INSIDE OUT: I part company from CSR cheerleaders when they justify helping Lewisham schoolkids on the grounds that this is good for company profits

INSIDE OUT: I part company from CSR cheerleaders when they justify helping Lewisham schoolkids on the grounds that this is good for company profits - I recently attended a May Day party given by Citigroup in the austere Orangery of Kensington Palace to ce

by ROBERT PESTON, City editor of the Sunday Telegraph; e-mail:peston@peston.com
Last Updated: 31 Aug 2010

I recently attended a May Day party given by Citigroup in the austere Orangery of Kensington Palace to celebrate its centenary of operating in the UK. A mob of bankers and blue-chip business people from around the world swapped gossip and made contacts, while just a couple of miles down the road a different kind of exchange was taking place: self-styled anti-globalisation protestors were trading insults with HM's constabulary, as the international day of action turned nasty.

As we sipped on the elegant spoils of global capitalism, we were regaled by Citigroup's head honchos and by the governor of the Bank of England about how much the world's biggest financial services group does to help the young people of Lewisham in south London through an education initiative called the Academy of Finance.

Building on a programme launched in the US two decades ago by Sandy Weill, Citigroup's chairman and CEO, it will provide sixth-form students in four schools with a grounding in 'all facets of the financial services industry'.

This is, in the words of the governor, a wonderful example of Citigroup manifesting its corporate and social responsibility.

Some at the top of very big companies justify this sort of social initiative as mitigating the rage of the anti-capitalists, or reducing the risk that elegant cocktail parties will be spoiled by dreadlocked interlopers (no-one at Citigroup tried this argument on me). But, as readers of this column will know, I regard it as a bad reason for spending company funds on social initiatives.

Of course I say hooray when any person or institution with deep pockets backs a worthy cause - helping state-school children to receive valuable vocational training is obviously worth doing. I stress this because my February article, critical of the hype surrounding CSR, has occasioned - ahem - a mixed response.

Thus I found myself addressing a joint House of Commons and House of Lords group on all this, under attack from the left for my scepticism about CSR and from the right for my view that government should not abdicate responsibility for social reform and improvement to big firms.

Now, there is a bit of method in what the parliamentarians plainly viewed as my bonkers theorising. For me, the justification for helping the underprivileged children of Lewisham is that it is the right thing for a powerful and privileged corporation like Citi to do, by the same ethical standards that make it right for any of us to try to do good.

I part company with CSR-cheerleaders, however, when they justify helping Lewisham kids as being good for company profits. Thus, at the party, governor Sir Edward George stressed the benefits to staff morale of engaging with local communities on good causes. His implication is that Citi is helping itself by helping others.

Sir Edward is right in saying employees get a nice warm feeling from going into local schools or raising money for charity. It's plainly good for team building and self-esteem. But it's a dangerous argument.

Once a company justifies doing good in terms of the quality of the inputs into its business and therefore the magnitude of its profitability, it is on a slippery path. It is not what I would really see as a 'good' company.

The risk is that such a firm might come to see good citizenship merely as an alternative to giving out luncheon vouchers. It would withdraw from mentoring fatherless children just as soon as it found a cheaper way of giving staff a nice warm feeling.

It would clearly be preferable if making a positive contribution to the world around it were simply part of the culture of a company, separate from any satisfaction its customers derive from its slickness of service.

It is plausible, as many well-meaning business people tell me, that the strongest and most long-lived companies are those that 'give back' in just this way. But I am uncomfortable about justifying good behaviour by reference to long-term profits. It's a shaky foundation, because it allows the possibility that the most rational corporate behaviour is to present a philanthropic face to the world as a cover for less laudable - but more profitable - behaviour.

And here is the test case. If profits come first, then it was probably right for tobacco companies to consistently deny over decades that smoking is bad for health. However, I suspect that they could not have behaved like this if the concept of 'good' had been divorced from the concept of 'profits'.

Anyway, as you may guess, I am also not a fan of what you might call the paramilitary wing of the proponents of CSR, which calls for companies to show 'social leadership' and subsume many of the traditional functions of government by working to change the world for the better - all in the cause of increased profits.

If the recent manifesto of this group, Good Business, by Steve Hilton and Giles Gibbons (Texere), is a bit of agitprop to stir up a debate, so much the better. If it is taken seriously as a programme for corporate reform, forget the holidays in space - I am applying for permanent residency up there.

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