If Corporations Want to Help They Will Have to Forgo Some Profits

Now that the top 1% of Americans own forty percent of the wealth, rich people are starting to get nervous. In August the Business Roundtable, that bastion of fortune 500 companies, changed its policy regarding the responsibilities of corporations. In 1997 they adopted Milton Friedman’s position that the only responsibility of a corporation is to make money. However, in their new statement they promise to deliver value to customers, invest in employees, deal fairly and ethically with suppliers, and support the communities in which they work.

Then Forbes magazine came out with a piece about how the ultra-rich are investing “in ventures that both make money and have a positive social or environmental impact.” Doing well by doing good, so to speak. In the category of people with “$5 billion or more” are 18 people or couples neatly rank-ordered by net worth who are investing in numerous things that may be beneficial. Bill and Melinda Gates’s foundation has invested in 70 projects addressing health care and poverty. Mark Zuckerberg and his wife Priscilla Chan have created a company that has invested in a childcare software provider, an internet platform that promotes college attendance by diverse students, among other things.

The Forbes piece doesn’t indicate exactly what benefit is coming from the investment activities of the billionaires they describe. However, I am willing to believe that many of the things they are doing will be beneficial.

But if we are going to redress the imbalance in wealth and income in the U.S. we can do better than stories of the beneficence of the rich and famous. We can use behavioral science to evolve a society that greatly improves the wellbeing of most people.

By using public health principles, we can measure the wellbeing of the population and assess whether any given corporate practice does or does not do harm. We already do this with the marketing of harmful products. We know how the marketing of tobacco, alcohol, and unhealthful foods result in poor health and premature death. We can assess the impact of any corporate practice in the same way. We are beginning to study how the practices of Facebook are harming people. It should not be a matter of labeling people and corporations as “good” or “bad”. We should applaud specific actions that are beneficial and condemn those that aren’t. If Mark Zuckerberg is investing in a program that increases minority student attendance at colleges, we should support that. But that does not absolve him and his company from practices that enable foreign interference in our elections.

We need to create a system in which any practice of a corporation that can be shown to harm a segment of the population (e.g., marketing of tobacco, opioids, the sale of fossil fuels; the facilitation of the creation of hate groups) should result in financial losses to the company — not simply fines which become just another cost of doing business.

We also need to consider the impact of economic inequality on the wellbeing of Americans. The U.S. has, by far, the highest rate of economic inequality of any developed country. Countries with greater inequality have higher rates of a wide variety of health and behavioral problems including drug abuse, violence, obesity, depression, and even longevity.[1] And it is not just the poorest people who suffer in unequal societies. Even more affluent people have a lower life expectancy in unequal societies. Why? Because life is much more stressful in a society where we frequently encounter people who are above us or below us in the kind of stark status hierarchy that characterizes unequal countries.[2, 3]

From this perspective it is not just a question of whether the wealthy are doing good things for society — though we should encourage them to do so. But we should ask whether we should allow such astronomical amounts of wealth to be accumulated in the first place.

Senator Warren has proposed that we put a 2% tax on any wealth above $50 million. According to an analysis by economists Emmanuel Saez and Gabriel Zucman, the fifteen wealthiest people in the U.S. would have $433.9 billion less than they do if such a tax had been in place since the 1980s. Such a policy begins to reduce income inequality.

If corporate America pledges to select practices that benefit investors, customers, employees, suppliers, and the community, we should remain skeptical. But we should also help them succeed. Here are a set of science-based principles that they could follow.

• Measure the wellbeing of each constituency. In order to comply with the new Business Roundtable principles, companies can measure the health and wellbeing of its employees. In addition to measuring the impact of their products on public health, they can examine deaths due to poverty, economic inequality, and discrimination, problems that have gotten worse over the years that the business community put profits above all else. We also have measures of wellbeing in communities. Companies can examine whether the communities they do business in are high in poverty, pollution, family instability, homelessness and so on. (The companies are already carefully measuring the impact of what they do on investors.)
• Implement policies and practices that reduce harm to customers, employees, and communities. There is considerable research on policies and programs that can reduce the harm of many products.[4] By taxing tobacco, alcohol, and sugar sweetened beverages and restricting marketing, we can reduce youth use of these products and thereby reduce obesity, diabetes, and cardiovascular disease. [5–10] We also know that many communities are plagued by poverty, inequality, and conflict among diverse groups. Any corporation that embraces the Business Roundtable pledge will need to examine how their policies and practice affect communities in which they work. For example, they can measure what proportion of their employees are living in poverty or near poverty. (The current ratio of CEO salaries to the average worker is 287 to 1.) At the national level, they can examine how tax policies they have supported have contributed to the enormous increase in inequality and poverty over the past fifty years.

In short, if the business community wants to reduce major causes of ill health and inter-generational poverty [11] or most of the other problems in society, its leaders will have to decide whether they are willing to forgo some of their profits.

Change is not impossible. But it will only happen if we build an inspiring reform movement built on the value of ensuring everyone’s wellbeing. We need higher education to ask whether it is training the people needed in prevention, human services, education, and behavioral science who can help to make our society more nurturing. We need a new generation of criminal justice leaders who are committed to reducing incarceration and to using evidence-based practices to prevent crime and reduce recidivism. We need our healthcare system to focus on improving the health of the entire population by ending the marketing of unhealthful foods, reducing inter-generational poverty, economic inequality, and discrimination. We need to build a network of media organizations that are dedicated to advancing wellbeing. And, of course, we need to cultivate a generation of political leaders who are explicitly committed to advancing this agenda.

Tony Biglan is a Senior Scientist at the Oregon Research Institute and author of The Nurture Effect and Rebooting Capitalism (January 2020). He and his fellow scientists have recently launched a movement to make reforms that improve the well-being of all.

References

1. Wilkinson, R. and K. Pickett, The spirit level: why greater equality makes societies stronger. 2009, London: Bloomsbury Press.

2. Pickett, K.E. and R.G. Wilkinson, Recalibrating Rambotti: Disentangling concepts of poverty and inequality. Soc Sci Med, 2015. 139: p. 132–4.

3. Wilkinson, R.G. and K.E. Pickett, The enemy between us: The psychological and social costs of inequality. European Journal of Social Psychology, 2017. 47(1): p. 11–24.

4. Biglan, A., The Nurture Effect: How the science of human behavior can improve our lives and our world. 2015, Oakland, CA: New Harbinger.

5. Pacula, R.L. and F.J. Chaloupka, The effects of macro-level interventions on addictive behavior. Substance Use & Misuse, 2001. 36(13): p. 1901–1922.

6. Chaloupka, F.J., et al., Tax, price and cigarette smoking: evidence from the tobacco documents and implications for tobacco company marketing strategies. Tobacco Control, 2002. 11(Suppl I): p. i62-i72.

7. Chaloupka, F.J., Contextual factors and youth tobacco use: Policy linkages. Addiction, 2003. 98(Suppl 1): p. 147–149.

8. Powell, L.M., et al., Nutritional Content of Television Food Advertisements Seen by Children and Adolescents in the United States. Pediatrics, 2007. 120(3): p. 576–583.

9. Wagenaar, A.C., A.L. Tobler, and K.A. Komro, Effects of alcohol tax and price policies on morbidity and mortality: A systematic review. American Journal of Public Health, 2010. 100(11): p. 2270–2278.

10. Pechmann, C., et al., Transformative consumer research for addressing tobacco and alcohol consumption. Transformative consumer research for personal and collective well-being, 2012: p. 353–390.

11. Van Ryzin, M., D. Fishbein, and A. Biglan, The Promise of Prevention Science for Addressing Intergenerational Poverty. Psychol Public Policy Law, 2018. 24(1): p. 128–143.