraced the idea of "cause marketing". Since political neutrality is no longer possible, best to tackle it head on. Really, it's also another way to cement your relationship with your Clients. I found out recently that Geico insurance donated nearly all of their contribution budget to the Republicans in the last election, while Progressive contributed almost entirely to the Democrats. If you were a customer of one or the other, you may want to jump ship upon hearing this news. I for one am certainly considering it.

You can call it "voting with your dollars" or "consumer activism" or whatever you want. By your choices of the "companies you keep" (with apologies to New York Life), you are supporting policies whether you know it or not. In today's world, not knowing is becoming a sort of sin of ommision or willful ignorance.

Just as we are our clients, and we are our portfolios, we also are de facto representatives of the products and services we buy. So... what, exactly, are we representing?

Posted by Michael Martine at May 14, 2005 10:01 PM

How can any business not be intimately involved in the social aspect of a society?

Business shapes society in a profound way!

Look at mobile phones and communication culture, the internet, film, transport, food. All of these areas could easily be replaced by corporate names and with those names come social issues.

For a corporation to shrug off its social responsibility is simply and completely irresponsible.

Read Mr. Peters closely… these are new times and they demand new thinking.

Time to not just think but do.

In the words of Mr. Peters. Ready, FIRE, Aim.

Posted by James Piecowye at May 15, 2005 12:20 AM

If you’re a Republican and a company you do business with has invested in the Democratic party, how does that affect the quality of the product or service you are buying? Why should we become an intolerant society where every company we do business with, or every person we speak with, has to agree with everything we agree with? I would add, Michael, that most people have no idea what companies their savings and pensions are invested in. I’m not sure they’re willfully ignorant.

If you really believe strongly in something, then of course you don’t have to do business with a company that doesn’t agree with you. Where we draw the line is personal; it’s a personal decision. But I think that a majority of people are inured to all forms of marketing propaganda, including this political social responsibility stuff which companies are leaping for because their PR departments or consultants have persuaded them it will give them an edge.

A business’s responsibility to society is to make good products people want to buy, treat workers as a resource, not a cost, take care that it does not demolish the natural environment it operates in (because it’s only common decency to clean up after yourself), report earnings honestly and make a good return on its investments for its owners.

Other people’s views on the best ways to go about doing these things interest me.

Posted by Noel Guinane at May 15, 2005 5:00 AM

Many of us have admired the work of artists or writers, and were faced with a conundrum when we found out through personal experience or hearsay that the artist or writer was an abominable jerk. Many (not all) would suddenly find it difficult to enjoy that artist's work without being turned off or distracted by their new knowledge. And so now there is a cognitive dissonance in need of resolution.

In the old days, it was expected that there be a chasm between the passions of an organization's individuals and the Big Lie that was a company's PR facade. Consumers are now aware of that chasm, and of the falseness of the facade. They crave authenticity. Blogs have utterly disintermediated the big PR lie, bringing passionate people closer together from both sides of the sales counter.

Super-loyal, evangelical customers are worth more than their weight in gold. True passion can win this, but a false "green PR" ploy can be smelled by consumers without fail. You can't tell people you want passion and then silence their voices behind the facade of the company. The company isn't any thing. This notion that a corporation is some kind of entity with personhood is crumbling. A company is its people. So, what do the people stand for? People, even as consumers, seek meaning in their lives by taking a stand. What do they stand for? Producers and consumers can align themselves with each other and be passionate together in an interactive, relational synergy that goes beyond normal marketing/PR.

Posted by Michael Martine at May 15, 2005 12:19 PM

“The right to utter words whether or not they have meaning and regardless of their truth could not be a vital interest to a great state but for the presumption that they are the chaff with the utterance of true significant words. But when the chaff of silliness and deception is so voluminous that it submerges the kernels of truth, freedom of speech may produce such frivolity that it cannot be preserved against the restoration of order and decency.”

Walter Lippman. 40 odd years ago.

Posted by Noel Guinane at May 15, 2005 1:01 PM

Thanks for the great debate Michael and Noel. As you say, Michael, consumers do vote with their dollars, which makes me wonder...what responsibility, as consumers, or employees (probably an entirely other topic for discussion) do we have in shaping the decisions of corporations as they relate to social/political issues. Are consumer's buying behaviors really indicative of their social values? Do consumers really cast their vote based on political/social issues, or, at the end of the day, do they sacrifice their own values and beliefs for products and/or services that satisfy a need? You might agree that many people vote either Republican or Democratic not out of a clear understanding of the issues, but because their parents did. Isn't that the same reason many consumers buy Tide or Crest....is it really a company's social conscience that determines consumer's buying habits? I agree with Shannon in that the way to engage your stakeholders is to stay true to your beliefs, regardless of what they are. Stand for something! Be transparent! so stakeholders can make clear and educated choices. Thanks for the comments.

Posted by Darci at May 16, 2005 12:12 AM

It comes back to branding.

The conventional wisdom was: Customers don't just buy a product, they buy into the aspirations that the company sells them. But with increasing consistency among products, brands, and companies in what they all mean, customers choose a new wisdom.

The new wisdom seems to be: The customer decides on his or her brand, and choose products and services, and communities that support that brand. Companies that want to tap into this new wisdom - and that would mean almost all companies, will need to change the way they brand. If they find that customers are divided on a certain issue, the companies may feel that they need to take both sides of the issue. But then again, the company could choose whether to "invest" at all in the issue.

My take is that companies should first figure out what they stand for. Then they should take that list of issues that they champion, and court the demographic that identifies with that issue.

But given the fact that eventually sanity prevails on people, and excesses in communication such as pressure groups and so on regress to the mean, Companies may find that in the long run, any progressive issue, that is not too controversial, should definitely be part of the list of issues that they stand for and support the brand promise of the company.

Posted by Arun Sadhashivan at May 16, 2005 7:41 AM

This is all rubbish. When I go to the supermarket my first consideration is price and my second is health with very little thought given to what the companies of the forty or so products I may be buying ‘stand for’. Who has the time? And frankly who cares. It is so transparently insincere and self-serving. The truth is no one really believes that these companies care about anything other than the bottom line and I would have a great deal more respect for them if they were honest about wanting to make money instead of trying to hoodwink me into believing that they really care about some cause they may be donating .003% of their profits to (before expenses).

Posted by Cassandra Helm at May 18, 2005 4:36 AM

Sean - I'm boycotting Lopez & Anthony mostly because of their bad duet at the Grammys. :)

I think that companies have the right to get involved in social issues. Bill Gates, if he personally disagrees with that lifestyle, has the right to direct his company to do what it is doing. He also has the right to not to be involved in any social issues. He can choose to support or deny 'domestic partner' benefits even if he agrees with their choices.

Why??? Simple. The squeaky wheel may get the grease...but the majority rules. At the risk of causing significant problems (mainly financial/stocks) it may have been a wiser choice for the BUSINESS to back away from the issue and focus on selling product.

Personally, I am involved in certain social issues and as my company continues to grow, I will be putting even more of my money where my mouth is. For me, those convictions are a major part of who I am. It is ultimately what I'm building my buisiness on. It is also why I have no interest in EVER taking my company public. Oh, the joys of being a private company. :)

Posted by Tony May / Mayday Media at May 18, 2005 11:54 AM

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Tony, you're right. There is a difference between a private and a public company. You own your business and can pretty much do whatever you like with it. Bill Gates, or any other businessperson with less than 51% ownership is responsible to the businesses shareholders. The shareholders own the business.

generic viagra no prescription Whose cause (when he makes up his mind) is Bill Gates supporting? Did he ask the shareholders how they feel about it?

Do a majority support it?

Posted by Noel Guinane at May 20, 2005 2:10 PM

Welcome Darci! it's very brave to start with such a hot topic as people's sexual orientation, congratulations.
I find that it is not of my business what others decide to do with their sexual life, as far as we have RESPECT and don't comment about it to others, especially in our companies, where is the problem?. Sexual orientation is a personal choice we made at some point in our lifes, consciously or unconciously, and given I am deeply ignorant about other people's life paths, I prefer to just accept it and go along with that.

There are more serious social issues anyway and I support companies showing solidarity with those in need or with ideas about making our planet a nicer place to life in, indeed: it reports benefits to everyone. Who cares if companies do it for marketing or for real commitment to it: if it's done?

Posted by Omara at May 22, 2005 5:03 AM

Okay, nickle and dime contributions to worthy causes may not need the approval of a majority of the stockholders. Nor does suggested employee volunteerism in local community initiatives need their approval because most of them will go along with these things anyway. But taking a position, one way or the other, on the controversial social topics of the day?

My view is that the company would do better to focus its energies on producing excellent quality products, particularly in Microsoft's case.

Posted by Noel Guinane at May 22, 2005 8:36 AM