Howard Schultz, Starbucks and a History of Corporate Responsibility - The New York Times 29.01.

2018, 16*41

Howard Schultz, Starbucks and

a History of Corporate
Responsibility
By TANYA MOHN NOV. 15, 2017

Howard Schultz, right, executive chairman of Starbucks, tells Andrew Ross Sorkin that corporate profits are not
incongruous with social responsibility. Mike Cohen for The New York Times

While corporate profits might seem incongruous with doing social good,
Howard Schultz, the executive chairman of Starbucks, would counter that
the opposite is true.

There is a great need, Mr. Schultz said, “to achieve the fragile balance
between profit, social impact, and a moral obligation” to do everything
possible “to enhance the lives of our employees and the communities we
serve.”
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At the annual DealBook conference last week, hosted by The New York
Times, he said that for such goals to be attainable, sound business
practices were essential. “The price of admission to have a social impact
agenda is to have financial performance.”

Starbucks has stood out over the years in its efforts on behalf of social do-
gooderism.

In 1988, it became one of the first companies in the United States to offer
comprehensive health benefits to both full- and part-time employees,
including coverage for domestic partners.

Under Mr. Schultz’s leadership, Starbucks started stock ownership and

free college tuition programs for its workers; it made a point of hiring
people from underserved groups, including veterans and refugees.

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But the notion that companies had some obligation to social good started
long before Starbucks, although the history is a little murky.

The discourse about how companies should make money dates to the early
1600s in Amsterdam. The Dutch East India Company, the world’s first
publicly listed company, profited “by war, rape, pillage and colonization,”
said Stephen Davis, associate director and senior fellow of the Harvard
Law School Program on Corporate Governance.

“A group of Dutch burghers protested, arguing that the company should

abide by ethical principles, so they launched what became the world’s first
shareholder boycott of company stock on social grounds,” Dr. Davis said.
The effort failed and the company carried on its ways, he said, but it laid
the groundwork for addressing corporate behavior “that’s become part of
the DNA of capital markets.”

In America, some early examples of corporate social responsibility (also

known today as corporate citizenship, conscious capitalism and purposeful
businesses) date to the late 19th and early 20th centuries with the creation
of company towns for workers and the Community Chest movement, one
of the first large-scale endeavors by business people to be involved in local
communities, said Archie B. Carroll, professor emeritus of the Terry
College of Business at the University of Georgia and a co-author of
“Corporate Responsibility: The American Experience.”

By midcentury, business philanthropy and employee volunteerism, in

which corporations give away resources like money, products and services,
as well as their employees’ time and expertise, began to take hold, he said.

But it wasn’t until the 1970s that the debate over how companies should
ethically make money resurfaced, instigated in large part by Ralph Nader,
whose challenges to General Motors and auto safety caused shareholders,
investors, and consumers to question “how companies choose to behave,”
said Dr. Davis, who is co-author of “What They Do With Your Money: How

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the Financial System Fails Us and How to Fix It.”

In the late 1970s and 1980s during the anti-apartheid era, large-scale
divestiture by American colleges and universities prompted shareholders
to pressure their companies to also pull investments out of South Africa.

From the 1960s through the 1990s, in response to social movements and
ethics scandals, “we witnessed a broadening in the social contract between
business and society,” Dr. Carroll said. A heightened expectation of social
performance and a series of regulatory actions, like the formation of the
Consumer Product Safety Commission, led to an increase in corporate
accountability. The public began expecting businesses to do more than
supply jobs, goods and services, he said.

It was in this climate that the Social Venture Network, a group of socially
oriented entrepreneurs and investors, was created as a way to serve society
by aligning business with personal values.

“It was a shift in thinking,” said Joshua Mailman, who founded the group
with Wayne Silby in 1987 to bring together like-minded people for
inspiration and collaboration, and to support businesses for social good.
“We wanted to instigate a movement, to change the world,” Mr. Mailman
said.

What began as a small gathering at Gold Lake Ranch in Colorado is today a

coalition of more than 600 entrepreneurs, investors and nonprofit leaders,
and hundreds more through affiliations with similar groups it spawned or
inspired. Some of the network’s first members are well-established
companies today: Bright Horizons, Ben & Jerry’s, Stonyfield Farm and
Seventh Generation.

Mr. Mailman, managing partner of Serious Change, and Mr. Silby, co-
founder of Calvert Funds, continue to be involved in social impact
investment initiatives. Mr. Silby is also chairman of SynTao, a Beijing-

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based consultancy that advises Chinese companies and multinational

corporations operating in China on what it means to be a corporate citizen.

“Some of those concepts are kind of new,” he said. “The Chinese are known
for strong family values, but have not traditionally embraced concepts of
community and the integration of social values in business.”

Dr. Davis, of Harvard, said in recent years there has been a big paradigm
shift. “Corporate social responsibility has moved from an ethics issue to a
risk issue,” as companies and investors are increasingly concerned about
managing risks, such as how to deal with global warming and greenhouse
gases.

Today, much of what were once thought to be acts of corporate social

responsibility are now important, competitive business issues, Dr. Carroll
said, like producing higher quality and sustainable products that are safe;
promoting honest and ethical business behavior; committing to safe
workplaces and environmental protections; and avoiding deceptive
advertising.

And while most highly recognized companies today do much more than the
robber barons of the past, there are very few true believers, Dr. Carroll
said.

There is considerable greenwashing going on, through deceptive public

relations, making claims without evidence and misleading labeling, he
said, characterizing those acts as attempts to convey an image of social
responsibility when, in fact, it’s business as usual. But the public will
continue to expect companies to integrate social concerns into their
everyday business practices. Corporate social responsibility “will continue
to grow in importance,” he said.

Mr. Silby said the Social Venture Network’s founding principles remain
more relevant than ever.

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“We need to get ready to face the challenges ahead because of the way
society is going to change, due to the rapid force of technology.” He
recounted a recent meeting of Silicon Valley billionaires, after which one
participant told him some of them regretted what they had created,
referring to their businesses and their societal impact.

“There really is some soul-searching going on,” Mr. Silby said. “It’s
important to take risks and stand up for what’s right, but we need a
community behind us to help us do that, to be more bold.”

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