Is Big Business an Agent of Social Change?

In the wake of the killing of George Floyd by Minneapolis police in May 2020, Corporate America pledged to spend billions of dollars to address systemic racism. A new analysis by the Washington Post raises questions both about those commitments and the entire idea of relying on big business to address social problems.

Surveying the 50 U.S. largest companies (based on stock market valuation), the Post found that 44 of them pledged a total of $4.2 billion in donations and committed another $45.2 billion in loans, investments and other initiatives. More than one year later, the companies reported disbursing only $1.7 billion.

The slow movement of the funds should not be taken as an indication that the commitments were a burden on the firms. As the Post points out, the $4 billion cash portion represented less than one percent of the aggregate annual profits of the 50 companies.

Much of the $45 billion in other commitments, 90 percent of which came from Bank of America and JPMorgan Chase, represented loans and investments on which the companies would make a profit. Moreover, providing home mortgages and other financial services in Black and Latino neighborhoods is something the banks were already supposed to be doing under federal laws such as the Community Reinvestment Act.

All this goes to show that the companies were not sacrificing very much in their racial justice commitments. Yet many of them have still dawdled in writing the checks. For example, the Post notes that Chuck Robbins, the CEO of Cisco Systems, tweeted in June 2020 that his company would be contributing $5 million to a handful of groups such as Black Lives Matter. The newspaper found that Black Lives Matter has not yet received any money.

It remains unclear whether Cisco and the other companies ever intend to make good on their pledges, even though they have already reaped the public relations benefits from the commitments.

Apart from the matter of reliability is the question of whether it makes sense to call on large corporations to help deal with matters such as systemic racism. Typically, this is framed as a debate between those who see big business as a potential force for positive change and those who argue that corporations should focus solely on creating value for shareholders.

There are problems with both those positions. The notion that the business of business is solely to generate profits, long popularized by the rightwing economist Milton Friedman, is not only amoral but simplistic. Corporations may find it beneficial to spend money on things such as charitable contributions or lobbying even if the immediate effect is to reduce profits a bit. Those expenses may very well lead to higher profits in the longer term by generating good will or changing public policy.

Some corporations, in fact, may seek to project an image of social or environmental responsibility as part of their brand—think Ben & Jerry’s, Patagonia, etc. When they make contributions to progressive causes, they are really engaged in nothing more than marketing.

Yet perhaps the biggest misconception in most discussions of the role of corporations is the assumption that big business is somehow part of the antidote to social and environmental ills. The truth is often that companies are a cause of those ills.

For example, when it comes to systemic racism, large corporations are hardly innocent bystanders. Many of them have decades-long track records of racial discrimination in the treatment of both employees and customers.

Many of these cases are documented in Violation Tracker. The database contains more than 3,000 entries on employment discrimination (of all kinds) with total penalties of more than $4 billion. These include actions by agencies such as the Equal Employment Opportunity Commission as well as class action lawsuits. Among the latter are multi-million-dollar settlements paid by major companies such as Coca-Cola, Federal Express, and Eastman Kodak.

Violation Tracker also has more than 200 cases in which companies were accused of bias in their dealings with customers—such as charging African-American borrowers higher interest rates than their white counterparts. These cases have resulted in more than $1 billion in fines and settlements. Among the companies involved in these matters have been MetLife, JPMorgan Chase, and Toyota.

All of this is to say that many corporations have much work to do to eliminate systemic racism under their own roof before being called on to help address the problem at a national level. When it comes to social change, big business often remains part of the problem rather than the solution.

Targeting Gunmakers in the Courts

Among the scores of industries covered in Violation Tracker, one of the most under-represented is the business of producing firearms. That’s not because gunmakers are particularly virtuous, but rather because there are few laws and regulations for them to violate.

Federal oversight of the industry is pretty much non-existent. The few penalties that have been imposed on companies such as Remington, Beretta, Colt’s Manufacturing, Smith & Wesson, and Sturm, Ruger have had nothing to do with their specific activity. Instead, they have been imposed by agencies such as OSHA that oversee companies of all kinds. The penalty total for each of these firms is no more than a few hundred thousand dollars—a trivial amount for an industry whose products do so much harm.

The other arena in which the industry has enjoyed near impunity is the court system. That’s largely due to the 2005 Protection of Lawful Commerce in Arms Act, which prevents dealers and manufacturers from liability when guns are used in shootings and other criminal activities.

Ironically, gun companies are still considered liable when their products are defective. For example, in 2016 the Brazilian gunmaker Forjas Taurus agreed to pay $239 million to settle a class action brought in federal court in Florida. The plaintiffs had alleged that its guns fired unintentionally when dropped.

Various attempts have been made to get around the industry’s liability shield. A lawsuit brought against Remington by the families of the victims of the Sandy Hook massacre in Connecticut was able to proceed by using the state unfair trade practices law. The case still dragged on for years, though it was recently reported that Remington is offering to settle the matter for $33 million. That’s not much, but it could serve as a stepping stone to more appropriate damages in other cases.

Another novel approach is being taken in a lawsuit recently filed in federal court in Massachusetts by the government of Mexico against ten U.S. gunmakers. The suit accuses the companies of facilitating the flow of weapons to the drug cartels causing so much havoc in Mexico. It argues that the federal liability shield does not apply, since the harm took place in another country.

The lawsuit is considered a long shot, but if nothing else the case may expose more details about the questionable practices of the industry. The complaint has already highlighted the brazen practice by one gunmaker of engraving the image of Emilio Zapata on one of its models to appeal to Mexican buyers. One of those pistols was used to kill a Mexican investigative reporter.

There are signs that the real purpose of the lawsuit is to pressure the U.S. government to put restrictions on the firearms trade. The suit seeks to do this by equating cross-border gun trafficking from the U.S. to the drug trafficking from Mexico that American officials frequently decry. Significant change is not likely to happen any time soon, but meanwhile any challenge to the gun’s industry’s impunity is welcome.