The More Money You Have, the More You Should Care About CSR

The more money you have at stake, the more should you care about CSR – corporate social responsibility.

CSR is a business philosophy and profit-making strategy that links a company’s value to all those who contribute to its success: customers, employees, owners, creditors, suppliers, community, environment.

CSR also stands for “company stakeholder relationships”.

Managing stakeholder relationships is the best and surest way to build value.

Those who have assets and those who hope to acquire assets need to worry a lot about value.

Some of their most valuable assets are in a company; others in land or real estate; more in securities and other contracts for investment return.

In every case, upholding the asset value of their wealth draws thoughtful concern.

This is especially true today after the meltdown of financial markets and the resulting global recession.

The vital insight here is that a focus on cash, on income, on short-term profit is not enough. Current income is only a step towards real wealth. For if income comes with too much risk or is vulnerable to new conditions, then the wealth underneath that earning power is not that valuable.

How can assets be enhanced to hold their value?

The first step is to reduce the risks association with earning a profit. Quality not quantity is important. Quality in a company and in any investment in that company; quality in the location of land and real property; quality in the reliability and safety of investment contracts like stocks and bonds.

This is where CSR comes in. CSR teaches how to secure customer loyalty, build up brand equity, and charge higher prices for value-added in the customers’ minds.

CSR teaches how to motivate employees and get loyalty and high productivity from them. This is increasingly vital for sustainable profitability in all service, high tech and other businesses that need know-how.

CSR teaches how to retain the trust of owners and investors and creditors so that financial strength is there when it is most needed and at a fair cost.

CSR teaches how to get the most from suppliers so that one’s quality is shock-proof.

CSR teaches how to take care of the environment and communities so that social capital is available in education and culture, public health, infrastructure, government is supportive and not corrupt, and the competitive and natural environments are fruitful for sustainable business.

What CSR teaches in each of these management arenas is how to maximize stakeholder value. Such value is in the relationship with each stakeholder constituency. Taking care of relationships builds long-term value and puts worries to rest.

As asset holders grow older, have less time to run the business and an investment portfolio, and think more and more about the financial needs of their children and grandchildren, they need to have long-term value locked in place. They don’t need assets that might collapse in value due to a breakdown in some key stakeholder relationship like loss of brand equity in the eyes of customers or suppliers.

Take millionaires for example: the more wealthy they become, the more they must rely on agents and managers. They need to trust investment advisors and asset managers; vice-presidents and division chiefs. They can’t do it all. And they don’t want to. After a point in a successful business career, the attractions of spending time in travel, study, collecting, social leadership, cultural entrepreneurship, etc., grow more enticing and distract some owners from hands-on management of their companies and business affairs. Age too has its impact on the inevitable need for us to trust others with stewardship of our wealth.

CSR values and CSR cultures promote trust. Wild-west, Bernie Madoff style, dog-eat-dog capitalism is neither friendly nor trustworthy. In such business environments, we are surrounded by potential cheats and thieves, rascals and schemers. Who can secure success under such conditions? Who can enjoy life when everything is always at risk of loss?

If we need to rely on others, we need to promote a moral capitalism. What goes around, comes around. If we insist on high standards of transparency, accountability, honesty and good work habits, we will benefit as others adopt those practices towards us. CSR is the win/win formula for social justice and all wealth is happier and more secure when society is just.