There was a small story in yesterday's paper that caught my attention. It refers to a PBS show Wall $treet Week with Fortune (the transcript of which is here), on which Matthew Kiernan of Innovest Strategic Value Advisers argued that socially responsible firms offer better returns to investors:
[W]e know from all our Wall Street friends that management quality is the number one driver of financial performance by companies, and for us a company's ability to manage that swirling constellation of environmental and social issues better than their competitors is simply a proxy for superior strategic management. And show me a better managed company, I'll probably show you a financial out-performer as well.
The programme also interviewed Jeffret Immelt, GE’s CEO, about a project the company is undertaking in Ghana (building a hospital in a remote town) and asked him why they had done this:
You can't create commerce, but you can create citizenship. In other words, I can't go create a customer, put them right down in the middle of Ghana -- someday I can -- but I do know how to be a good citizen and I do think we can learn from this experience so that we can decide how to approach Africa over time. And there's going to be oil and gas projects and other projects that are in Sub-Saharan Africa and we're going to be in a better position to understand how to do business in those economies.
In other words, companies cannot exist in isolation and ignore the communities in which they operate (or hope to operate in the future). Good management knows that behaving responsibly helps employee satisfaction (which in turn almost always improves customer satisfaction) and that it improves their public image. Although we are talking about intangibles, they do impact the bottom line in a positive way.
So whilst it might be intellectually attractive to argue that companies should always choose profitability over popularity, it doesn’t mean that it makes sense in the real world. What I find encouraging about the Hunghom Peninsula business is that some Hong Kong companies are starting to think in the same way as some of the most admired companies worldwide.