SUSTAINABLE FIRMS. Green businesses. Socially responsible corporations. A growing number of magazines, activist groups and websites publish such lists, suggesting that one can distinguish the good companies from the bad.
The claim that such distinctions are possible is likewise central to ethical mutual funds, indexes and stock rating services that recommend "responsible" investing -- with some even asserting that "better" firms have superior financial performance.
For The Record
Los Angeles Times Thursday February 15, 2007 Home Edition Main News Part A Page 27 Editorial Pages Desk 0 inches; 26 words Type of Material: Correction
Exxon Valdez: An article on Tuesday's Opinion page about corporate responsibility misstated the date of the Exxon Valdez oil spill. It was in 1989, not 1979.
But corporate social responsibility isn't such a clear-cut matter. People are rarely consistent in their ethical behaviors, as numerous psychological studies have shown. An individual can cheat on his spouse and file an honest income tax return, or be a model employee and an irresponsible parent. Andrew Carnegie and John D. Rockefeller were ruthless businessmen yet also generous philanthropists -- a category in which some also place Bill Gates. Interestingly, the work of the Bill & Melinda Gates Foundation -- criticized in The Times recently for "irresponsible" investing -- reflected so well on Microsoft that the company topped the Wall Street Journal's Reputation Quotient survey.
So if it is difficult to judge the overall ethics of an individual, it is certainly more so in the case of complex business organizations. Few firms widely regarded as socially responsible consistently exhibit ethical behaviors, while even the most criticized are not without virtues. The more closely one looks, the harder the determination gets.
Consider, for example, British Petroleum -- long entrenched in the pantheon of corporate responsibility because of its leadership on the issue of global climate change. Yet after a major oil leak last year, it was revealed that BP had not maintained its pipelines in Alaska. Corporate cost-cutting also contributed to a 2005 oil refinery explosion in Texas that resulted in 15 deaths and 180 injuries. How, then, should we rank BP's overall environmental record?
Another icon of corporate responsibility is American Apparel. This firm has been widely praised for manufacturing all of its products in the United States and for the high wages and other benefits it provides employees at its Los Angeles factory. Yet its marketing uses images of women that border on soft pornography, and its founder and chief executive has been repeatedly accused of sexual harassment. On balance, is American Apparel a virtuous firm?
