Corporate Social Responsibility: maybe nice guys don't exactly finish last?
A few people have posted some really provocative comments. I think I'll hash out some of the ideas presented tomorrow or Saturday.
I had a thought while walking Apollo--my dog--this afternoon; I was ruminating on an blog post I read here: Straight Talk About Corporate Social Responsibility. The piece came from Robert Stavins, a faculty member at Harvard's John F. Kennedy School of Government and was published on the website of the Belfer Center for Science and International Affairs at KSG.
The post offered four questions to ask when thinking about firms and Corporate Social Responsibility (CSR) and some analysis about each of the questions: may they, can they, should they, and do they?
The post also asserted that in many (if not most) cases a CSR-friendly firm--the nice guy, so to speak--does not reap substantial benefit from that choice. Moreover, the firms that do benefit from the move are often existing market leaders. (Of course, the preceding summary is rough, read the post for the author's exact idea...don't worry it's short).
Which got me thinking about nice guys. Why does the adage go, "nice guys finish last"? Well, I don't think nice guys always finish last, it just depends on the length of the race. If companies are competing against eachother in the short-term the company built for short-term results will surely win. If companies are competing against eachother in the long-term, the company built to last will surely perform better. Just like two different world-class runners: one a sprinter, the other a marathoner, the length of their race will determine who wins. If they race in a 200m dash, the sprinter will surely win. If they race a longer distance, the marathoner will surely win. Anecdotally, the "nice guy" successfully courts girls interested in building a long-term relationship, but fouls up with women who are looking for the opposite.
Firms that engage in CSR are firms investing in their long-term health, on balance. I don't exactly know if this is true, but let's assume that the majority of said firms are choosing to engage in CSR for longer-term reasons, relative to firms not engaging in CSR as rigorously.
These CSR-friendly firms are the "nice guys" that succeed in long-term initiatives. It doesn't pay to be CSR-friendly unless it's a long-term business strategy...perhaps a move that changes the competitive landscape over time or will dramatically reduce variable costs in 35 years. Maybe the socially responsibile activities require investment in the short to medium term, but pay dividends in the long-term. Maybe CSR is something that changes the culture of the company, but never leaves a direct mark on stock price. In summary, firms conscious of CSR--and I mean ones that do serious stuff, not off-setting carbon footprint as a PR stunt--might not have any benefit doing so in the short-run. CSR-friendly firms are the marathoners, not the sprinters.
This presents a problem for advocates of CSR, whether the advocates are firms, policy-makers or issue publics, if success is measured in the short-term. Which it seems like it is. Quarterly earnings reports, stock-price, etc. are measures that incentivize behaviors which yield short-term gains, right?
CSR-friendly firms are like marathoners trying to beat a sprinter in a 200m dash. Imagine if there were respected measures of corporations' performance that emphasized long-term vitality. Would that change the actions of companies? Would the changes be drastic? Are there measures of long-term vitality used for evaluating companies now?
Nice guys will certainly finish last in races that don't play to their strengths. But if they change the parameters of the race, maybe they'll win. I think this applies to firms and to nice-guys, generally. Rather, I hope so.