Corporate natural hazard philanthropy, environmental risks and workplace graft

The geography of disaster response

The new millennium seems to have brought a veritable plague of natural disasters. Alongside the aid agencies and government organisations, companies are increasingly a part of the disaster response picture.

Much is known about what the private sector contributes. About half of the Global Fortune 500 firms, for example, collectively contributed cash, goods and services worth $580 million to the tsunami relief effort. The share of company donations in relation to individual donations is also on the up. Of the $93 million given by Americans to hurricane Katrina victims, for instance, more than $27 million came from corporate pockets.

Few investigators have examined how geography feeds into companies’ decisions about whether to give and, if so, how much. Looking at how Fortune Global 500 companies responded to three recent natural disasters – the south Asian tsunami, hurricane Katrina and the Kashmiri earthquake – this paper identifies some illuminating regional patterns.

Understandably, perhaps, companies are more likely to give to disasters close to home – what the authors term the “home region effect”. The findings also highlight a great propensity to help in markets where a firm is active, even if the location of the disaster is some distance from the firm’s country of origin. Different cultural attitudes to philanthropy also play their part, the paper notes.

Worryingly, there is a suggestion that companies could be suffering from “disaster fatigue”. “Successive disasters are less and less novel and therefore less able to capture firms’ attention”, the authors state.

“Exploring the Geography of Corporate Philanthropic Disaster Response: A Study of Fortune Global 500 Firms” by Alan Muller and Gail Whiteman, Journal of Business Ethics, forthcoming.

Environment: the value of being prepared

Take environmental management seriously and there is no getting around it: it is going to cost you. The question for the market is whether that investment will pay off in the company’s value. Pinstriped sceptics pooh-pooh the green do-gooders. But an increasing number of empirical studies suggest there are opportunities to be had. This working paper is one of them.

Previous scholarship has tended to focus on the opportunities accrued by first-mover companies when they anticipate environmental legislation. Resource-based management theorists have also stressed how pro-active environmental management can provide future savings by increasing operating efficiencies. What the research has not done so far though is consider these arguments through an industry-specific lens.

Polluting industries are necessarily more regulated and face more environmental constraints on their operations than cleaner industries. With an industry-microscope in hand, this paper finds evidence that companies in high-risk industries typically have lower market values than their peers in low-risk industries, even if the latter are less profitable.

The lesson for companies? The cost is worth it: the higher reputation that comes from better environmental management leads to higher rankings and higher market pricing. And the implication for active investors? Find those companies in polluting industries with a willingness to bite the environment management bullet – and opportunities to profit from doing so.

“Financial Outcomes of Environmental Risk and Opportunity for US Companies” by Lars Hassel and Natalia Semenova, Sustainable Investment Platform Research Working Paper, November 2007.

Keeping the corruption habit

Using office stationery for private use or calling in sick after a late night out can become such ingrained habits that they transform into “business as usual”. Corruption is no different. So prevalent is it in some markets that companies easily begin treating it as a cost rather than a crime.

Authorities in the US have done much in recent years to realign companies’ ethical compass. Leading the way are the Securities Exchange Commission and Department of Justice. Under US anti-bribery laws, they can – and do – oblige companies to adopt more effective anti-corruption programmes. The demands include the retention of independent monitors to check that these programmes are properly implemented. Welcome though these are, this paper questions whether such measures will truly persuade hardened bribers to kick the habit.

Independent monitors, the authors argue, need to be more like consultants or team members than mere legal-minded compliance officers.

Slapping a fine on the worst offenders seems the easiest option, but, in the long-term, there might just be something in trying to change the sinner from within.

“Corporate Corruption and Reform Undertakings: A New Approach to an Old Problem”, by David Hess and Cristie Ford, Cornell International Law Journal, forthcoming.

Campus round-up

As featured in Ethical Corporation’s new business education special report, Stanford tops the business school sustainability rankings. Other top-rated schools in the biannual “Beyond Grey Pinstripes” list include the universities of Michigan, California (Berkeley), Notre Dame, Cornell and Yale.

Corporate responsibility campus network NetImpact has launched its second guide to graduate business programmes.

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