Social responsibility of Company: What does it really mean?
January 17, 2019, is the 20 years’ anniversary since Bill Gate and Melinda Gate first started their donation to the four big public health organisations. On the 23rd, Bill Gate told CNBC in Davos that during the past 20 years, the Bill and Melinda Gate foundation has in total donated more than 10 Billion US dollars to these organisations (Gavi, The Global Polio Eradication Initiative, The Global and the Global Financing Facility) and these donations have received a superb return of 20: 1 in terms of social economics benefits, which is so much higher than 170% return of the S&P 500 index. The donation has made it possible for the initiation and completion of numerous researches and medical aids which mainly focused on infectious diseases and Children health improvements and the result is not only successful but also quantifiable: The mortality rate of babies under 5 years has decreased by more than 50% since 1990 and the number of death caused by infectious diseases like HIV, malaria and measles almost decline 100% in poor countries. Bill Gates expressed in the interview with CNBC that this is the best investment he has ever made and he will continue to support the funding into these organisations.[i][ii][iii]
After reading this report from CNBC, many questions came into my mind which also reminded me about the reading (Debate: Rethinking the Social Responsibility of Business[iv]) that I did a few days ago. In my opinion, the reason why this debate is so hard to come to a one-sided conclusion is because that both sides on this topic are actually correct: they are just looking at it in different ways, and I believe that from the case of Bill Gates, more relevant insights can be gained which will consequently make the problem become clearer to us. In this paper, I will look at the case from both sides, explain my understanding of why certain things happen and certain things do not, and what is the role of corporations in society.
One of the first thing I would like to talk about is that as one of the most classic and representative examples of philanthropy in the business world, Bill Gates’ donation has actually nothing to do with the corporation: Microsoft that he founded 43 years ago, except that Microsoft is the major way he acquired his personal wealth. In my opinion, this is the most efficient way and also the most rational way for either the corporation as a legal person or the entrepreneur as a real person to give back to society.
John Mackey is definitely right about the needs of human: profit and money is not everything. In fact, the desire for love, esteem and self-actualisation are proposed to be the higher level of individual needs by the famous psychologist Maslow in his paper “A Theory of Human Motivation”. This theory justifies all the individual behaviours from a common working class citizen giving away changes to the homeless to billionaires making big donations to NGOs, however, it could not justify any corporation philanthropies, as the hierarchy of needs does not fit for a legal person without any self-awareness like a company in the first place. Bill Gates and Melinda Gates understand this when they decided to create a separate entity: a foundation, while at the meantime allows Microsoft as a for-profit organisation to be able to focus on its own needs: Maximizing profits and survive. Actually, not making Microsoft a “Hybrid Business/Charity” is not only beneficial for the company its self but also beneficial for the society in the long run as well.
Being efficient is the best way for society, as a whole, to aggregate the most wealth, and a society can only be efficient and sustainable when the motivation for creating and working is in line with the needs of individuals that form the society. Corporations fit perfectly in this role as they constantly searching for the best way to do things as efficient as possible in order to maximize its profits in the long run. Corporations help the society in its own way by providing unique and high-quality product or services to meet the public and decrease the unemployment rate. Anything that can directly or indirectly facilitate this function of corporations should be in line with the ultimate wellbeing of the society and thus should be advocated. Letting the corporations to focus on what they do best so that they can survive and do better is the priority among all of them.
Although the principle of maximizing profits itself is in line with the well being of the society, it does not mean that corporations should not engage in philanthropies directly. Direct donations can sometimes be very important for the long term benefits of a company and John Mackey obviously knows that. He is a much better entrepreneur than either Milton Friedman or T.J. Rodgers from the marketing point of view. As he pointed out himself, his philanthropic policies have acted perfectly as a way of marketing and consequently increased the firm’s value, not to mention the possible tax benefits from these donations. The way he interprets the corporation behaviour and social responsibility of Whole Food is actually the best way of branding its company, or, like what Mackey said, the best way to explain capitalism, to those who does not really understand the nature of the free market system and the important role of corporation in modern capitalism.
The world would not be as wonderful as it is without the generosity of Bill and Melinda Gates but would be even worse without Microsoft. The decision of letting Microsoft focuses on its own business is not only a responsible move for its shareholders but also a responsible move for its stakeholders and the society as well. Giving back to the community as individuals and non-profit organisations, and let for-profit corporations to do their best to maximize profits and contribute to the society in its own and most efficient way.
[i] https://www.cnbc.com/2019/01/23/bill-gates-turns-10-billion-into-200-billion-worth-of-economic-benefit.html
[ii] https://qz.com/1526049/the-gates-foundation-has-given-nearly-10-billion-to-these-four-organizations/
[iii] http://www.xinhuanet.com/english/2019-01/17/c_137752526.htm
[iv] http://reason.com/archives/2005/10/01/rethinking-the-social-responsi
