Cities, states, and national
governments invest substantially in public goods that support corporations in
their daily business, including basic infrastructure such as roads, ports,
airports, railways, water, and sewage systems, as well as legal systems, an
educated workforce, a national defense, local security, a financial system,
public health services, and social security for the retired, unemployed, and
disabled. Governments also frequently provide business with subsidies or
markets protected from foreign competition. In doing so, local and national
communities place substantial investments at risk in support of industry, in
the belief that a healthy and productive business community is good for
society.
We believe that when companies treat
their local and national communities fairly in return, they are making an
investment in their own well-being by enriching the communities upon which they
depend for financial success. Creative and generous philanthropy, open dialogue
and ongoing partnerships with community-based organizations, honest and
transparent relations with government, and paying a fair share of taxes are
among the ways companies can reinvest in their communities, strengthening the
base from which they operate. Conversely, corporations that harm their
communities or benefit disproportionately or inappropriately from them will
ultimately undermine their own long-term self-interest.
Themes
The following are the five major
themes we use to assess the strength of corporations’ relationships with their
local and national community partners:
While other issues are also important in this regard, these
five are those which we believe we can most meaningfully and consistently
assess.
Generous and Innovative Philanthropy
Traditionally, corporations have
used philanthropy to give back to the local communities in which they operate.
Too many of these programs, however, are little more than public relations
campaigns seeking to protect a company’s good name at minimal cost. With
corporate giving programs averaging less than 1% of pretax profits and many
corporate initiatives focusing only on high-profile giving to well-established
sports, academic, or cultural programs, most companies fail to identify those
causes that foster much-needed economic self-sufficiency among recipients and
fail to devote sufficient resources to solving communities’ greatest
challenges.
We look for companies that target
their giving creatively, particularly those that assess the actual needs of
their communities and, drawing on their own greatest strengths, work toward
empowering local communities. Endowing a corporate foundation, which companies can do with
their own stock, or giving generously from pretax earnings, demonstrates a
willingness to allocate serious resources to enriching the more intangible
aspects of the communities in which companies operate. Corporations should seek
to use their philanthropy to fill the most important gaps left by local or
national governments in developing a self-sufficient community. These efforts
demonstrate an understanding of the importance of the company’s investments in
the spirit, as well as the economy, of the regions in which it operates.
Community
Partnerships and Trust
Communities and corporations often
find themselves at odds over basic issues such as the siting of a new plant or
store, the effects of their pollution on the economically disadvantaged, their
policies on layoffs or plant closings, or their use or abuse of local
resources. Corporations rarely seek proactive involvement in collaborative
partnerships with groups that understand and give voice to the basic concerns
of those in the communities in which they are operating. True partnerships require
considerable investments in time and a willingness to communicate openly — on
both sides. The reward from such hard work, however, is a mutual understanding
and trust that can help reduce litigation, avoid plant sitting disputes, and
generally keep problems from escalating into major controversies.
We
look for companies that are willing to listen to their communities’ opinions
and act collaboratively to reach mutual understanding. These partnerships can address
complicated environmental and natural resource challenges, difficult issues of
health and safety, matters of adequate housing or improved education, job
training for the economically disadvantaged, or the legacy of racial or gender
discrimination. We believe that such partnerships not only strengthen the
community base on which corporations build, but establish a trust between
corporations and society that benefits both parties in long-term and intangible
ways.
Protection
of Community and Public Goods
The
wave of privatization and deregulation that has swept over the world as part of
the globalization of national economies since the 1980s has aroused
controversies around the world about the proper role of corporations in
society. We believe that companies have an obligation to understand that a clear
boundary often needs to be drawn between government and the private sector and
to support government’s responsibility to provide basic public goods that are
as varied as healthcare, prisons, primary school education, and national
security. We also understand that in different countries and different regions,
historical and cultural differences have led to different decisions about which
goods and services are best provided by government and which by the private
sector, and understand that these decisions are often part of involved
political processes.
We
look for companies that appropriately balance their efforts to innovate and
experiment with respect for the role of government in assuring the availability
of public goods. The
market is not the solution to all problems and companies should not
inappropriately interfere with the political processes by which local and
national communities allocate responsibilities to the public and private
sectors.
Fair Tax Dealings
Paying
their fair share of taxes is in many senses the most basic responsibility of
corporations to society. Without the public services that a well-financed
government can provide, corporations cannot operate successfully or generate
the profits upon which their employees and stockowners depend. However, today’s
global economies combined with the sophistication of today’s accounting
principles mean that companies often have a wide range of choices of how much
in taxes they pay and where they pay them. The temptation to cut taxes to
enhance profits is great and companies are increasingly successful in this
tactic. In the United States, for example, the share of the national revenues
derived from corporate tax payments has declined from 20% to 25% in the early
1960s to 10% to 12 % by the early 1990s. Without adequate tax revenues, society
will suffer to the detriment of all participants, including corporations
themselves.
Judging
the appropriateness of a specific company’s tax payments is a difficult task
and beyond the scope of our research. However, we look for broad indications
of corporations’ willingness to pay their way and we take seriously disputes
between government and companies over tax avoidance schemes and situations in
which corporations appear to have inappropriately used their influence to
obtain tax abatements by threatening to site or move their factories to other
regions, or have abused the trust of communities that have offered such
abatements.
Government
Relations
The
relationship between corporations and government is of great importance, of
great complexity, and of great concern to Domini. The relationship is complex
because government is sometimes a customer, and frequently a good one;
sometimes a regulator, and potentially a strict one; sometimes an owner, and
occasionally an involved one; and sometimes a financial supporter or a partner,
and often a generous one. Corporations simultaneously want as little contact as
possible with governments when it comes to oversight by them and as much
contact as possible when it comes to doing business with them; as small a role
as possible when it comes to government participating in the marketplace and as
large a role as possible when it comes to setting the rules for that
marketplace. To complicate the matter further, governments in Europe and Asia
are often stockowners in the companies they contract with, regulate, and
support.
For
these reasons, we believe transparency and openness are crucial in dealings
between companies and governments. This means disclosure and effective internal controls on
lobbying, contributions to candidates or political groups, payments to
government officials, hiring, and other interactions with government and public
policy institutions.
We
also believe that collusion and corruption are particularly serious when they
involve government officials and corporate representatives. Corruption within
the corporate world — whether through bribery, price fixing, or anticompetitive
practices — is serious in and of itself. But when public officials are
compromised by corporate misdeeds or actively collude with business to steal
from the public, the resulting contamination of public trust in our local and
national governments is of great concern.
