Philanthropic Fulfillment

Earlier this week I came across this interesting article in the FT from Michael Skapinker about corporate social responsibility. Skapinker argues that one reason companies focus on CSR (instead of solely focusing on shareholder value, as capitalism suggests companies should behave) is that it makes executives “feel better”–it is a way for them to give something back when they can’t afford to act personally philanthropically in the way that Bill Gates can.

When Nada and I surveyed a number of UK and US boards in 2007, we did not detect this sentiment. Boards tended to shy away from using language like CSR and sustainability; instead they were focusing on effective risk management, compliance, internal controls, and reputation management. These were critical to the pursuit of accountability and the reduction of risk to shareholders.

It’s fine for executives to ‘feel good’ about their company’s socially responsible activities, including philanthropy, but these activities really need to be embedded in the company’s strategy and provide a demonstrable value to shareholders in order to be successful.