The Case for Active Goodness

By  Ric Rhinehart

It was in 2000 that Google employees Paul Buchheit and Amit Patel first wrote a phrase on a conference room whiteboard, three little words that would become the unofficial statement of corporate values for the company: “Don’t Be Evil.”

The phrase, akin to the medical version of “First, do no harm,” was initially a plea to the cadre of newly hired “business types” who were gaining prominence at the rapidly growing firm, where the culture had been largely driven by quirky engineers and programmers. Eventually, Google endorsed this phrase as the most memorable and succinct expression of the company’s values when filing their IPO in 2004.

While “don’t be evil,” is an admirable goal and an easily embraceable value statement, the question arises of whether it is adequate. Is it enough to simply not “be evil?” Don’t humans and the companies they run have a more active role to play in doing good?

Philosophers and ethicists have wrestled with the concept of corporate morality for several centuries now, with John Locke and Adam Smith weighing in at the very birth of modern capitalism. The general operating principle that emerged for corporate ethics was that as long as companies broke no laws, they were meeting their obligations to the public. By the later part of the 20th century, however, concepts of corporate social responsibility and business philanthropy were hotly debated in academic circles and, in turn, spilled out into the market place. Free-market giant Milton Friedman decried any notion of corporate responsibility beyond the narrow idea that businesses are responsible solely to maximize profits:

“The view has been gaining widespread acceptance that corporate officials…have a social responsibility that goes beyond serving the interest of their stockholders…This view shows a fundamental misconception of the character and nature of a free economy. In such an economy, there is one and only one social responsibility of business—to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition, without deception or fraud… Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.”(1)

The broader view of business ethicists and economists in recent years has been that corporations have an obligation not only to their shareholders, but to all of their stakeholders, including employees, vendors, customers, and the residents of the communities in which they engage in business. When surveyed, most Americans believe that a corporation’s top obligation is to its employees, while a scant 17 percent believe that stockholders have the highest priority.(2)

Today, rather than questioning whether corporations have any social responsibility, thought leaders are debating the extent to which businesses must meet moral obligations in addition to legal obligations.

In most of the developed world, corporations exist as legal entities in much the same way that people do. For example, they are subject to civil suit, protected by law, and can enter into contracts. Likewise, they are subject to the law and punished for violations.. Still, as much as they enjoy the legal rights and obligations accorded to people, corporations are legal constructs, not individuals. They cannot feel shamed, cannot be imprisoned, cannot be inspired, nor can they contemplate their actions. Of course, it is people—with their capacity for all of these emotions and activities—who manage corporations. It is here the legal argument encounters an interesting twist.

For much of capitalism’s history, corporate managers were regarded as leaders with an obligation to the company, employees, community, and shareholders alike. It has only been within the last 50 years that CEOs have been seen as obligated both legally and ethically to maximize shareholder value. This shift in thinking has created an ethical tension for corporate big wigs, one that was further complicated by the explosion of greed in the 1980s that led to enormous stock option payouts and other incentives. These innovations moved the traditional CEO from “highest ranking employee” to an extraordinarily wealthy shareholder and peer to the directors, further muddying the waters, as self-interest can easily trump all other concerns.

The end of the 20th century was a time of massive upheaval on the corporate landscape as we saw CEOs imprisoned for fraud, increased exposure of insider trading scandals, and the beginning of the end for the corporate raiders of the decade prior. The death knell reverberated through Wall Street as leveraged buyouts collapsed, wiping out billions of dollars in shareholder value. The resulting scandals and meltdowns (Enron and Citicorp spring to mind) created a public sentiment of extreme distrust. As a result, companies now face a generation of consumers who distrust brands, multinational corporations, and the traditional media. Young consumers in particular distrust business. According to the surveys conducted in 2007 and 2008 by BBB/Gallup (The Gallup Organization, 2008), nearly half of all adults surveyed claim to have marginal trust, at best, in businesses. Moreover, 85 percent of young people say that not only do companies have a responsibility to support social causes, but that they as consumers will switch brands based on social issues. As a result, there has been a dramatic rise in formalized programs of corporate social responsibility.(3)

The reaction of the corporate world to the combination of distrust and demand for more finely honed corporate participation in social issues has had an interesting result in the US. According to the 2011 report from the Indiana University Center on Philanthropy, corporate giving rose an estimated 10.6 percent in 2010. Of the nearly $300 billion donated to charitable causes by Americans, some $15.9 billion came from corporations; in 1980 that figure was just $2.25 billion ($5.59 billion in inflation-adjusted dollars). Clearly, corporations feel pressure to change their images and meet the market demand for commitment to social causes. Considered in this light, the rather passive position taken by Google hardly seems adequate.

A recent article in an Arizona business magazine was devoted to the rise of both corporate generosity and employee volunteerism. More and more, Americans are volunteering in their communities through programs endorsed or sponsored by their employers. Nearly 20 percent of recent college graduates indicated that an active corporate social responsibility program was a key factor in job selection. One might make the case that active volunteerism has become a replacement for cash-giving in the current strained economy., However, the Center on Philanthropy has found that, despite the dramatic downturn in 2008, individual giving is on the rise everywhere, except in the religious purposes arena, where it enjoyed a meager 0.8 percent growth in 2010.

So how do the “Friedman Purists” respond to all of this activity? Many say that this is simply a manifestation of good managers doing what is necessary to promote their businesses, no different than an advertising campaign or trimming long-term benefits. The less cynical are arriving at a very different set of conclusions. First, it may be argued that while it is good business to be active in community causes, there is, for the first time, a real sense of how small the global community is. Charitable giving to global causes is at an all-time high, and is the fastest growing segment of the American philanthropic landscape. This is largely thanks to corporate leaders, from supply chain managers to CEOs, recognizing that everyone is intertwined socially, politically and financially. With an ever-increasing world population, the strain of the planet to support seven billion living humans is showing more frequently. Leaders like Unilever CEO Paul Polman are committing their companies to thoughtful, engaged participation in improving the lives of people around the world who farm and process raw materials that go into Unilever’s consumer products. The best, like Polman, have shifted their thinking from reacting to changing market conditions to proactively investing in the lives and communities of suppliers around the world.

Second, while many admire the message that Google embraced in their three-word value statement, even the most ardent capitalists are pursuing more active engagement for its own sake. (For a fascinating dialog between the late Milton Friedman and self-proclaimed Libertarian stalwart John Mackey, check out the article from the October 2005 issue of Reason.)4 From relatively small local businesses to multinational giants, corporations around the world are responding to a call from consumers, workers and top management to take a broader look at their responsibilities to the world beyond the shareholders.

Finally, academics, ethicists and legal scholars are starting to challenge the notion that corporations have the right to enjoy the protections afforded an individual, while not being exposed to the same incentives and deterrents that people face. This line of thinking has a real chance of gaining traction in a post-financial-market-meltdown era, where individuals have been saddled with the responsibility of long-term national debt incurred in corporate bailouts. Meanwhile, corporations are guilty in the courts of Public Opinion, with each passing day revealing 100 Newscorps to every one Google. If businesses fail to embrace meaningful ethical behavior, or fail to actively engage as upright “citizens” with the larger world, they may find themselves punished not only by consumers, but by the law.

While our industry has long viewed itself as a leader in corporate social responsibility, as well as active volunteerism, this is no time to rest on our laurels. We cannot ignore the fact that smallholder farmers continue to struggle to feed themselves and their families, and many face cyclical hunger between coffee crops. The Common Fund for Commodities estimates the total value of coffee worldwide at nearly $120 billion, with only $16 billion of that making its way into the hands of producers. If we are not actively trying to create a supply chain where all the actors can thrive, then we run the danger of simply doing no evil.

Ric Rhinehart is the executive director of the Specialty Coffee Association of America. He has more than 20 years of experience in the coffee industry, and has designed, developed and produced a wide range of coffee and tea products. He has considerable experience in developing manufacturing and packaging capabilities, and has traveled extensively as a green coffee buyer.

(1) Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1962), 133
(2) “Work Week,” Wall Street Journal, May 21, 1996, A1
(3) “The Corporate Givers,” Business Week, November 29, 2004, 102–103
(4) “Rethinking the Social Responsibility of Business,” Reason Magazine, October 2005, 38–43