In
early October this year, the New York Times published an article titled
“Profits and Social Responsibility: Revisiting Milton Friedman.”[1] From lay people to Chief
Executives and business professors, the article presents New York Times’ readers’
critiques of Friedman’s shareholder primacy theory.[2] Criticism of Friedman’s
school of thought is on the rise in the wake of corporate scandals such as
Enron and Wells Fargo, and the financial meltdown of 2008. Millennials are
looking for socially responsible companies to work for and to buy products
from.[3] This corporate
responsibility zeitgeist has led business schools to be more intentional about
training managers to look further than profit maximization in their decision
making.[4] Today many companies make
much ado over the good they are doing in the world. With so much focus on
social impact, one has to wonder whether these efforts are having their stated
impact or only creating an attractive façade to lure consumers. For companies
whose corporate social responsibility (CSR) professes to give back to the local
community, we have a way to evaluate the efficacy of their efforts. By
examining corporate social responsibility through a community economic development
lens, we can determine whether corporations are putting their resources to work
in a way that improves communities, or are using those resources to improve
their reputations without lifting their communities.
Community Economic Development (CED) focuses on improving
the lives of people who live in low-income and underserved communities.[5] CED is not satisfied with
handouts or charity, rather the goal of CED is to empower these communities by
creating a more egalitarian distribution of goods and resources.[6] While donating money to charities
and sending volunteers to soup kitchens are virtuous acts, those actions do not
accomplish the goals of CED. Stanford Professor Robert Reich put it well in an
interview he gave in 2018. He said “Charity is a good thing – it provides
people things that they might deserve or need. But it doesn’t get at the root
source of the problem.”[7] Companies whose corporate
social responsibility efforts stop at charitable acts are nice, but they are
not addressing the root source of the problem. We should be skeptical of
corporate social responsibility rhetoric that is not followed up with actions
that contribute to empowering underprivileged communities.
General Motors’ Strategy for Social Impact names community
development as one of its focus areas.[8] The strategy looks at the “number
of individuals whose socioeconomic opportunity is improving” as an indicator
and identifies “decreasing economic barriers” as well as “increasing
individuals with marketable technical skills” as its social outcomes. In
Detroit, General Motors strategy aims to “increase third grade reading
proficiency”, “increase college graduates”, and “increase the number of
livable, thriving neighborhoods” among other goals.[9] All of these aims fit
within the framework of community economic development. Improving access to
knowledge and opportunities to obtain valuable skills are hallmarks of CED, as
they enhance the community’s self-determination.[10] In February General
Motors invested $1 million in a Beyond Basics, a Detroit nonprofit aiming to
intervene and assist struggling readers in K-12 education.[11] Other CSR efforts from GM
have included supporting Tiny Homes Detroit, a program providing a path to
homeownership for low-income Detroit women, and Vehicles for Change, which
provides a bridge to sustainable careers for Detroiters.[12] Some might fairly argue
that GM could, and maybe should, do more to uplift the community it calls home,
but the inclusion of these community based efforts to enhance the
self-determination of Detroiters makes General Motors an effective partner in
efforts to alleviate inequitable conditions in our society.
Quicken Loans also has corporate social responsibility (CSR) efforts in Detroit. Their Community Fund has been helping Detroiters remain in their homes since 2017.[13] To date, the program has saved 1,157 families from eviction.[14] This is another example of CSR giving resources to underprivileged communities to help them improve their self-determination. But Quicken Loans goes further. Their Community Fund also sponsors Detroit Demo Day which invests more than $1 million annually in Detroit entrepreneurs.[15] This fits into community economic development by providing economic opportunity in a self-sufficient way. Rather than relying on outsiders, these entrepreneurs can use financing from the Community Fund to grow and control their own economic destiny. This contrasts with Shinola, a popular watch manufacturer which has associated itself with Detroit’s resiliency to build a luxury brand. Shinola touts itself as a Detroit company, and it has provided jobs for more than 600 Detroiters.[16] Job creation is valuable, but it is not enough. And in Shinola’s case, it keeps resources and power in the hands of outsiders rather than sharing it with the community.
A Love from Detroit sign by Shinola at JFK Airport in New York City. Shinola’s Detroit heritage is integral to its brand.
Community Economic Development is not just the work of
community businesses, non-profits, and activists. In our digitally connected
age, individuals are increasingly aware of and dissatisfied with inequity and
injustice in our society. We look to leaders and expect them to work towards
alleviating these issues. Our largest businesses are responding to this by
establishing CSR policies with high and noble aims. However, if corporate
social responsibility is not developed with community economic development thinking,
it runs the risk of being largely ineffective by leaving the root causes unaddressed.
In Detroit, companies can look to the examples of General Motors and Quicken
Loans to make their CSR truly impactful. We need more White Knights, and fewer
imposters; if our largest companies incorporate development thinking into their
CSR efforts, then we will be ever so closer to creating a more just and fair
society.
[1] Profits
and Social Responsibility: Revisiting Milton Friedman, The New York Times.
(2020).
[2]
Id.
[3]
Ryan Rudominer, Corporate Social Responsibility Matters: Ignore Millennials at
Your Own Peril; China’s 382 Million Millennials Demand Corporate Social
Responsibility
[4]
Megan Kamerick, Can Business Schools Make Companies Ethical?, Fast Company
(2017).
[5] Alicia
Alvarez and Paul R. Tremblay, Introduction to Transactional Lawyering Practice,
at 315 (2013).
[6]
James A. Christenson, Kim Fendley & Jerry W. Robinson, Community Development
in Perspective. (1989)
[7]
Melissa De Witt, Stanford Scholar Addresses the Problems with Philanthropy, https://news.stanford.edu/2018/12/03/the-problems-with-philanthropy/
(2018).
[8]https://www.gm.com/content/dam/company/docs/us/en/gmcom/company/2020%20Strategy%20for%20Social%20Impact.pdf
[9]
Id.
[10]
Alicia Alvarez and Paul R. Tremblay, Introduction to Transactional Lawyering
Practice, at 316 (2013).
[11] https://www.detroitnews.com/story/opinion/2020/02/06/opinion-funding-first-responders-detroits-literacy-crisis/4668443002/
[12]
Id.
[13] https://www.rocketcommunityfund.org/2020/02/27/how-we-helped-1157-detroit-families-stay-in-their-homes/
[14]
Id.
[15] https://www.rocketcommunityfund.org/2020/07/16/rocket-mortgage-detroit-demo-day-returns-to-support-local-entrepreneurs/
[16] https://www.detroitnews.com/story/news/local/detroit-city/2019/02/25/shinolas-not-saving-detroit-itself-detroiters-say/2981941002/