The Corporation: The New Santa Claus?

The story of Santa Claus is centered on giving, particularly to others in need. Could investing in ExxonMobil (NYSE: XOM  ) one day be akin to contributing toward meeting the needs of the world, such as poverty reduction and environmental protection? Don't laugh, it just might happen.

One of the world's largest corporations has taken some heat in recent years as oil prices have skyrocketed and more and more data is released indicating that global warming is no longer a fiction but a deadly reality. One article published by USA Today a little over a year ago criticized the energy giant for being behind the times in developing alternative energy. An ExxonMobil spokesman was quoted as saying, "We're an oil and gas company. In times past, when we tried to get into other businesses, we didn't do it well. We'd rather reinvest in what we know."

Peering beneath the hood of the company, however, we find that it is indeed taking steps to address two pressing global problems: energy demand and environmental protection. In a recent company-produced report called "Tomorrow's Energy: A Perspective on Energy Trends, Greenhouse Gas Emissions and Future Energy Options," the firm revealed that it spends over $600 million per year in research and development. ExxonMobil balances these investments in extending current energy technology, like partnerships with Toyota (NYSE: TM  ) and Caterpillar (NYSE: CAT  ) to improve the internal combustion engine and lead to a potential "30% improvement in fuel economy," and "breakthrough research" that could lead to tomorrow's primary energy source, hydrogen.

Certainly it can be argued that $600 million is not nearly enough of an allocation of R&D expenses, considering the company is on track to haul in almost $40 billion in net income by the end of this fiscal year. But at a minimum it is a very small step in the right direction. From ExxonMobil to Johnson & Johnson (NYSE: JNJ  ) to Google (Nasdaq: GOOG  ) to Motorola (NYSE: MOT  ) , some of the world's largest enterprises are lining up behind the idea that they are more than corporations -- they are corporate citizens. All of these, and many more, have information available to the public on their corporate citizenship efforts.

Corporate citizenship and the new corporate philanthropy
In an essay titled "The New Corporate Philanthropy," Craig Smith, associate professor of marketing at Georgetown University, fleshes out this new understanding of corporate citizenship, writing: "Like citizens in the classical sense, corporation citizens cultivate a broad view of their own self-interest while instinctively searching for ways to align self-interest with the larger good. That is, they hunt for a reconciliation of their companies' profit making strategies with the welfare of society, and they search for ways to steer all parts of the company on a socially engaged course."

The old way of doing philanthropy, in which corporations contributed to those causes that were furthest away in relation to the company's business, is quickly going the way of the horse-driven carriage. It is unlikely, for instance, that ExxonMobil will return to giving primarily to non-related causes like it once did with its Exxon Education Foundation.

As Smith points out, this foundation was once admired because its charitable efforts "bore no relation to Exxon's main line of business." But today the tide of corporate philanthropy has completely shifted, to one that can align charitable interests with competitive ones. Doing so frees up an enterprise to back philanthropic initiatives with "real corporate muscle." Marketing and advertising, human resources, real estate development, building construction, products, outsourcing, distribution systems, and even R&D -- all parts of the company are being used to support not only business interests, but also the interests of the public.

The SOX effect
Many people have challenged the view that a company's sole purpose is to maximize profits; and today, some are looking for companies that have purpose-driven profits. As we've highlighted prior in an essay that looked at two business strategists who have taken Milton Friedman to task, seeking competitive advantage and fulfilling charitable purposes are not necessarily distinctly separate ends.

This transformation didn't happen overnight; it took several catalysts. One was the accounting and corporate governance scandals that rocked Wall Street from 2000 to 2002, significantly impacting the public's trust in stock market capitalism. In response, the Sarbanes-Oxley Act was enacted, ushering in the most significant changes to corporate law since the 1930s and the Great Depression. The call for corporate social responsibility was fueled as WorldCom, Enron, Tyco, and others failed to live up to their side of the social contract.

Corporate power
Another factor leading to the emergence of a new understanding of philanthropy is the dominance of the corporation.

It is difficult for us to imagine a world without the corporation; during our entire lives, we come in contact in one form or another with corporations. However, this wasn't the case not so long ago -- by 1800, there were just over 300 corporations in existence in America, most of which were in banking or canal construction. Today there are roughly five million corporations based in the United States, meeting every known public demand. And the 13,000 or so that are currently publicly traded control over 90% of the nation's business assets.

Today, there are corporations with greater economic power than many small nations. But with power comes responsibility, and the call has never been greater than it is now.

Government alone is not the solution
Through much of the 1900s, the U.S. government had developed programs lacking any form of partnership with private enterprise, from from low-income housing to Social Security -- and the results weren't always pretty. Governments are realizing that through partnerships with non-profits and for-profits, they have a better chance to meet the general welfare demands of their people. Private developers utilizing state funding now work on affordable housing developments. And there is increasing speculation that Social Security will have to move to some form of privatization to meet retirement needs.

This transition of the government has given rise to what some have described as the market-state, in which partnership with private enterprise helps in implementing social programs. This transition is most prevalent in the United States and the United Kingdom, and given the influence of these two powers on global affairs, there are hopes that other nation-states will also transition to the market-state. Such a shift will continue to place a heavier burden on corporations in making greater contributions to some of the world's most pressing problems.

Extreme problems
It is the world's most pressing problems, such as extreme poverty and environmental destruction, that require new solutions. Governments, foundations, and non-profits have so far proven unable to tackle these problems on their own. A new partner is needed -- partners including ExxonMobil, Johnson & Johnson, and many, many others.

Perhaps one day, making an investment in a company like ExxonMobil will be akin to making an investment in Earth. The Santa of old and outfitted in red might just become the Santas in suits and ties, overseeing some of the world's most powerful organizations and addressing the great issues of the 21st century. Don't tell the kids.

For more socially responsible Foolishness:

The Motley Fool's own philanthropic endeavor, Foolanthropy, is in full swing for 2006. More information can be found at our Foolanthropy site.

We're proud to partner with Hilton Family Hotels in our Foolanthropy 2006 campaign.

Fool contributor Jeremy MacNealy is writing a thesis paper at Duke University on corporate social responsibility. He has no financial interest in any company mentioned. Johnson & Johnson is anIncome Investorselection. The Motley Fool has a disclosure policy.


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