Category: Corporate “Social Responsibility”

As they push forward to fill a Supreme Court vacancy shortly before a presidential election, Republicans are putting on a master class in hypocrisy. A new report on self-proclaimed socially responsible corporations reminds us that the tendency to say one thing and do another can also be seen in the world of business.

The study, produced by consulting firm KKS Advisors and an initiative called Test of Corporate Purpose (TCP), looks at large corporations that were signatories to a much-ballyhooed statement issued in 2019 under the auspices of the Business Roundtable. That statement was meant to give the impression that big business is no longer concerned only with maximizing returns for shareholders and is promoting the well-being of other stakeholders such as employees.

Some of us responded to the Roundtable’s statement with skepticism, but KKS and TCP decided to put the 181 signatories to the test, looking at their behavior in dealing with the pandemic and the problem of inequality. Basing its analysis on news coverage of corporate actions, the report compared signatories and non-signatories on topics such as workplace safety, healthcare access, wage levels, diversity and environmental justice. The evaluations used data prepared by Truvalue Labs using the framework of the Sustainability Accounting Standards Board.

The report’s conclusion is that signatories were slightly less likely to respond in a responsible way to the pandemic and slightly more likely to do so with regard to inequality—in other words, endorsement of the Roundtable statement did not make a big difference one way or the other. KKS and TCP put it this way: “our results suggest that corporate commitments to purpose are less informative about a company’s future performance on social and human capital issues than other indicators. What matters more is whether a company has a strong track record of proactively managing issues that may become material during a crisis, and whether a company is an early responder on relevant issues during a crisis.”

I’m not sure exactly what is meant by “proactively managing issue” and being an “early responder” may be a good or bad thing depending on the nature of the response. I also think the report goes too far in trying to use news coverage to assess and rank corporate behavior.

My preference is to use concrete evidence relating to corporate behavior—especially the extent to which companies have been found to be violating regulations relating to the workplace, the environment, consumer protection, etc.

When the Roundtable statement was initially released, I ran the names of the signatories through Violation Tracker and found that they accounted for more than $197 billion in cumulative penalties, with 21 of them having penalty totals of $1 billion or more.

Serious violators can also be found among the companies—both signatories and non-signatories—that receive the highest ratings in the KKS-TCP report, which groups the firms into four quartiles without listing specific scores. For example, included in the quartile with the best ratings is drug giant Novartis, which according to Violation Tracker has paid more than $1.5 billion in fines and settlements over issues such as the promotion of drugs for purposes not approved as safe by the Food and Drug Administration.

That figure will increase to more than $2 billion next week when the database is updated to include recent cases such as one in which Novartis paid $642 million to settle Justice Department allegations relating to kickbacks and other illegal payments. Also in the first quartile are other repeat offenders such as the French bank BNP Paribas, whose Violation Tracker penalty total is more than $12 billion.

Until large corporations end their unlawful conduct, they have no claim to being models of social responsibility.

It is amazing how much attention is being paid to the Statement on the Purpose of a Corporation just issued by 181 chief executives of large corporations under the auspices of the Business Roundtable. We are supposed to think it is a major breakthrough that big business is claiming to do more than maximize returns for shareholders.

In fact, Corporate America has long given lip service to the notion that it has an obligation to other stakeholders such as employees, communities and suppliers and that it needs to promote sustainability in its operations. The language of the Roundtable statement could have been taken from similar pronouncements that have been made by the vast majority of large companies under the rubric of corporate social responsibility or a similar phrase. The website of Exxon Mobil, for instance, contains a page on its Guiding Principles, which are said to include adherence to “high ethical standards.”

The question, of course, is whether these high-minded statements have any real meaning—whether they result in more responsible practices or are designed mainly to let corporate executives pretend to be moral exemplars.

The answer seems clear. If large corporations truly had a commitment to their employees, they would not engage in so many exploitative practices and fight so hard against unionization. If they truly cared about the environment, they would take more aggressive steps to reduce pollution and address the climate crisis. If they truly cared about ethical supply chains, they would stop sourcing from low-road producers.

Not only are most large corporations far from ethical leaders—in many cases they cannot bring themselves to adhere to their most basic responsibility: obeying the law and complying with regulations.  

For the past few years, I’ve spent most of my time documenting corporate lawlessness by building the Violation Tracker database, which now contains more than 360,000 examples of misconduct that have resulted in $470 billion in penalties since 2000.

I ran the names of the 181 companies whose CEOs signed the Roundtable statement through Violation Tracker and, not surprisingly, the results were eye-popping. The signatories and their subsidiaries together account for more than $197 billion in cumulative penalties, or more than 40 percent of the total penalties from tens of thousands of companies.

Twenty-one of the signatories have penalty totals of $1 billion or more, and three with $25 billion or more. At the top of the list is Bank of America, with more than $58 billion in penalties from 128 cases largely involving mortgage abuses and toxic securities. JPMorgan Chase comes in at $30 billion from similar cases. As a consequence of its role in the Deepwater Horizon oil spill and other disasters, BP ranks third with $27 billion in penalties.

The list continues with other big banks (Citigroup, Goldman Sachs, etc.), big utilities (American Electric Power, Duke Energy, etc.), big pharmaceutical manufacturers (Pfizer, Abbott Laboratories, etc.), other big oil companies (Marathon Petroleum, Exxon Mobil, etc.), and others such as Boeing and Walmart.

It is significant that two of the worst corporate miscreants of recent years, Wells Fargo and Volkswagen, are missing from the list of signatories. Perhaps they or the Roundtable realized that their inclusion would have detracted from the message.

Yet the track records of many of the other signatories are not much better. Large corporations that repeatedly break the rules concerning consumer protection, environmental protection, workplace protection, investor protection and every other kind of protection cannot profess that they are committed to serving the well-being of all their stakeholders. Until they change their behavior, their purported principles mean little.