Imagine a world in which corporations battled not to shave an extra half cent off the cost of every product, but to win the hearts and minds of customers by using their profits to make real societal change. A world where wins were judged on reputations for good. A world in which corporate executives didn't have to be tied down by laws that force them to put shareholder returns ahead of the world in which we live.
Socialism? Perhaps, but Henry Ford was once accused of same when he stated that he would pay Ford (
NYSE:F,
Forum) employees $5 per day, far more than his competitors, because, if his staff couldn’t afford to buy his products, he reasoned it would be bad for business.
Of course, Ford was actually an A-grade douchebag, and more than took that extra money back by working his people into an early grave, having them beaten and whipped if they dared to try to organize, and hitting them with ever-increasing production goals that bordered on third world standards.
But that $5 per day became the thing that multitudes remembered him for, and which put him forward as an American corporate icon.
More recently, American corporate icons are judged by the wealth they accumulate rather than what they do with it, but that might just be changing.
A scan of the news today shows some fairly repugnant behavior from our corporate overlords, but also a real burst of those same corporate stooges being increasingly held accountable for their actions.
Last week saw the likelihood that some $18 billion will come off Volkswagen’s (
OTO:VLKAF,
Forum) bottom line when it was caught gaming emission standards across North America for several years. Mexico is talking about another $7 billion there. That has all resulted in the CEO being walked off the plank, and investigations popping up across the world by outraged legislators and regulators and, likely soon, consumers.
The potential benefit for Volkswagen by going the fraudulent route appears to be minimal; a little extra power from their engines in return for a 40x betrayal of emission standards and likely $30k+ fines for every car sold? Bad business, for sure.
Likewise GM (
NYSE:GM,
Forum), taking a $900 million fine to settle its ignition probe switch scandal and avoid criminal charges for ‘wire fraud and scheming to conceal material facts from a government regulator.’ Sure, 124 people died while GM stayed quiet, but hey, business.
They car companies are not alone. Today in Virginia, Lumber Liquidators (
NYSE:LL,
Forum) said it would pay $10 million in fines and admit to five violations of environmental law (including pleading guilty to a felony) over a federal investigation that alleged the company illegally imported wood products from places it shouldn’t.
According to a report in Canadian Press, “The Justice Department says the wood came from Russia and Myanmar, and that illegal logging in Eastern Russia threatens the habitat of wild Siberian tigers. It also says Lumber Liquidators Holdings Inc. tried to cover up the origin of the lumber.”
Lumber Liquidators needs that investigation like a hole in the head, being as it is also dealing with laminate flooring from China that contains the carcinogen formaldehyde.
Abbott Pharmaceuticals (
NYSE:ABT.W,
Forum) was fines $1.5 billion in 2012 for paying nursing homes to prescribe one of their medications to dementia patients, despite it not being an approved use. One of the pharmacy companies it was sending kickbacks to, today, was fined $9.25 million for their part in the scheme. There will be more.
Skypan, a Chicago-based aerial video company, was fined $1.9 million today for 65 illegal drone flights over New York City and other cities for nine months of 2012. As far as corporate crimes go, that’s not the worst, but people in New York get a little jumpy about their air space being invaded, and for good reason..
TD Waterhouse was fined a relatively small $10,000 today for preventing a widow from gaining access to her dead husband’s money, while Bristol-Myers Squibb (
NYSE:BMY,
Forum) was hit with $14m in fines for bribing Chinese hospitals with cash, jewelry, meals and ‘entertainment’ to prescribe their products to patients, and Carillion Canada (
OTO:CIOIF,
Forum) was fined $900k for not doing its job in clearing Ontario highways from snow. At the same time, in West Virginia, a judge has set aside $2 million of Freedom Industries’ money to cover the cost of a chemical spill that made local water undrinkable.
Even the world of fantasy sports has seen a dark side emerge. FanDuel and DraftKings, the two big fantasy sports gaming sites in North America, which rake in millions of dollars, had their own catastrophe when an employee of DraftKings won $350,000 in one of their pools while potentially having early access to roster data.
FanDuel is hiring Michael Garcia, famous as the lawyer who resigned from the FIFA ethics committee when it mishandled his findings of corruption, to join an ‘advisory board’ to help them get to the bottom of the drama, and prevent future drama. New York’s attorney general is investigating, and the scandal may see fantasy sports dragged into the regulatory arena, something that would cost the industry dearly.
Interesting timing that a competitor, Canadian-listed Fantasy Aces (
TSXV:FAS,
Forum), has chosen now to make a concerted run at the big guys, raising $3.8m in finances as it begins its run.
Somewhat deliciously, DraftKings’ spokeswoman was Justine Sacco, a former communications exec who became the subject of internet wide scorn when, just before getting on a plane to South Africa a few years back, tweeted that she wasn’t afraid of getting AIDS there, “because I’m white.”
The hashtag
#HasJustineLandedYet went viral while she was unaware of it all, enjoying her long range flight, only to learn when she touched down that she was fired, a global punchline, and famous for being a dick.
Heck, it even appears FIFA boss and entrenched corruption magnet Sepp Blatter may finally be walked, as a FIFA investigative committee meets to decide his fate.
Monsanto (
NYSE:MON,
Forum), which is almost impossible to type without adding the word ‘evil’ before the title, is losing big money right now and booting around 12% of its workforce because, weird! People are buying less and less of their ‘round-up ready’ seeds, which resist herbicides, but also tend to lose nutrition and are illegal to take seed from. Monsanto has famously sued farmers that aren’t customers for theft, when seeds have blown over the fence and taken root in their fields.
Monsanto also
likes growth hormones in milk, even if it might cause cancer or leave the cows with weeping pus sores. It is, quite simply, one of the most hated companies on the planet. So weird, then, that their sales would drop..
Fast food chain A&W (
TSX:AW.UN,
Forum) made the decision to stop using chicken products with antibiotics some time ago, and it hasn’t hurt them at all, even as the industry at large has struggled to keep up with demand.
“Canadian poultry farmers have been excellent partners with us, and so as consumer demand rises, I think the Canadian industry will absolutely be able to meet that demand,” said A&W CEO Susan Senecal in a recent interview.
A&W is the second largest hamburger restaurant chain in Canada, and their shift into the anti-antibiotic space brought a hefty increase in demand for the product.
Being a dick has become a fairly commonplace occurrence in many well-to-do parts of the world, where successful people see their success as something that inspires others, and which should be celebrated by all.
Consider the $20m donation offered to Paul Smith’s College by a former CEO of Citigroup (
NYSE:C,
Forum) – but only if the school agreed to change its name to Joan Weill-Paul Smith’s College, adding his wife’s moniker to the founder of the actual school.
A group of alumni objected, petitioned the courts, and won out in confirming the will of the college’s founder prohibited such an action, but why even ask for it in the first place? Would a building in her honor be not gauche enough? Maybe an endowment fund in her name? Maybe a scholarship or fifty?
But no, Sanford Weil decided to show his philanthropy by pushing harder than any philanthropist before him, and now his legacy is that of being a a dick with $20 million, a legal bill, and a whole lot of annoyed strangers.
The Canadian markets have more than their share of douchebags at the wheel. Consider the reputation of one biotech CEO, infamous for being unable to keep his hands off Vancouver restaurant servers and/or employees, to the point where his wife routinely fires those she considers targetworthy. Or the mining CEO who brags about the number of hookers he handles at once, and slides his hotel room key across the table to female journalists, only to throw out a ‘just kidding’ when they’re grossed out by the offer. You know who you are, lads. Flying close to the sun..
Clearly being a d-bag has its down side. But what about being a noble corporate citizen? Anyone actually making money from that?
Yes and no. Companies like Chipotle (
NYSE:CMG,
Forum) and Whole Foods (
NASDAQ:WFM,
Forum) have been part of a wave of wellness-focused companies that have made giving a crap part of their business plan for several years now, and their growth has not been harmed by the practice. Warby Parker went global quickly with its promise to donate glasses to the poor every time a customer bought a pair for themselves. In June of 2014, it announced it had donated its one millionth pair, which is quite the achievement.
But joining that wave of goodwill is tougher for companies with a legacy of douchebaggery.
Wal-Mart (
NYSE:WMT,
Forum) gave away 421 million lbs of food in 2013, and 4.5% of its pre-tax profits, which went to some 50,000 different charities. That didn’t buy the company much love in the greater world, however, as many of its employees still have to turn to food stamps to survive and the company is infamous for closing down stores rather than allowing workers to unionize. Wal-Mart also used to insure the lives of low end employees (who are much more likely to die early), naming itself as the beneficiary upon their death, a practice known as a ‘dead peasant’ policy. Wal-Mart had $780 million in premiums on its low end employees lives in 2002, when litigation began to shut down the practice.
Competitor Costco (
NASDAQ:COST,
Forum), on the other hand, pays well above minimum wages, offers help to their staff for things like college tuition, boasts a CEO who earns (considerably) less than $1m a year, and maintains an angelic corporate profile among potential customers who give a crap about where their money goes.
Chevron (
NYSE:CVX,
Forum) runs a program that helps schools pay for learning materials, which has been in action for years. That didn’t get it much love in Vancouver last year, when the incumbent mayor (incorrectly) used that program to damn the company for trying to push itself into the curriculum, and rode to victory on a ‘we hate Chevron’ platform that conveniently ignored the deal the city had earlier struck with the company to buy all their gasoline from them for the next several years.
Goldman Sachs (
NYSE:GS,
Forum) gave away $241m in cash in 2011, but will long be remembered as one of the companies that broke Main Street for the benefit of Wall Street. Frankly, if GS cured cancer overnight, there are plenty of cancer victims who would have to think long and hard before accepting their help.
Target (
NYSE:TGT,
Forum) gave away $147m in 2011, but won no fans when it moved to Canada, taking over the venerable Zellers department store chain, laying off existing employees while they renovated stores and forcing them to reapply for their jobs in competition with new applicants, and then proceeded to offer no discount deals to customers worth much of a damn. Losing their customer data to hackers? Not helpful. Within two years, Target left Canada completely.
McDonalds (
NYSE:MCD,
Forum) in Canada has long collected money for their Ronald McDonald House charity, which builds homes at hospitals so families of sick children can be nearby. Nice work, but a recent marketing spree of TV ads designed to ‘remind’ customers that the company does this may have been better served to just be a straight up donation to the cause, and years of artery plugging food are still remembered far more than the ‘healthy options’ now offered and charitable works.
But if your company hasn’t got a legacy of customer and societal abuse, there’s a genuine profit imperative involved in being a good guy, especially in the startup world.
Skyline Socks sells socks with images of a city’s skyline on them, and promises to donate a pair for every pair it sells. It has thus sold a LOT of socks.
Toms, which sells shoes and eyeglasses does the same one-for-one routine, as does
Better World Books, medical scrubs supplier
Figs, bedding seller
The Company Store,
Hand in Hand soaps, and neon school supplies seller
Yoobi, which sends school supplies to classrooms across the US when you buy them online or in Target stores.
2 Degrees sells healthy snack bars and donates a meal to a hungry kid for every two they sell.
Oak sells clothing and gives a backpack to homeless kids for everything they sell.
Twice as Warm gives a product to a shelter for every winter clothing item sold.
Baby Teresa sells baby clothes – same deal. You can even buy a toothbrush online, and thus provide one to a child in need, through
Smile Squared.
Roma Boots donates boots and school supplies.
Good Spread donates peanut butter.
Bogo Bowl donates pet food to shelters.
One World Play Project donates soccer balls.
People Water donates water.
WeWood Watch plants a tree when you buy one of their wooden watches.
Granted, few of these givers are building a corporate giant (though
Warby Parker is worth some $1.2 billion as of last month, and is killing their established competitors in the eyewear business). But they present an interesting option for customers that care to look at who they’re buying from.
When a mega corporation decides to actually change for the better, massive things can happen. If McDonalds, as an example, decided to switch to whole grain buns and offer a veggie burger to its permanent menu, two entire industries would need to overhaul their offerings as a result. As an example, when McDonalds created a burger in Australia a few decades ago that included beets (an Australian burger tradition), they effectively wiped out the nation’s beet supply overnight and had to remove the offering while they sourced alternatives and compelled farmers to grow more the following season.
Suffice to say, less corn and more quinoa would make for an interesting switch in the North American farming space. Less sugar and more protein ditto. Less antibiotic-fed chicken, less Roundup Ready soy, less eggs bleached white, less bananas shoved into chemical-filled shipping containers, less colouring…
Google’s long time internal slogan has been “Don’t be evil.” It’s debatable whether they’re living up to that, but it’s a line that is increasingly less about altruism and more about profit.
Don’t be a dick. Because, increasingly, we’re watching, and we give a crap.
--Chris Parry
https://www.twitter.com/chrisparry