Getting Smart at Being Good…Are Companies Better Off for It?

 Getting Smart at Being Good...Are Companies Better Off for It?
T.J. Rodgers may be many things–tough taskmaster, Green Bay Packers fan–but reticent he is not. And if anything gets the pugnacious founder and CEO of Cypress Semiconductor talking, it’s the notion that corporations ought to exist for more than the pursuit of profit. In the simplest terms, that idea–called corporate social responsibility, or CSR–invites companies to consider their impact on people and the planet on a par with their traditional quest for profit. Rodgers considers that bunk. Not that he opposes conscientious corporate conduct or occasional acts of charity. He’s quick to point out that he and his company do quite a bit of both. “What I do criticize,” he grumbles, “is the preachy and somewhat arrogant framework of philosophy that says, In order to be a good company, thou shalt do the following.” Rodgers isn’t just being curmudgeonly. He and other critics believe that shareholders entrust managers with their investment solely to maximize long-term returns, not so those managers can use the proceeds to underwrite their urge to better the world. It is unclear how many of America’s CEOs silently sympathize with Rodgers’ views. But a large and rapidly growing number are neck deep in CSR initiatives, spending billions, tackling everything from AIDS in Africa to deforestation in Brazil. If anyone doubted that CSR has finally come of age in the U.S., they were probably set straight in October when Wal-Mart, the world’s leading corporate bad guy in the eyes of a staggering range of social activists, claimed it had caught the bug. The $288 billion behemoth announced it would slash solid waste and greenhouse-gas emissions, invest $500 million a year in energy efficiency and offer better medical benefits to its 1.2 million U.S. employees. “We are going to do well by doing good,” said CEO Lee Scott. The jury may be out on Wal-Mart’s motives, but the apparent conversion of such a bare-knuckled competitor raises a question: Could CSR be smart business? Are critics like Rodgers missing something? Rodgers has contributed significantly to the debate over the past decade, most recently when he was invited, with Nobel laureate Milton Friedman, to debate CSR with Whole Foods Market CEO John Mackey in the October issue of Reason magazine. Rodgers assailed the CSR-imbued philosophy that guides Whole Foods, calling it similar to those of Karl Marx and Ralph Nader. Mackey, an avowed libertarian, replied that his approach has brought a lot more wealth for Whole Foods’ investors than the one embraced at Cypress, which, he noted, has struggled to be profitable. Indeed, though Cypress made a small profit in 2004, it booked losses in the three previous years. It’s hard to dismiss Mackey. He opened a shop in 1978 with a former girlfriend and $45,000 in capital and nurtured it into a FORTUNE 500 business that boasts 180 stores in North America and Britain. Its stock has soared from $4 to $145 in little more than a decade, and its sales of often pricey organic and ethically produced groceries pulled in $4.7 billion in its last fiscal year. All those profits, yet the company measures its performance by the value it creates for six stakeholders: its customers, its employees, its investors, its vendors, communities where it operates and the environments those operations affect. “The art of leadership,” says Mackey, “is to balance different constituencies and try to create value for all.”