Philip Mattera for the Dirt Diggers Digest
A new report on self-proclaimed socially
responsible corporations reminds us that the tendency to say one thing and do
another can also be seen in the world of business.
The study, produced by consulting firm KKS Advisors and an initiative called Test of Corporate Purpose (TCP), looks at large corporations that were signatories to a much-ballyhooed statement issued in 2019 under the auspices of the Business Roundtable.
That statement was meant to give the
impression that big business is no longer concerned only with maximizing
returns for shareholders and is promoting the well-being of other stakeholders
such as employees.
Some of us responded to the Roundtable’s statement with skepticism, but KKS and TCP decided to put the 181 signatories to the test, looking at their behavior in dealing with the pandemic and the problem of inequality.
Basing its analysis on news coverage of corporate actions, the report compared signatories and non-signatories on topics such as workplace safety, healthcare access, wage levels, diversity and environmental justice. The evaluations used data prepared by Truvalue Labs using the framework of the Sustainability Accounting Standards Board.
The report’s conclusion is that signatories were slightly less likely to respond in a responsible way to the pandemic and slightly more likely to do so with regard to inequality—in other words, endorsement of the Roundtable statement did not make a big difference one way or the other. KKS and TCP put it this way: “our results suggest that corporate commitments to purpose are less informative about a company’s future performance on social and human capital issues than other indicators.
What matters more is whether a
company has a strong track record of proactively managing issues that may
become material during a crisis, and whether a company is an early responder on
relevant issues during a crisis.”
I’m not sure exactly what is meant by “proactively managing
issue” and being an “early responder” may be a good or bad thing depending on
the nature of the response. I also think the report goes too far in trying to
use news coverage to assess and rank corporate behavior.
My preference is to use concrete evidence relating to
corporate behavior—especially the extent to which companies have been found to
be violating regulations relating to the workplace, the environment, consumer
protection, etc.
When the Roundtable statement was initially released, I ran
the names of the signatories through Violation Tracker and found that they accounted for more than $197
billion in cumulative penalties, with 21 of them having penalty totals of $1
billion or more.
Serious violators can also be found among the companies—both signatories and non-signatories—that receive the highest ratings in the KKS-TCP report, which groups the firms into four quartiles without listing specific scores.
For example, included in the quartile with the best ratings is drug
giant Novartis, which according to Violation Tracker has paid more than $1.5 billion in fines and settlements over
issues such as the promotion of drugs for purposes not approved as safe by the
Food and Drug Administration.
That figure will increase to more than $2 billion next week
when the database is updated to include recent cases such as one in which
Novartis paid $642 million to settle Justice Department
allegations relating to kickbacks and other illegal payments. Also in the first
quartile are other repeat offenders such as the French bank BNP Paribas, whose
Violation Tracker penalty total is more than $12 billion.
Until large corporations end their unlawful conduct, they
have no claim to being models of social responsibility.