HOW WAL-MART AND OTHER LARGE CORPORATIONS PICK AND CHOOSE WHEN TO BEHAVE
For the past 52 years, Fortune magazine has been publishing a list of the largest
U.S. corporations, an annual chance for chief executives to brag that “my
revenue is bigger than yours.” For the past seven years, Business Ethics
magazine has issued another kind of ranking—a list of what it calls the
“100 Best Corporate Citizens”—that promotes virtue over size
in the perennial game of corporate comparisons.
The Business Ethics list, the 2006 version of which appeared recently, has
become a leading scorecard in the field of corporate social responsibility,
or CSR (increasingly used as an abbreviation for corporate sustainability and
responsibility). CSR has evolved from a rallying cry of business critics to
a fashionable concern among corporate executives eager to demonstrate that high-mindedness
can co-exist with the pursuit of profit. Many of the companies cited by Business
Ethics consider it a badge of honor, putting out press releases touting this
Yet when one looks at the companies on the Business Ethics list, it is easy
to be baffled at the real meaning of CSR. Some of the firms may have done laudable
things, but the list is riddled with companies that have significant blemishes
on their record when it comes to environmental matters, labor practices or treatment
of customers. The likes of Wal-Mart and Big Oil have not yet made the cut, but
that may be only a matter of time.
NOT SO CLEAN
Business Ethics compiles its list using data on corporate social performance
in eight categories—community, diversity, employee relations, environment,
etc.—from the Socrates database produced by KLD Research & Analytics.
That information is then processed quantitatively using methodology developed
by Sandra Waddock and Samuel Graves of the Carroll School of Management at Boston
College. Unfortunately, the magazine says nothing about that methodology, so
the reader is confronted with a statistical black box. An article accompanying
the list provides scanty details. Thus, one must essentially take the rankings
at face value.
The first thing that stands out is that the list is top heavy with high-tech
firms, including Hewlett-Packard (No. 2), Advanced Micro Devices (No. 3), Motorola
(No. 4), Cisco Systems (No. 8), Dell Inc. (No. 9), Texas Instruments (No. 10),
and Intel (No. 11). The magazine says this is, in part, because “most
top tech companies do well on environmental issues.” That claim would
come as a surprise to groups such as the Silicon Valley Toxics Coalition (SVTC),
which has for years been pointing out that high-tech industry is far dirtier
than its clean image. The electronics industry is a heavy user of toxic chemicals,
which have a way of seeping out into the environment, resulting in a proliferation
of Superfund toxic waste sites in places such as Silicon Valley.
In recent years, SVTC has also been looking at another environmental problem
caused by high tech: the growing volume of e-waste generated when obsolete computers
and other devices—with toxic material inside—are thrown away. SVTC’s
Computer Take Back Campaign has been pressuring the major tech companies to
take responsibility for recycling. While Dell and Hewlett-Packard have responded
positively to the pressure, the campaign faults companies such as Apple (No.
25 on the Business Ethics list) for resisting.
Also difficult to accept is the other reason given by Business Ethics for the
prevalence of tech firms at the top of the list: high scores on employee relations,
including workplace health and safety. The same toxic chemicals that pollute
communities around electronics plants have taken a toll on the health of workers
inside the plants. For instance, in 2004, IBM (No. 41 on the Business Ethics
list) paid an undisclosed amount to settle lawsuits brought by about 50 current
and former workers who were suffering from cancer that they attributed to workplace
As for the aspect of employee relations relating to unions, Business Ethics
fails to mention that the high-tech firms on its list are all largely unacquainted
with collective bargaining. The electronics industry has resisted unionization
of its domestic workforce for decades. A Wall Street Journal reporter once took
a job incognito at a Texas Instruments plant and found workers there so intimidated
that they panicked at the mere mention of unions. At the same time, these same
companies have not hesitated to move much of their production to foreign sweatshops.
In recent years, the industry has also been moving high-level technical, research
and design functions abroad to low-wage havens such as India—much to the
detriment of U.S. workers. IBM, now focused on computer services rather than
hardware, has increased the size of its Indian workforce to 43,000. Any owner
of a Dell computer knows that a call to tech support is likely to be answered
by someone sitting in Bangalore.
TAKING TAX BREAKS
U.S. high-tech companies are not offshoring everything, but when they build
new domestic operations they often engage in another practice that should raise
questions in the minds of the ethics monitors: extorting tax breaks and other
subsidies from state and local governments. Recently, the Albany Times-Union
reported that New York State officials may be preparing a subsidy package worth
$1 billion to persuade Advanced Micro Devices to build a new chip fabrication
plant in Saratoga County.
This would be the latest in a long series of generous “incentives”
that semiconductor and computer producers have taken from governments across
the country. In 2004 Dell got a package worth up to $267 million when it agreed
to locate a new assembly plant in Winston-Salem, North Carolina. The deal, which
is being challenged in a lawsuit brought by the North Carolina Institute for
Constitutional Law, mirrored a package Dell received in 1999 in connection with
the construction of a plant in Nashville. When the city of Austin, Texas turned
down Dell’s demand for long-term property tax breaks, the company moved
its headquarters to the suburb of Round Rock, which agreed to 20 years of abatements.
Intel has avoided hundreds of millions of dollars in local taxes on its facilities
in New Mexico, Arizona and Oregon by using complex financing schemes involving
industrial revenue bonds as well as straightforward abatements and exemptions.
All these subsidies weaken the fiscal condition of local governments, making
it harder for them to pay for services such as education and public safety.
SHARKS AND PREDATORS
High-tech is not the only industry that accounts for some questionable entries
on the Business Ethics list. Take financial services. Wells Fargo & Co.
(No. 16) scores high on workplace diversity, but it has been accused of mistreating
its poorer customers—many of whom are people of color. For the past several
years, Wells has been the target of a campaign by the community-organizing network
ACORN over its predatory lending practices. ACORN charges Wells with a slew
of abusive practices, such as charging higher interest rates than a borrower’s
credit warrants and imposing excessive mortgage origination fees. This spring,
for the third year in a row, ACORN activists—including some carrying inflatable
sharks—demonstrated outside the Wells Fargo annual meeting. Also protesting
were supporters of Rainforest Action Network (RAN), which has charged the bank
with financing environmentally destructive infrastructure projects in developing
RAN’s Global Finance Campaign has succeeded in getting Citigroup Inc.,
No. 62 on the Business Ethics list, to adopt guidelines that promote more environmentally
responsible projects, but the financial giant is still widely criticized for
the predatory lending practices of its subsidiary Associates First Capital.
More surprising is the appearance of Freddie Mac, No.38 on the list. The mortgage
finance entity has been embroiled in a major accounting scandal. In April it
agreed to pay $3.8 million to settle charges relating to illegal campaign contributions.
Many other examples of companies with ethical lapses can be found on this list
of supposedly exemplary corporate citizens. Johnson & Johnson (No. 12) refuses
to join the 300 other companies that have signed the Campaign for Safe Cosmetics
pledge not to use toxic ingredients. NIKE Inc. (No. 13) has adopted some reforms
in response to years of criticism over labor practices at its overseas suppliers,
but activist groups continue to cite abuses. General Mills (No. 14) sells food
products with unlabeled genetically modified ingredients.
A question can even be raised about the company at the very top of the Business
Ethics list: Green Mountain Coffee Roasters. The company seems to have a strong
commitment to CSR, but one of its main customers is Exxon Mobil, which sells
Green Mountain coffee at many of its service stations.
NO COMPANY IS PERFECT, ESPECIALLY WAL-MART
The fact that the corporation dubbed most ethical does a great deal of business
with a company that is widely seen as one of the least ethical—along with
the many mixed track records described above—puts into question the legitimacy
of the concept of CSR.
Wait, you may say—no company is perfect. Maybe so, but should we be honoring
some of those rather imperfect entities as “the best corporate citizens?”
We certainly don’t use such limited standards when it comes to real citizens.
Do we honor embezzlers because they recycle their newspapers? Do we overlook
child abuse because the parent contributes to the United Way? People are expected
to follow all laws and ethical norms—not only those that are convenient
to obey. Why not apply the same standard to corporations?
Which brings us to Wal-Mart. Having been subjected to probably more criticism
than any other single company (including two national pressure campaigns devoted
exclusively to it), Wal-Mart is now changing its stripes—or at least some
of them. Last fall, the company announced a sweeping set of voluntary environmental
measures that are supposed to sharply decrease its energy consumption, reduce
its waste production and expand its recycling efforts. The giant retailer also
said it would pressure its suppliers to adopt greener practices. More recently,
there have been reports that Wal-Mart is making a big push into organic food
products, sustainably fished salmon and fair trade coffee.
What the company has not announced are any significant changes in its labor
practices. Wal-Mart remains adamantly anti-union and continues to offer low
pay and limited benefits. It strongly opposes living wage initiatives. The fact
that nearly half the children of its U.S. employees are uninsured or have to
get coverage from taxpayer-funded programs is not likely to change any time
soon. There is no evidence as yet that the company has eradicated the tendency
of store managers to force employees to perform extra work off the clock. Slick
TV ads notwithstanding, it remains to be seen whether Wal-Mart has significantly
addressed charges of sex and race discrimination in its domestic workplaces.
Given the company’s obsession with cutting costs, there is every reason
to believe that sweatshop conditions will persist in the factories of its foreign
RESISTING CORPORATE GREEN HYPE
The divergence between Wal-Mart’s environmental reforms (assuming they
turn out to be more than greenwash) and its retrograde labor policies symbolizes
the selective business ethics that prevail today.
Like Wal-Mart, much of Corporate America claims to be going green. Sometimes
this is the result of pressure, such as RAN’s successful campaigns against
firms such as Home Depot, Citigroup and Goldman Sachs. Sometimes it is for public
relations purposes, such as General Electric’s “eco-imagination”
ad blitz that came after years of resisting responsibility for cleaning up PCBs
in the Hudson River. And sometimes it is because companies have decided they
can make money selling alternative products or technologies, such as Toyota’s
promotion of hybrids. While some executives may claim to be following their
conscience, the fact is that corporate environmentalism today is deemed good
The same cannot be said about enlightened employment practices. Most big companies
still hold down wages, restrict medical coverage, downgrade retirement benefits,
pay inadequate attention to workplace health and safety, engage in downsizing
and offshoring, and, of course—fight unionization or demand concessions
from unions already in place. Chief executives at firms such as Wal-Mart claim
they cannot afford to make major improvements in working conditions—even
if they will result in higher productivity—yet they are now willing to
spend heavily on environmental change.
It may take a major resurgence in the labor movement to get big business to
give the same priority to workplace reforms that it now accords to environmental
matters. In the meantime, we shouldn’t get too carried away with the corporate
green hype. And we certainly shouldn’t be giving good citizenship awards
to companies that view ethics as a menu from which to choose only that which
is most palatable.
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