South-Western - Management  
Asked to be Charitable, More CEOs Seek to Aid Their Business As Well
Topic Ethics and Social Responsibility
Key Words Corporate philanthropy, social responsibility
News Story 

Top executives today face a dilemma of deciding how to exercise their corporate social responsibility. Old models of giving no longer work for today's companies. Steel executive Andrew Carnegie donated millions for museums, libraries, and universities, but he also treated workers poorly and polluted towns where he had his mills. The mere act of giving cannot make up for poor management practices. Many CEOs are looking for a new way of giving, that can benefit others and have a direct impact on their business as well.

Starbucks is an example of a company that has learned how to do this well. Orin Smith, president and CEO of Starbucks says that the company is building social responsibility into its business model. They believe that a strong connection with employees pays off in customer service. To that end, they pay workers more than minimum wage, and offer health benefits to anyone working over 20 hours a week. In addition, for every hour an employee gives to a charity, the company donates $10. Starbucks believes employees are inspired to feel proud of their company and are more likely to be loyal. The company is also investing money in the "fair trade" movement, which advocates fair pay for farmers in developing nations. Smith says that the customer who chooses a business mainly because of their social responsibility is a minority, but that many more will choose NOT to buy if they feel the company acts irresponsibly.

Shelly Lazarus of Ogilvy & Mather believes that customers feel more positive about a brand when they believe that company has redeeming social value. Her ad agency developed Dove's "campaign for real beauty" which shows all types of women and pronounces them beautiful. Unilever, Dove's parent company is also giving money to a fund that supports girls with eating disorders and self esteem issues.

Corporate responsibility can also lead to business opportunities. Citigroup has funded small business efforts in developing countries for years. They are now looking at these efforts as a business opportunity. They don't expect to make money, but they do hope to learn about doing business in these countries. Being socially responsible doesn't have to just cost money; it can boost the bottom line and add value for investors.

Questions
1.

The article describes an "old model" of giving, represented by steel magnate Andrew Carnegie who gave money for libraries and universities while his steel plants harmed the environment and he treated workers poorly. Why would this method of giving no longer be acceptable today? Give at least three reasons why expectations for corporate responsibility have changed.

2.

The article mentions the "free trade" movement. Do some research in your book or on the Internet about the free trade movement. What is it and why is it a good charitable match for Starbucks?

Source "Asked to be Charitable, More CEOs Seek to Aid Their Business As Well," Wall Street Journal, Feb. 22, 2005, pB1.
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