Corporate responsibility: StMU speakers tell how individuals can make a difference

Jennifer Moriarty and K. Matthew Gilley listen to the introduction of their presentation on corporate social responsibility at President’s Peace Commission. Carol Baass Sowa | Today's Catholic

SAN ANTONIO • In keeping with this year’s focus on global accountability, the President’s Peace Commission at St. Mary’s University (StMU) offered an enlightening panel, “An Insight into Corporate Responsibility,” on Oct. 30. Providing these insights were K. Matthew Gilley, PhD, the Bill Greehey Chair in Ethics and Corporate Social Responsibility at StMU, and Jennifer Moriarty, Community Development Officer for Wells Fargo Bank and a StMU graduate.

K. MATTHEW GILLEY
“When we talk about corporate responsibility, what we’re talking about is responsibility of top executives,” noted Gilley, who observed that, while such executives may sometimes “run amuck,” they primarily try to act in the best interests of the corporation’s owners, who desire high financial returns.

The most basic definition of a corporation, he said, is “a nexus for organized activity,” and within this nexus are a variety of stakeholders. A corporation is successful when profitability is attained by acting responsibly for these stakeholders: employees (who want salaries, benefits, job stability, growth opportunities and to be treated responsibly); customers (who want safe, quality products at low cost); creditors (who want to be repaid with interest); suppliers (who want a steady stream of business); and the community (who want environmental protection, charitable donations, community participation, jobs and taxes paid). The key to success is to find ways to simultaneously balance and meet all these needs, said Gilley.

When top management acts irresponsibly towards its stakeholders, he noted, the effects on that organization can be quite severe. Focusing on the good companies do, however, he pointed out this includes employment, with over 100 million persons working in the U.S. private sector and about 60 cents of every corporate revenue dollar going to wages.
Corporations gave about 13 billion dollars to philanthropy in 2006, he related — and this does not include private corporate foundations, such as Bill and Melinda Gates’.

Corporations also contribute to health, since the search for profits leads pharmaceutical companies to develop new drugs and the medical sector to pursue new treatments and equipment that save lives. Taxes are a huge contribution, and Gilley noted in 2007 ExxonMobil paid 30 billion dollars in taxes — 43 percent of their net income.

Companies that have behaved irresponsibly, creating billions of dollars in financial losses and costing thousands their jobs and pensions, have had a dramatic effect on our society, he said, and led to new regulations. Pollution, discrimination, unfair labor practices, deceptive marketing and financial market manipulation are other examples of corporate irresponsibility in the search for abnormal profits.

“However,” he said, “enlightened management know that only by being truly responsible to your stakeholders can you ensure the organization’s long-term success.” He added that this starts with ethical leadership, as organizations with unethical management tend to promote an unethical culture throughout the company.

On the other hand, he observed, ethical corporate culture leads to operational advantages, such as General Electric’s environmental program, which they are pursuing across the board, and which will accrue benefits to them in the form of human resources (more people will want to work for such a company), as well as public relations advantages that will increase their sales and investors.

“In short,” he said, ethics and social responsibility are found in good management and some research has shown this to be the case.” However, some do not agree, one being Milton Friedman, Nobel Prize winner in economics, who believed corporate social responsibility to be fundamentally subversive. Gilley personally observed similar sentiments in an unforgettable lunch meeting with a senior executive of one of America’s largest corporations who told him, “Just the fact that you have corporate social responsibility on your business card makes me want to puke!”

The most important question facing capitalism, Gilley stated, is what should corporations, especially the large ones, be doing for the world’s poor. “Over four and a half million children under the age of five died last year,” he said. “You divide that up and that’s like 250 children since the beginning of my talk.” He spoke of a video he had seen at a recent Harvard workshop, which showed children in Pakistan chained to looms to produce rugs we put on our floors in the United States.

“Creative capitalism can make a difference,” he said, noting that forward-thinking companies, such as Unilever, are attempting to pursue profits while helping the poor through such means as encouraging women in remote Indian villages in entrepreneurial enterprises that involve selling smaller, re-packaged versions of their products. While not yet profit-making for Unilever, the company has faith that, in time, it will be a way to raise these women out of poverty.

Gilley sees corporate success and responsible actions as being intimately tied together and, in conclusion, urged those present to educate themselves about what is going on in the world and use their powers as consumers, investors, employees and citizens to effect socially responsible behavior in corporations.

“The challenge for you,” he said, “is to figure out what role you’re going to play in this important issue.”

JENNIFER MORIARTY
“It isn’t easy being green.” With this quote from Kermit the Frog, Jennifer Moriarty went on to ferret out, by a show of hands, how many present actually were socially responsible — not drinking water from throw-away bottles, using only recycled paper and recycling more than just bottles and newspapers.

Being socially responsible, she said, is “about a commitment to your own values and then living out those values.” She treasures a saying of her grandmother’s, “You take yourself with you wherever you go,” and has found this to be true in her own career, choosing a company, Wells Fargo, whose values match her own. A finance major, earlier on she worked for a mortgage company and then in community development for USAA, helping provide loans to small businesses.

She agreed with Gilley that “companies that are around for a long time must be doing something right” and noted Wells Fargo has been around since 1875. Founder Henry Wells’ words continue to sum up the company’s corporate culture: “Our lives are not measured by the number of years and days we exist, but by what we accomplish while we live and the good we may render to our fellow men.”

The company’s commitment to this has four levels: social responsibility or “capital,” member volunteerism, financial contribution and regulatory compliance.

“Social capital,” she said, means a company applying their best thinking as leaders and making communities better places to live and work. Moriarty is an example of this. As a community development officer for Wells Fargo, she works with groups such as Neighborhood Housing Services, serving as their loan committee chair. She observed that while they had lost out in the past to subprime lenders who got people into home purchases quickly despite lack of good credit, her group stuck to their guns and made sure they got people into homes successfully and were not “setting them up to fail.”

Wells Fargo has their own community development mortgage program, she noted, and she has input in shaping its programs, local decision-making being a company policy. “I am the eyes and ears in our community,” she said, “because every community is different; every community has different dynamics that are going on within in it.” An example is the large number of families that live together in one household in San Antonio, paying “rent” to help out. A bank might look at someone in this situation as not having any credit history, but here this may not be the case.

Moriarty has also been involved with helping AVANCE, a parenting program that primarily trains young Hispanic moms to be their child’s first teacher and succeed in life themselves. Wells Fargo did a financial literacy program for them, as well as teaching the young mothers public speaking and setting up a program, with stipends, where mothers who had been through the course then trained others. “That’s another example of using our “social capital” in our community,” said Moriarty.

Wells Fargo puts out a call to employees to volunteer for various community causes, such as the Down’s Association, Habitat for Humanity, United Way and Junior Achievement, with suggestions for this often coming from the employees themselves. They also have a program in which an employee can take a two-month leave to volunteer full-time for a charity, as well as a program that offers financial awards up to $50,000 to worthy causes suggested by members who apply for this. Moriarty recently received a $1,000 award on behalf of Catholic Worker House. She noted that Wells Fargo gives away $266,000 a day in corporate contributions throughout their footprint, helping more than 14,000 nonprofits last year overall.

Regarding compliance, she explained banks are regulated by the Community Reinvestment Act (CRA), established in 1977 in response to “redlining,” a practice in which banks were catering only to affluent parts of town. Financial institutions are regularly graded on their compliance with the CRA, with 50 percent of their grade based on their lending and 90 per cent of that based on mortgage lending. Lending to low and moderate income individuals is stressed.

Investment in the community through corporate contributions is another 25 percent of the grade and the final 25 percent is on employee volunteerism, including leadership in the community. This means what employees are doing as corporate citizens to find solutions to community problems, such as the high drop-out rate in San Antonio. The CRA bank exam is the only examination open to public inspection, Moriarty noted.

She pointed out that Wells Fargo was recently able to merge with Wachovia because of Wells Fargo’s responsible management practices, requiring no “bail-out” money themselves. “Over the long term, if you operate in a socially responsible manner, you are going to survive,” she said. “And that’s what we’ve done at Wells Fargo.”

“Remember what my grandmother said,” she said in conclusion. “‘You take yourself with you wherever you go.’ What are the values that you have and how will you live up to those values in your career? And how do you choose who you are going to work for and who you are going to associate with in the life that you lead?”