Ethics is tough.
Where do you draw the line between what is ethical and what is affordable?
Should companies approach moral issues as you’d approach a face mask drop in a fast descending plane? Look after yourself first and then others lest you be unconscious (or un-woke) before you can help others?
Whatever you choose, there are risks.
Companies don’t want to be seen as going against a social movement but, on the other hand, as hundreds of firms in the US have found, when you go woke you go broke.
Following the Sandy Hook and later Parkland shootings, Dick’s Sporting Goods, which apparently sold a gun to the Parkland shooter, said it would no longer sell firearms and would destroy guns in its stores.
At the time, the move was widely applauded by all the right people. In other words, the media. And people who were unlikely to ever shop at a Dick’s store.
That was April 2018.
In August 2018:
Shares of Dick’s Sporting Goods plunged by more than 9 percent Wednesday morning after the retailer said it sold less merchandise during the second quarter than analysts were expecting.
Sales at Dick’s Sporting Goods stores open for at least 12 months also tumbled by a bigger-than-expected 4 percent during the quarter. It was partly blamed on the leisure brand Under Armour, which has been moving into more low-price retailers like Kohl’s, frustrating companies like Dick’s that try to sell inventory at higher price points.
Evergreen State College enrolment plummeted after fallout from the controversial “Day of Absence” in May 2017 when all white people were asked to leave the campus.
The publicly funded college – committed to social justice – became the poster child of a campus overrun by hyper-political correctness when students shut down the campus and shouted down then-evolutionary biology professor Bret Weinstein for merely questioning the event kicking white people off campus.
Weinstein has since built an incredible career, riding a similar wave to Jordan Peterson and the rest of the Intellectual Dark Web, a term coined by Bret’s brother Eric.
In the culture, go woke go broke has many casualties.
The reboot of Ghostbusters, the Solo movie, the latest whinge from Michael Moore and the take-the-knee stance of the NFL fit the mould.
Ratings for the 2018 NFL season are down but there are so many factors at play that evidence could support either argument. Time will tell, but as the take the knee began as the concussion issue also took off it is hard to find a single defining cause.
Nike’s support of Colin Kaepernick is the outlier.
Nike sales increased after the release of the Kaepernick ad as the target demographic is young people. Particularly ‘inner city’, as is said in polite circles. For Nike’s customers, the Kaepernick campaign isn’t changing the image of the company, it is reinforcing it.
Nike’s decision was not based on social justice principle – it was hard-arsed commerciality. Although Nike would likely object to having its motives questioned, but it pays for them to support a rebel. A rebel against white owners and a very white president representing a very white culture.
Historically, social goals are often antithetical to profits. And once you open the door to social justice warriors and the like, they look on the cookie jar of a company’s revenues and profits and their eyes widen. There is no limit on the demands they can make as they have no direct cost on the people making the claim.
This was identified by Milton Friedman in the 1970s.
Known as the Friedman Doctrine, it states that the social responsibility of business is to increased profit.
Friedman’s argument was that when companies concern themselves with the community rather than focusing on profits, it leads to totalitarianism.
This isn’t to say they should act without morals:
There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud.
The left hates the doctrine.
They won’t say it, but the main reason is that it closes the cookie jar.
Activists lose a key revenue stream when CEOs can’t open the company vaults to support pet causes. Alan Joyce is the most obvious example in Australia, but so too are all of the major winter sporting codes. The AFL and NRL both have large indigenous rounds, while the AFL, hilariously, has a ‘green round’. Played under … er, lights.
On the other hand, leftists such as Naomi Klein see the Friedman Doctrine as a license to rip off consumers that also leads to inequality. Doesn’t everything?
Leaving aside the second point, which is totalitarian and a clichéd trope, Klein misreads Freidman. Likely on purpose as few will take the trouble to go back to the source material to check that she is quoting Freidman correctly.
His point was that corporations must act legally, and that ethics are subjective.
So too is consumer whim.
No one holds a gun to the head of the consumer. It is a voluntary exchange (which is why a carbon ‘market’ is nothing of the sort – it’s a tax).
Friedman’s point is a beautiful (maybe even virtuous) circle.
Their social responsibility is to make a profit and they make a profit by satisfying consumer needs.
As a key element is providing value, they can’t rip off the consumer. Well, they can. But if they do, they won’t get away with it for long.
Their purpose is to provide a product that meets the consumers’ needs … in a market in which there are alternatives. If there aren’t alternatives, but profits are high, it is likely that more entrants will come to the market and create competition. New entrants will eat into the profits of the market leader, or compel them to provide a better product. In other words, the consumer will again be satisfied.
Why bring this up?
Because we have another executive banging the ethics drum. In this case, serial CEO Ziggy Switkowski.
Switkowski is formerly of [deep breath … Kodak, Optus, Amcor, Telstra, NBN Co, Suncorp-Metway, Healthscope, Tabcorp, Lynas, Opera Australia, the Business Council, Oilsearch, Chancellor of RMIT and probably a thousand more. Who could keep up?
On 21 September The Australian reported that:
Ziggy Switkowski has welcomed any measures from the financial services royal commission to improve the treatment of customers, arguing profits should be achieved in a “responsible and ethical way.
Wait. That’s not right. That line should read:
Outgoing Suncorp chairman Ziggy Switkowski …
Yes, he found his morals as he was leaving the building.
Just like Roman Quaedvlieg found his morals and contempt of offshore detention after he left Home Affairs.
Maybe they were lying under a 24 year old girl. Who knows where you can find morality these days?
But back to Ziggy …
The board understands that it’s not enough to deliver profits and dividends — growth must be sustainable and profits achieved in a responsible and ethical way.
The royal commission has placed poor processes and behaviours within our industry under the spotlight and while this is not always comfortable, we welcome any measures that promise to deliver improved outcomes for customers.
That was the said after Suncorp was grilled at the Banking Royal Commission.
Suncorp’s head of insurance Greg Dansfield was grilled about four ASIC infringement notices for making false and misleading representations about a home and contents insurance policy that purported to provide complete replacement cover.
The handling of claims by customers holding the policy became contentious in the aftermath of the Wye River bushfire on Victoria’s Surf Coast in 2015, and in relation to a storm that hit the Hunter Valley in NSW in April of the same year.
Suncorp sent out renewal letters and charged premiums to owners of Wye River properties destroyed in the bushfire.
“We should not have done that,” Mr Dransfield said.
Royal commissioner Ken Hayne suggested a fine equivalent to 1 per cent of the maximum penalty could be seen as “a very low cost of doing business”.
Mr Dransfield, however, said Suncorp’s board and risk management committee took such matters very seriously.
Indeed. They always do.
Dr Switkowski declined to answer a question from the Australian Shareholders Association about steps taken to crack down on the inappropriate sale of insurance and poor lending practices.
Indeed. They often do.
Notice how words are so easy but actions are so hard. Possibly because to do the right thing would have cost Suncrop real money. But saying what they should have done rolls off the tongue with carefree abandon.
Ziggy’s morality and latter-day conversion to best practice is hollow. It’s harder to put your money where your mouth is.
Suncorp has lots of community programs. Essentially, PR and little else. Look at me, look at me …
Maybe they should have lived by the Friedman Doctrine and not broken the law (allegedly) instead of parading their virtue. Actions always speak loder than words.