Last week, in a guest blog post at the Faculty Lounge, I suggested that corporate America has been behaving rather strangely recently. Oil companies have been touting investments in wind technology. Investment firms have been urging caution. Agriculture behemoths have been talking about conserving earth’s precious resources. And clothing companies, known for trading on sex, youth, and hipness, have been focusing their advertisements on the benefits that they provide to their workers.
In the post (part of which I excerpt below) I considered whether this recent shift might reference a genuine change in corporate culture or if it might just be the latest marketing fad (comparable, in certain respect, to playing up swine flu fears to sell hygiene-related products).
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Over the course of this term, I’ve encouraged students in my Business Organizations class to consider whether, in the wake of the current economic disaster, the role of corporations might be reconceptualized. As we’ve discussed the history of shareholder primacy, stakeholder statutes, fiduciary duties, director incentives, and the like, I’ve pushed the class to think about whether we are on the cusp of change.
What, if anything, are we to make of business school deans, like Yale’s Sharon M. Oster, arguing recently for a new emphasis on social commitment in B-schools and indicting the blind pursuit of profit? How should we view Treasury Secretary Timothy Geithner asserting that the financial industry needs “[n]ot modest repairs at the margin, but new rules of the game”? Are we perhaps entering a new era in which corporations will forsake profit in favor of good works—or, at least, only seek to profit from doing good?
Certain corporate managers—like Timberland CEO Jeffrey Schwartz—have been publicly embracing a compatible vision for a number of years (according to the company website, the Timberland “mission is to equip people to make a difference in their world. We do this by creating outstanding products and by trying to make a difference in the communities where we live and work.”). John Mackey, the CEO of Whole Foods, has gone as far as to state that
[l]ong-term profits are maximized by not making them the primary goal. A business is best not thought of as a machine with various factors of production working in tandem to maximize profits. A business model more in touch with our complex, post-modern, information-rich world is a complex self-adaptive system of interdependent constituencies. Management’s role is to optimize the health and value of the entire complex, evolving, and self-adaptive system.
Has the recent recession and resulting public outrage caused other companies to change their practices? It’s hard to tell, but they do appear to have changed their tune. Flipping through the New York Times yesterday morning as I waited for copies of my exam to print, I was struck by a particularly revealing full-page Starbucks advertisement—and it wasn’t solely because the somniferous drone of the copier left me in dire need of a little caffeine.
What is Starbucks selling?
Well, “[i]t’s not just coffee.”
Coffee, Hummers, diamond-encrusted purses, alligator cowboy boots . . . Those things are so 2007! Americans aren’t into blind consumerism anymore. People are no longer satisfied feeding on a never ending buffet of disposable products and easy comforts. Starbucks understands: “It’s not just what you are buying. It’s what you are buying into.”
And what is that exactly?
“[A] coffee ethic.”
As the advertisement explains, Starbucks “ensur[es] that the farmers who grow . . . [coffee] beans receive a fair price for their hard work” and that employees “receive full healthcare coverage.” Even the beans are taken care of—“nurtured from farm to cup under our watchful eye.”
And who is the final stakeholder?
It’s you, the valued consumer. The profit from your Frappuccino isn’t going to enrich some fat-cat Wall Street type; no, Starbucks is going to use it to better serve your needs: “[A] little bit of the price of a cup of Starbucks coffee helps furnish the place with comfy chairs, good music, and the right atmosphere to dream, work and chat in. We all need a place like that these days.”
One might be skeptical of the company’s motivation in all of this, were it not for the reassurance in the ad itself: “We continue to do this, even in hard times, because it’s the right thing to do.”
You know, I’d really, truly love to believe that. It’s just that the friends and colleagues of Mr. Starbucks have a long history of playing up their commitments to their customers and the broader community for the sole reason that doing so helps them sell more products. Could this time be different? Could the new wave of advertisements reference a real shift in corporate behavior—a genuine and lasting response to public concerns? Maybe.
But maybe it’s just the best way to get nervous consumers to open their pocketbooks in a sick economy.