Is There a Link Between Behavior and Profits?January 19th, 2008 | Posted by in Business Strategy | Corporate Social Responsibility | Interesting News
A recent writeup in the New York Times discussing a Harvard Business Review article makes the case that it depends, but overall, there is not much of a link between corporate behavior and performance. What is intriguing is that the authors state that while there is a weak correlation between good behavior and positive returns, bad behavior produces a much more prominent and consistent correlation.
I have not had a chance to read the HBR article yet, but the data and conclusion are not terribly surprising. In a system where profit-maximization is an obligation and niceties such as social responsibility are considered a kind of goodwill cake-icing (by most), social responsibility, if focused on, tends to default to either a risk-management or pubic relations initiative. Not a great endorsement, it would seem…
That said, if social responsibility is in its infancy (which I believe is the case), the data is not so alarming. When sales are strong, money is flowing in, bonuses are fat, and times seem good, most companies tend to celebrate and ponder how to further push the envelope. But an interesting thing happens along the way… One short-cut tends to lead to another. One decision where profit is prioritized over principle tends to lead to another. A legal problem that isn’t noticed today can probably be put off another day, right? How about another week? Okay, maybe next quarter or fiscal year (Hey! Look at our roaring stock price!!). The house of cards invariably collapses and suddenly everyone starts crying foul.
It seems to me that maybe, just maybe, doing the right thing could be a better choice (you know, if your objective is long-term profit maximization and not short-term fat bonus maximization, or some other selfish shenanigan…).
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