“Giving back” is a slippery slope: Con

Capitalism, Corporations and Charity: Another View
By Robert Capozzi

Imagine, for a moment, that you are an accounts payable clerk for Tyco International. One day, a bill for a $5000 shower curtain hits your desk. This shower curtain is allegedly for the CEO’s company-paid corporate apartment. You look at it again, wondering whether the price tag is a typo. You wonder what could possibly make the shower curtain worth that much. Is there gold sewn into it? You take the bill to your supervisor. “Oh, don’t worry, that’s for Dennis Koslowski. Pay it.”

We’ll pick this point up later.

Capitalism is the natural manifestation of freedom coupled with the respect for legitimately gotten property. It’s all about free choice. That’s it, and that’s all.

Corporations are voluntary collectives whereby individuals share their capital and resources for common goals. The corporate entity is enabled by the state to facilitate commerce in exchange for, among other things, limited liability. By limiting liability, investors are – by law – shielded from responsibility as individuals for any damages that the corporation or its employees may do. That, too, is it and all.

Charity is a somewhat more complex thing. It’s also voluntary behavior, motivated by the desire to “do good” in some way, shape or form – to make the world a better place. The charitable act involves no financial compensation to the giver of goods, services, cash, or time.

For the most part, human beings are not homo economicus (economic man). While much of our time is spent working for compensation, certainly not all of it is. Friends, family and fellowship are a large part of the human experience, activities that have nothing whatsoever to do with making our daily bread. Indeed, these non-commercial activities – including charity – are for many (if not most) of us far more important aspects of our lives. At the same time, for some of us, our work satisfies – at least in part – our desire to be with friends and to be involved in an enterprise that fulfills us above and beyond financial compensation.

This, it appears, is what Google has done with their charitable initiative, Google.org. Joseph Newhard’s description of this $1 billion philanthropic venture (funded in the form of 1% of Google’s stock and 1% of its profits) seems misplaced. For example, in announcing this initiative, Google disclosed part of its corporate values statement, which says: “You can make money without doing evil.”

Further, despite Newhard’s concerns that charity is somehow “left wing,” Google’s charitable grants are going in part to “budding entrepreneurs in Ghana turn good business ideas into thriving enterprises with the launch of a Business Plan Competition and an Entrepreneurship Development Program.” While charitable, to single out and scorn Google for providing seed capital for businesses in Africa seems off-base.

Google’s Brin and Page seem at once unapologetic and proud of their company, but at the same time modest and humble about it. “We hope that someday this institution [Goggle.org] will eclipse Google itself in overall world impact by ambitiously applying innovation and significant resources to the largest of the world’s problems.” With net worths estimated at $11 billion each, Brin and Page seem in command of the big picture about themselves, their company, and the larger world.

Finally, nowhere in my research for this piece was I able to find Goggle, Brin or Page using the term “giving back.” But what if they had? Does that mean that they were, as Newhard suggests, “acquiescing to notions of ‘public responsibility’” or that corporations “accumulate earnings at society's expense and should give some of it back to us”?

This seems unlikely. First, Google.org only represents 1% of the company’s capital stock and 1% of its profits, relatively small numbers. Second, Google had stated its intention to get involved in corporate philanthropy in its IPO documents, so Google.org merely represents a following through on a commitment the company had already made. Third, even if Brin and Page believe that they and their company have a “responsibility” to “give back,” that’s their business. This is all a voluntary transaction, and nowhere is Google saying that all corporations must by law engage in philanthropy.

For those who believe that capitalism and freedom not only work but are right, then I suggest that Brin and Page should be viewed as capitalist heroes, now more than ever.

Contrast them with Tyco and Koslowski. While, in the grand scheme of things, $5000 is a rather small amount of money, his shower curtain seems emblematic of the sort of in-your-face, dog-eat-dog, ruthless, and self-absorbed capitalism we saw far too much of in the 1990s. Add to that the high-profile financial fraud we witnessed, and Google’s kinder, gentler form of corporate behavior should be applauded.

By all appearances, Brin and Page are also smart businessmen. Intuitively (if not explicitly), they recognize the importance of building esprit de corps within the corporate collective. The Koslowski’s of the world don’t seem to get that. How motivated do we think the accounts payable clerk at Tyco was after he or she paid that obviously extravagant bill? How long before the entire department was whispering at the water cooler about that one?

Is Koslowski-ism just an isolated thing? Hard to say. I can report that I worked for a publicly traded company in the 1990s at which the CEO felt it was an appropriate use of corporate funds to have a washroom built next to his office for his use only, equipped with a $3000 marble toilet seat.

Perhaps Brin and Page, both young men in their 30s, saw this sort of thing going on, were repulsed, and said to themselves, “There has to be another way.” Unlike the dot-com busts of the 90s, Google is profitable. Yet, as part of building their company into a place that people actually like to work at, and feel a part of something bigger, Google.org is part of their efforts to imbue their corporate culture with esprit de corps.

Economists would call this recognizing “psychic” costs and benefits. While unquantifiable, psychic costs and benefits are, nonetheless, very important drivers of value in the corporate collective. You can run a corporation like a personal fiefdom, but there’s a cost, namely poor morale, which, in turn, hurts productivity. And there’s a benefit when a company – in a high-profile way – puts a stake in the ground and says, “We want to do our part to make the world a better place.” Customers find that attractive, too.

For those in favor of free markets, charitable behavior like Google’s should be commended, not condemned. We need more Brins and Pages in Corporate America.

Robert Capozzi is an Associate Editor for The Free Liberal.