Occupy Movement Pushes CSR to the Tipping Point
Occupy Movement Pushes CSR to the Tipping Point
By Carol Pierson Holding
Banks are big proponents of CSR (Corporate Social Responsibility). They give extensively to charities, pay their employees generously and contribute to the environment with LEED certified buildings and sustainable operating practices. They measure and monitor the results of their CSR investment, keep close tabs on their brands and reputations. So they’ve been watching as their reputations (and stock prices!) plummet.
Every day, the media reports on the rage sparked by the Occupy Movement. Much of it is directed at banks for their mortgage practices and malfeasance. The Occupy- backed “Bank Transfer Day” aimed to get one million supporters to move their accounts from big banks to community banks, and they did. That got Wall Street’s attention. Then Occupy Seattle protestors blocked Jamie Dimon, CEO of JP Morgan Chase, from delivering the keynote address at the University of Washington’s inaptly named “Business Leadership Celebration.”
But most investment banking clients are part of the 1%. What possible harm could they suffer from the ragamuffins, students and union members that make up the Occupy movement?
Let’s start with damage to client loyalty. Investment customers look for returns within an acceptable margin of risk. With visions of Lehman Brothers’ collapse and Bernie Madoff’s fraud so recently burned in memory — and Occupy signs listing bank injustices shown relentlessly in the media — the possibility of a total loss does not feel far-fetched. Already, I-banks have been forced by itchy clients to reduce their fees.
The protests are also damaging employee loyalty and recruitment. For at least 30 years, the best and brightest have gone to Wall Street because of the high salaries and prestige. Now, young people are less willing to work for companies whose misdeeds are known by all. Stanford students are starting an effort called “Stop the Brain Drain” to combat Wall Street recruitment and redirect “more young people to solve America’s greatest challenges.” Their effort is echoed in student newspaper editorials around the country.
Historically, CSR has been used to reduce outrage and pacify workers. According to William Scott, Assistant Professor of English at the University of Pittsburgh and author of Troublemakers: Power, Representation, and the Fiction of the Mass Worker (and Occupy Wall Street protestor), industrial companies from 1900-1940 had CSR-like policies designed to keep workers healthy in body and mind. Benefits like housing and higher pay — Ford’s famous $5/day — created docile workers who would be less likely to object to monotonous jobs on the assembly line.
Ford’s philanthropic gestures are famous among MBA programs as an early example of “doing well by doing good,” or CSR. Business students learn that Ford paid high wages so his employees could afford his cars. Mass labor created mass markets and the middle class. Luxury goods were affordable. Everybody won.
But when the automobile business soured after WWI, Ford enforced a plant speed-up, sometimes tripling the required output. When business bounced back, Ford did not reverse the policy. Power dramatically favored the industrialists, and the imbalance gave rise to the union movement of the 30s. Ford held off unions until 1941 with armies of thugs and machine guns mounted on factory roofs.
There is precedent for business to fix the imbalance before things get that bad. Just last year, the auto industry stepped up to meet the government’s environmental demands, agreeing to ambitious mileage standards. The financial industry could do the right thing too.
Financial firms have tremendous clout with regulators and Congress. Think of how much the industry could improve its reputation if its members actively supported laws to fix income inequities, such as taxes on trading and caps on executive compensation? It’s CSR in its ultimate incarnation, doing well by doing the right thing. Actions like these would show true leadership.
Recent actions by financial firms are not promising. Mayor Bloomberg, formerly a key player in the financial industry, authorized NY Police to use unnecessarily harsh methods to break up the Zuccotti Park encampment. The latest news is that banks are hiring lobbying firms to ensure that supportive politicians don’t defect.
But the Occupy Movement is not going away. Two days after their encampments were destroyed with knives and billy clubs, the Movement staged peaceful national protests against joblessness, with students and labor marching together.
Past imbalances in power and income were corrected, after much violence, by the emergence of unions. Two factors make this time different. This time, the imbalance crosses sectors and age groups. And consumers have a lot more power, through social media and information from watchdogs and raters of corporate behavior like this column’s sponsor CSRHUB. CSR gives power to the have-nots. It also gives corporate culprits the chance to regain their business leadership. Let’s hope they take it.
Carol Pierson Holding writes on environmental issues and social responsibility for policy and news publications, including the Carnegie Council's Policy Innovations, Harvard Business Review, San Francisco Chronicle, India Time, The Huffington Post and many other web sites. Her articles on corporate social responsibility can be found on CSRHUB.com, a website that provides sustainability ratings data on 5,000 companies worldwide. Carol holds degrees from Smith College and Harvard University.
CSRHUB is a corporate social responsibility (CSR) ratings tool that allows managers, consultants, academics and activists to track the sustainability performance of major companies. We aggregate data from more than 125 sources including seven leading socially responsible investing (SRI) analysts, Carbon Disclosure Project, indexes, NGOs, crowd sources, and government agencies to provide our users with a comprehensive source of employee, environmental, community, and governance information on nearly 5,000 publicly traded companies in 65 countries. CSRHUB is a B Corporation.