No good deed unpunished for U.S. corporate citizens

September 13, 2012

By Reynolds Holding
The author is a Breakingviews columnist. The opinions expressed are his own.

No good deed goes unpunished for U.S. corporate citizens. The likes of Apple and Whole Foods draw far more protests than rivals that pay less attention to social responsibility, new research shows. That may make admirable firms even better, but it gives dodgy ones a free pass.

Virtuous behavior has its rewards. Reputation accounts on average for 16 percent of a company’s value, according to Financial Analysts Journal, and firms on Fortune magazine’s list of most admired companies typically outperform the S&P 500 Index.

But efforts to save the whales and similar activities don’t necessarily appease critics. A recent Northwestern University study found that companies with the strongest reputations for good social behavior were also the most frequent targets of consumer boycotts. Those in the top third of the Fortune list led the way, along with firms that issued the most press releases announcing socially responsible projects.
Johnson & Johnson, for example, was singled out for a boycott in 2009 because some of its products contained potentially harmful chemicals. Critics also called for a boycott of Whole Foods, known for its socially responsible policies, in the same year because its chief executive publicly opposed President Barack Obama’s healthcare legislation. Organic food activists criticized Starbucks a decade ago even after it stopped using milk that contained artificial growth hormones.

The study’s authors conclude that these companies’ high profiles made them especially enticing targets. After all, one goal of activism is publicity for a cause, and going after the biggest, most respected names is one way to maximize that.
Even companies genuinely committed to social causes fall short. The upside of being under a critical spotlight is that they may improve further. Apple, for instance, seems to have forced major improvements at the Chinese factories of supplier Foxconn, since concerns over working conditions surfaced earlier this year. The iPhone and iPad producer, while not perfect, is a leader in this area – yet more criticism emerged just this week.

But there’s a cost to this approach. With attention focused on how the good can get even better, the least socially responsible companies escape the kind of scrutiny that might force them to catch up.

 

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