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Rape, Pillage and … Philanthropy: How Siloed CSR Misses the Point

| Wednesday March 24th, 2010 | 4 Comments

The bi-partisan Financial Crisis Inquiry Commission has been studying no less than 22 contributing causes of the financial crisis. At the risk of oversimplifying matters, Jed Emerson of Blended Value Proposition, believes he knows the root cause.  It all boils down to values, Emerson told participants at the Economist’s recent 2010 Corporate Citizenship Conference “Doing Well by Doing Good.”

“We experienced a bifurcation of values,” declared Emerson. “In much of our society, how you live life on Monday through Friday has become different from life on Saturday and Sunday.”

Rape, pillage and … philanthropy
The mentality in much of corporate America has become “rape, pillage and philanthropy,” quipped Emerson. Many executives and companies knowingly tolerate gross inconsistencies between destructive business practices and corporate philanthropy because they artificially disassociate these values.  Putting your philanthropic arm in a silo can salve the conscience of those in the core business units who feel they can act with impunity because their company engages in “do good” endeavors completely detached from its day-to-day activities. That mentality misses the point, Emerson maintained.

“What is the purpose of capital?” queried Emerson, who spoke on a panel about restoring trust in the financial markets. “Today, business schools teach that the purpose of capital is to pursue its own highest and best use of generating the greatest financial return, with no regard for returns on social, environmental, or other dimensions.  It has become a very ingrained attitude in the financial sector that the only criteria of value is financial performance. The economic crisis calls that assumption into question.”

“Our perception of value translates into practice and that practice will lead you down a road,” added noted co-panelist Diana Taylor, Managing Director of Wolfensohn & Co., an investment and advisory firm focused on emerging market conditions.

Eat what you kill
Fellow panelist Mark Standish of RBC Capital Markets concurred, noting that many financial institutions focused too heavily on driving profits to the detriment of their client franchise.   And, poorly-structured compensation practices generated an “eat what you kill” ethos.

With a twinge of pride, Standish noted that Canada managed to largely avoid the economic turmoil experienced in the US residential mortgage market.  That happened because Canadian financial institutions achieve balance in meeting the needs of all their stakeholders, not just shareholders. Nearly 70 percent of home mortgage loans in Canada stay on the books of the originator, noted Standish.

A crisis of virtue and values
“This is not a recession.  It’s a reset,” declared John Hope Bryant, Founder, Chairman and CEO of Operation HOPE, the first non-profit social investment banking organization in the United States.

“It is a crisis of virtue and values.  It is a failure of greed, not a failure of capitalism. We are all complicit,” scolded Bryant, citing greedy bankers, lax regulators, insatiable consumers and ignorant mortgage loan borrowers.

“Borrowers need to stop using their homes as ATM machines,” Emerson chided.

“Financial literacy is the new civil rights issue,” continued Bryant.  “If you don’t understand the language of money and have a bank account, you are an economic slave. Fifty percent of urban kids drop out of high school.  If we are not careful, the next set of under-performing assets in this nation will be our children.”

Financial literacy
The markets deliver better results when consumers make informed choices, stated Taylor, Superintendent of New York State Banks from 2003-2007, a position responsible for overseeing regulation of 3,500 financial institutions with assets totaling over $1.5 trillion. She noted the need for both smart, effective regulation as well as a “responsible, financially literate public.”

Taylor recommends robust investment in financial education, citing the example of New York City’s 16 Financial Empowerment Centers at which trained professionals teach money management basics and offer financial counseling to low income New Yorkers.

Hope expanded on this proposal, advocating a sweeping financial literacy agenda including financial literacy education from kindergarten through 12th grade, issuing bank account cards at birth and requiring all guaranteed student loan holders to complete a course in financial literacy.

“We need to re-imagine who we want to be.  We can embrace a more humble, caring, inclusive way to live,” Hope concluded.


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  • ullazillpha

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  • meganstrand

    A HUGE virtual standing ovation for this post and Emerson's “Rape, Pillage and Philanthropy” comments. I wish every company (large corporations, especially) would read this and recognize the importance of integrating their CSR activities into the very foundation of their company. Put these efforts in a silo, as Emerson points out, and not only are you at risk of the perception that these activities “cancel out” unethical practices, you also risk them being inauthentic and ultimately ineffective.

    Perhaps more people should be paying attention to the fact that “The Domini 400 Social Index (DS 400), the socially responsible investing industry benchmark, has outperformed the S&P 500 since its inception in 1990.” (this from http://ow.ly/1qlQB) Hmmmm….maybe there's a reason for that.

    Although this complete falling away from core ethical business practice in the financial sector has wreaked havoc on our society, hopefully the good that will come from it is the realization that a) People actually DO want their companies to be responsible and not just on a surface level and b) Sustainable and responsible business practice done correctly can ultimately lead to better returns…for everyone.

    Thanks for a FANTASTIC post.

    @meganstrand

  • http://twitter.com/cmehallow Cindy Mehallow

    Hi Megan,

    Glad you appreciated the post. Your final point is right on. Unsustainable business practices such as focusing solely on short-term financial gain benefits only a few and leaves the rest of us paying a very high cost. Wall Street bonuses this year reach in the billions, while budget cuts in New Jersey are forcing the firing of teachers and New York's MTA is eliminating bus and subway service that the “working class” rely on to get to their jobs – if they are lucky enough to still have one. Something's wrong with this picture. True CSR efforts must permeate a company's entire business strategy and its core activities.

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  • http://twitter.com/cmehallow Cindy Mehallow

    Hi Megan,

    Glad you appreciated the post. Your final point is right on. Unsustainable business practices such as focusing solely on short-term financial gain benefits only a few and leaves the rest of us paying a very high cost. Wall Street bonuses this year reach in the billions, while budget cuts in New Jersey are forcing the firing of teachers and New York's MTA is eliminating bus and subway service that the “working class” rely on to get to their jobs – if they are lucky enough to still have one. Something's wrong with this picture. True CSR efforts must permeate a company's entire business strategy and its core activities.

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