Good Corporate Citizenship
I saw a story about this on CNN this morning. In short, Citigroup — one of the world’s largest financial services companies — has set corporate policies in regard to issues such as endangered ecosystems and climate change. Hopefully this policy will set the standard for the financial services industry and actually have a positive impact. The cynic in me fears that less scrupulous companies will simply rush in to fill the void that Citigroup has created.
But regardless of the actual effect, this is still a victory for environmentalists. A major transnational corporation is betting that it can increase profits by acting in a “green” manner. The traditional wisdom has been that respecting the environment and acting responsibly will drive profits down. We are starting to see a change in the attitude of corporate America, and that is more powerful than all the hippies in the world planting trees and holding hands.
This change needs to go further, of course. We need to fundamentally alter the way we evaluate companies and purchase shares of their stock. Dividends are a thing of the past, so there’s really no motivation for profit-at-all-costs. But that is exactly what Wall Street continues to value: short-term gains and rising profits, quarter over quarter and year over year. We need to evaluate companies differently. Yes, they must be profitable, as any company in a capitalist system should be. But no longer should more profits be better.
Instead, once a company is in the black, let’s evaluate corporations based on their citizenship. Stock prices should rise when a company gives back to the community, cleans up the environment, or adopts an underperforming school. CEOs and middle managers should receive bonuses for exceeding federally mandated pollution targets. The government already offers tax breaks for some of these items, but the real motivation will come when Wall Street and the stockholders reward good behavior.
As any financial advisor will tell you, we need to focus on long-term returns, not short-term payoffs. Corporations in the last 100 years have gained many of the rights of flesh-and-blood citizens. It’s time they assume the responsibilities of citizenship and, just as we expect our most powerful and respected citizens to set a standard for the rest of us, behave as model citizens.
Tags: business, corporate citizenship