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Monday, September 18, 2017

Strategic CSR - Charity

In the aftermath of the devastation caused by Hurricane Harvey in Texas, local companies have been pledging donations to help with the rebuilding effort:
"Chevron, an energy giant with several offices in the Houston area, pledged $1 million to post-Harvey disaster relief efforts. So did Exxon Mobil and Dow Chemical, two companies with facilities hit by the storm. Companies in less regional industries also donated: Amazon offered to match $1 million in donations to the American Red Cross, while Verizon promised $10 million. Walmart, which took a front-line role in the clean-up after Hurricane Katrina, sent truckloads of emergency supplies to the affected area. In all, corporations have pledged more than $65 million to help clean up the wreckage from Harvey, according to a Wednesday morning estimate by the U.S. Chamber of Commerce."
This is necessary because early estimates suggest that the cleanup bill will be substantial:
"Hurricane Harvey may be one of the costliest natural disasters in American history, according to initial forecasts. Moody's Analytics has estimated that the storm's damage may be as much as $50 billion, though it is hard to know at such an early stage."
In explaining these donations (and demanding more), the article in the url below argues that local corporations have a duty to donate funds to the clean-up effort because they, themselves, had received large amounts of funds (e.g., tax relief, startup funds, etc.) previously. In other words, the article suggests these companies have an obligation to "repay" any benefits they received to conduct business in the area:
"As Houston recovers, its business community should feel especially compelled to help. That is partly because Houston and the surrounding area, as well as the state of Texas, have been generous to big business in recent years, showering companies with tax breaks, subsidies and other perks in an effort to keep them happy and create new jobs. Houston has benefited from the presence of large corporations, adding thousands of jobs and becoming one of the fastest-growing cities in America. But those companies have benefited, too — sometimes to the tune of hundreds of millions of dollars."
This is an unhelpful representation of the idea of "corporate citizenship." Although the money being donated by the companies can be described as charity, it is not correct to use the same term to describe the money those same companies received. They were not altruistic handouts, but incentives that were offered because those companies were in demand. The battle to secure a second Amazon HQ currently underway here in the U.S. will further demonstrate the lengths local governments are willing to go to attract big businesses:
"The donations announced for Harvey relief are generous by the standards of corporate philanthropy. Some of the donations are smaller, though, than the amounts many companies have gotten from the region's generous economic development programs."
I believe that companies absolutely should donate funds to help with the cleanup, but not for the reason stated in the article. It has nothing to do with 'paying back' the benefits they received in the past. Presumably, the companies have already delivered on whatever the quid-pro-quo was for them to receive those payments in the first place. Instead, corporations should donate because they have a stake in rebuilding the communities directly affected by the hurricane. They want those communities to recover as fast as possible because it will help them return to business as fast as possible. In other words, the reason for them to donate is a forward-looking argument (we have a direct stake in the future of these communities), rather than a backward-looking argument (we owe something from the past to those communities). The difference is the difference between a mainstream argument for CSR and the argument underpinning strategic CSR.
Take care
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Will Big Business Repay Houston's Generosity
By Kevin Roose
August 31, 2017
The New York Times
Late Edition – Final