Customer care -Last on the list?
by Lionel WIJESIRI
If you want to picket against the unscrupulous business magnates of
Sri Lanka, the caption would serve as a good slogan. Remember, I
mentioned the word ‘unscrupulous.’ It makes a big difference because
there are also genuine and honest businessmen who really care about the
community and make their regular contributions accordingly.
The slogan is meant for the other segment of the business community.
Although, globally today the entrepreneurs take their corporate
responsibility to community involvement very seriously, this lot does
not seem to agree with the idea. It’s sad but it’s the reality.

Corporate social responsibility or (CSR as its known) has now become
the ‘new new thing.’ The old argument that the business of business is
business and that companies have no obligation or even the right to
become involved in the community is no more valid. An integral part of
their corporate culture is the concept that together they can work
towards satisfied and stronger communities.
Talking on this topic, I remember what a marketing guru has told me
some years ago. He said in Sri Lanka the CSR and New Year’s resolutions
go hand in hand. ‘Did you know that the most common New Year’s
resolution is to “Lose weight and get into better shape’ he asked me,
and added,” An exemplary goal, indeed, but did you also know that of all
the people who started daily exercises in January only 25% of them were
continuing on a regular basis by March’.
Can you now deduce the connection to CSR? Each year countless
companies hold their annual management meetings where the subject of
improving their community responsibility always comes up.
Their Mission Statements do have catchy phrases like: “We aim to
build stronger and healthier communities through strategic social
investments.” “We believe we should go beyond the basics of ethical
business practices and embrace our responsibility to the community.”
These little gems crop up and finally become a resolution to improve the
deteriorating levels of their responsibility towards the community. But
just like the New Year’s exercise resolution, its implementation and
follow-up loses momentum and dies an agonizing death by March until it
comes back to life at next year’s meeting.
Profit
This story also reminds me of Milton Friedman who in 1970 wrote that
“there is one and only social responsibility of business—to use its
resources and engage in activities designed to increase its profits so
long as it stays within the rules of the game.” Most of our
entrepreneurs seem to be firm believers of this theory.
Social scientists and marketers strongly disagree with this argument.
They believe that all businesses should try to create value for all of
its constituencies including the community. Perhaps from an investor’s
angle, he may see the purpose of the business is to maximize profits.
But that’s not the purpose for other stakeholders—for customers,
employees, suppliers, and the community. Each of those groups will
define the purpose of the business in terms of its own needs and
desires, and each point-of-view is valid and legitimate.
Being a company Director myself, I am not hostile to profit.
Definitely no! I believe I know something about creating shareholder
value. My experience is that by making shareholder value the primary
purpose of our business, in long term we will never achieve an increase
in shareholder value. The most successful businesses throughout the
world put the community ahead of the investors. In the customer-oriented
business, community satisfaction has become an end in itself, and is
pursued with greater interest, passion, and empathy than the
profit-centered business is capable of.
Any right-thinking person will readily accept the argument that
caring about customers, employees and the community is good business.
But when it comes to serving the community, some might draw the line at
believing a company has any responsibility to its community and
environment. To donate time and capital to philanthropy, they will
argue, is to steal from the investors. After all, the company’s assets
legally belong to the investors and the Management has a fiduciary
responsibility to maximize shareholder value.
Personally, I agree this position sounds reasonable.
A company’s assets do belong to the investors, and its management
does have a duty to manage those assets responsibly. In my view, the
argument is not wrong so much as it is too narrow.
Objections
First, there can be little doubt that a certain amount of corporate
philanthropy is simply good business and works for the long-term benefit
of the investors. It is also is an excellent marketing strategy that has
benefited the investors of many companies worldwide.
That much said, I believe such programs would be completely
justifiable even if they produced no profits and no P.R. This is because
the entrepreneurs, not the current investors in a company’s stock, have
the right and responsibility to define the purpose of the company. It is
the entrepreneurs who create a company, who bring all the resources
together and coordinate it into viable business. It is the entrepreneurs
who set the company strategy and who negotiate the terms of trade with
all of the voluntarily cooperating stakeholders—including the investors.
The shareholders of a public company own their stock voluntarily. If
they don’t agree with the philosophy of the business, they can always
sell their investment, just as the customers and employees can exist
their relationships with the company if they don’t like the terms of
trade. If that is unacceptable to them, they always have the legal right
to submit a resolution at the annual shareholders meeting to change the
company’s philanthropic philosophy.
Another objection to this philosophy is where to draw the line. If
donating 5 percent of profits is good, wouldn’t 10 percent be even
better? Why not donate 100 percent of our profits to the betterment of
society? But the fact that each company has responsibilities to the
community doesn’t mean that they don’t have any responsibilities to
their investors. It’s a question of finding the appropriate balance and
trying to create value for all of our stakeholders. Is 5 percent the
“right amount” to donate to the community? I don’t think there is a
right answer to this question, except that I believe 0 percent is too
little. It is up to the directors and shareholders to decide what a
‘reasonable’ amount is. Corporate philanthropy is a good thing, but it
requires the legitimacy of investor approval. In my experience, most
investors understand that it can be beneficial to both the company and
to the larger society.
Capitalism
That doesn’t answer the question of why a company should give time
and resources to the community stakeholder. For that, you should turn to
one of the fathers of free-market economics, Adam Smith. The Wealth of
Nations was a tremendous achievement, but businessmen would be well
served to read Smith’s other great book, The Theory of Moral Sentiments.
There he explains that human nature isn’t just about self-interest. It
also includes sympathy, empathy, friendship, love, and the desire for
social approval. As motives for human behaviour, these are at least as
important as self-interest. For many people, they are more important.
When we were small children we were concerned only about our own
needs and desires. As we matured, most of us grew beyond this
egocentrism and began to care about others—their families, friends and
communities. Our capacity to love can expand even further: to loving
people from different races, religions, and countries—potentially to
unlimited love for all people and even for other sentient creatures.
This is our potential as human beings, to take joy in the flourishing of
people everywhere.
Today what we need is a new form of capitalism. What I mean by that
is one that more consciously works for the common good instead of
depending solely on the “invisible hands of the Government” to generate
positive results for society. The current “brand” of capitalism is in
terrible shape among our common people, and companies and businessmen
are widely seen as selfish, greedy, and uncaring. This is both
unfortunate and unnecessary, and could be changed if businesses and
entrepreneurs widely adopt the corporate social responsibility as a main
theme in their business models. |