Corporate socialism?

The pandemic lockdowns brought world economies to their knees. Corporations reeled from the impact of business disruptions on their cash flow and indeed for some, wondered about the viability of their business model.

But worst hit are people who lost jobs and the means to keep their families alive. Our overseas workers are being sent home. Last count I recall, about 300,000 of them, with and without work papers, are back home to resume lives of poverty.

If it were the occasional typhoon or natural calamity, some of our largest corporations will be quick to offer relief assistance. They have budgeted for these disasters under Corporate Social Responsibility. But the pandemic is threatening their bottom line or their continued existence like never before. Understandably, there is palpable hesitation on what to do next.

Fingers are pointed at the government. It is the government’s responsibility to provide relief to families who lost their livelihoods in an instant. Corporates have their hands full trying to figure out what to do with their own employees in the light of an uncertain future.

The retail sector, most badly hit, had to almost immediately close stores and shed workers. The bigger conglomerates managed to keep their workers on regular payroll, but with the understanding that things are not normal. What looks like corporate generosity can change.

Some, like San Miguel, decided to do more for their employees and folks in areas where they operate. An existing food bank and kitchen in Tondo boosted their operations to feed more people. And when it was difficult and expensive to get a Covid test, San Miguel set up its own RT-PCR testing center for employees and the public.

But the question arises, should San Miguel even be doing things that seem alien to its business of bottling beer, producing power, manufacturing food products and building infrastructure? Did the shareholders authorize management to spend their money this way, rather than with a clear view of clearing profits quickly?

Noted economist Dani Rodrik in a recent article recalled that “50 years ago, Milton Friedman published an article in the New York Times that articulated what has come to be known as the Friedman doctrine: ‘the social responsibility of business is to increase its profits…’ He argued that the ‘one and only’ responsibility business owes to society is the pursuit of profits within the legal rules of the game.”

But as Rodrik pointed out, “It legitimized the freewheeling capitalism that produced economic insecurity, fueled rising inequality, deepened regional divides, and intensified climate change and other environmental problems.

“Ultimately, it also led to a social and political backlash. Many large businesses have responded by engaging in – or paying lip service to – the notion of corporate social responsibility…

“And yet, despite the groundswell of private-sector support for corporate social responsibility, the effectiveness of relying on companies’ enlightened self-interest remains unclear.”

Is Friedman still relevant today? We must now balance shareholders and society.

I look back on my corporate communications career and I was there when CSR was born. There was enthusiasm for the concept but unfortunately, it remained largely a rhetorical public relations effort.

There were glorious speeches that extolled the supposed shift of corporate focus from shareholders to stakeholders. Looking after stakeholder interests and CSR won so many awards in international conferences I attended. But most are… PR projects.

Corporations must be more genuinely responsive to the community. Corporate governance itself must be more democratic to achieve this goal.

Our corporate governance system, with supposedly independent directors chosen by the principal shareholders, can’t protect the interests of all stakeholders. Getting other stakeholders represented is logical, but not easy to do with our mostly family-owned conglomerates.

Perhaps the two-tier German system with a supervisory board, half of which are elected by employees, is the way to go. Otherwise, it is a hit and miss affair,  with much depending on having socially conscious management as in San Miguel.

But does social responsibility betray the fiduciary responsibility of management to those who provide the company its working capital?

It may be argued that feeding the hungry, like what San Miguel is doing in Tondo, is a form of corporate socialism. So is buying PPEs and health insurance for health workers which should have been shouldered by taxpayers rather than SMC shareholders.

The pandemic gave some corporates little choice because of the government’s obvious inability to provide the essential needs for fighting the pandemic. So, Ricky Razon and Piki Lopez built quarantine facilities to help segregate all those who test positive for the virus.

Additionally, Piki supported PGH with laboratory testing that will increase their test processing capacity 10 times.  DMCI also worked overtime to build new Covid wards at the Philippine General Hospital. Knowing that PGH is always lacking funds for its regular needs, it can be assumed the Consunjis paid for this from their own pockets.

In a country like ours where government corruption and ineptitude are the norm, the better situated corporates must always be ready to step up and use its resources to help make things better for everyone.

We all know what the country needs… better education, better health care, more efficient delivery of essential services and other such things normally expected of the government. The private sector must help and never mind that they have already paid their share of taxes.

But more than all that, the corporates must also not aggravate social inequalities through predatory pricing and other expressions of corporate greed. Or in the case of those involved in exploiting natural resources like mining, they must not cause environmental problems that make poverty worse in those areas.

Big business must stop buying the politicians to protect their interests at the expense of the public good. American politics is a mess now, and to a great extent we are in a similar situation because industries have been buying politicians.

Maybe San Miguel’s corporate socialism also misses the point. But by attending to the immediate problems on the ground, like hunger, it is probably buying time for a tough reckoning that seems inevitable for our troubled society.

Boo Chanco’s e-mail address is [email protected]. Follow him on Twitter @boochanco