“We do not seek profit in the short term; we seek companies with strategies for creating value in the long term.
Not to maximize shareholders’ profits but rather maximize value for all stakeholders in the company: Employees and their families, customers, subcontractors, the community in which the company acts, and the entire country.”
(Larry Fink, CEO of BlackRock, the largest private investment company in the world).
There is a long history connecting corporations to social and political struggle. From the civil rights movement in the United States to opposition to the regulations President Trump sought to pass. Examples of this in Israel include the conduct of SodaStream and other leading figures in the economy with regard to the struggle against the expulsion of refugees, and the Conscious Capitalism movement, which is gaining momentum. Studies show that businesses with social responsibility generate higher revenue for their shareholders and have greater brand value. These data strengthen trends among corporations and investment funds, who choose to invest in companies and organizations that create long-term value for stakeholders in the organization, rather than just for shareholders.
The connection between business organizations and social and political struggles exists in different forms in different countries. In the USA, where corporations and companies have great economic power and do not fear government intervention in their business activity, there is a long history of such activity. One example is the connection of large corporations such as Avon, McDonald’s and Xerox to the civil rights struggle. These corporations changed their recruitment methods, their marketing plans, and even their investment plans to give Afro-Americans a fair opportunity to enter the labor market. Even in the fight against AIDS, private companies like American clothing designer Kenneth Cole®, in cooperation with amfAR, The Foundation for AIDS Research, launched a media campaign to break the conspiracy of silence surrounding the disease.
Whether they like it or not, 21st-century technology forces businesses into playing a role in social struggles. Social media’s influence on brands comes from two directions. From consumers themselves, who lead campaigns on issues important to them, and exert direct pressure on corporations and companies. On the other hand, legislators exposed to these campaigns and wishing to appease their voters apply pressure on corporations through legislation.
In recent years, the United States provides several interesting examples for the mobilization of corporations to political and social struggles.
In March 2016, North Carolina announced a new law determining that men and women may only enter restrooms marked for use by the biological sex they were born with. The LGBT community saw this law as discrimination against transgender people, bisexuals, homosexuals, and lesbians and launched a social media campaign against it. The public response was quick and vocal, and figures such as Bruce Springsteen and Ringo Star canceled planned performances in North Carolina. Important sporting events scheduled to be held in this state were canceled as well. Major corporations such as Apple, Facebook, General Electric, Google, Lift, and Starbucks announced that they oppose the new law. Over 200 major corporations signed a joint letter together with Human Rights Campaign (the largest LGBT rights organization). In addition, major corporations have taken more serious measures: PayPal announced that it would delay implementation of works planned for North Carolina, and Deutsche Bank announced a halt to its recruitment in the state. The Associated Press estimated the economic damage to North Carolina at about 3.76 billion dollars. As a result of this response, the governor who signed the law lost the following elections, and the new one signed a softened version of the law.
In January 2017, President Trump signed an order to suspend visitors’ admission from several predominantly Muslim countries: Iran, Iraq, Somalia, Libya, Sudan, Syria, and Yemen. In response, an online protest was launched, calling for a boycott of all products carrying the Trump brand. The protesters began campaigns to boycott companies suspected of favoring the law, such as Uber, with a campaign calling to remove the app. Over a hundred technology companies signed in support of the suit against the law. Howard Schultz, CEO of Starbucks, issued a letter to company employees announcing that he intended to hire tens of thousands of refugees to work at the company in response to the law.
In September 2017, Trump announced that he intended to halt the DACA plan allowing unregistered refugees, who came to the United States as children, to remain and work in the country with no fear of deportation. The response to Trump’s announcement was vehement. Figures such as Mark Zuckerberg and Tim Cook denounced it, saying they would fight it with the means at their disposal. Hundreds of CEOs signed a letter of appeal to Trump, asking him to cancel his decision with regard to DACA.
In the wake of the high school massacre in Parkland, Florida, 17 students and faculty were murdered. The school’s students launched a media campaign under the hashtag #NeverAgain, in which they demanded changing the gun-carrying laws in the United States. In response to the campaign, major corporations announced cutting or diminishing ties with the NRA (National Rifle Association). Major department stores such as Walmart announced they would raise the gun purchasing age to 21. Citigroup announced that it would not approve companies selling firearms without proper background checks on the people buying them. Bank of America issued instructions not to grant loans to bodies manufacturing military-grade weapons for civilian use. United Airlines, Delta Airlines, Hertz, and Avis announced that they would stop offering NRA Customer Club members discounts, numbering over 4.5 million.
In more social areas, too, examples can be found of corporations adopting business tactics more favorable to society as a whole. For example, outdoor and camping retail giant REI has closed all of its stores on Black Friday to enable employees, suppliers, and customers to go out to nature and realize the company’s mission – a move that has become a well-liked and publicized tradition.
In Israel, things are different. Corporations and companies are afraid of taking clear moral-political positions for fear of alienating customers and business partners. There are two main reasons why company owners and businessmen refrain from expressing a political opinion, even when they think it is warranted. First of all, the Israeli market is small and fragmented, and any political statement could lead to a vehement reaction by a particular group in Israel and cause severe economic damage. The other reason is the government’s deep involvement in the business sector through regulation and supervision. Businesses required to comply with government regulation are to voice an opinion that could lead to further limitations and cause economic harm. Nevertheless, in Israel, too, examples can be found of business owners who have voiced political positions and even assimilate their values in the business’s ongoing activity. Daniel Birnbaum, owner, and CEO at SodaStream called on Israel to absorb Syrian refugees in Rahat, and employed them at his company’s facilities. As Birnbaum says, “what we do at SodaStream is to serve as an example for other industries worldwide that we are ready to employ refugees. This is a wonderful example of social responsibility by industrialists. We get positive feedback on this from all over the world.” SodaStream acts in this area to improve its standing vis-à-vis the Arab world, which had boycotted its products when operating from within the occupied territories. The expulsion of refugees is one of the only issues that have made the leaders of Israel’s economy come together in a clear statement in opposition to government policy on this issue. Another businessman who assimilates his ideology in the current activity of his business is Moshe Mizrahi. Mizrahi, the founder CEO of InMode, a provider of innovative medical technologies, is one of the businessmen active in assimilating Conscious Capitalism in Israel’s economy. Another type of capitalism is based on the inclusion of employees and all systems in a company’s economic chain – from subcontractors and suppliers to the community. “For years now, it has been clear to the corporate world and governments around the world that a new economic system and social contract are needed. There must be a new, profitable and humane economy”, says Mizrahi; “however, we do not know what such a system will look like. What roles will be played by the state, employees, and corporations.” Conscious Capitalism is in the process of development worldwide. It is manifested by Moshe Mizrahi’s decision not to fire or send on unpaid leave even a single worker during the COVID-19 crisis. The crisis has hit the company’s ongoing work; however, employees have continued working on infrastructure and other projects and improving its ability to return to full activity as soon as possible.
These examples are specific and do not reflect the general mood in Israel’s business sector.
The subprime mortgage crisis of 2008 caused the status of classical capitalism, founded on Milton Friedman’s philosophy, to waver. Friedman claimed that businesses have just one social responsibility: To pursue activity designed to increase their shareholders’ profit. According to this theory, this profit will trickle down to society’s middle classes. This theory has failed, and it is now clear that shareholders’ profits do not trickle down to the lower classes but rather become concentrated in the hands of the wealthy. The economic gap between the upper and lower classes has only increased in recent years. In light of Friedman’s theory’s failures and increasing pressure by consumers and social movements calling on corporations to take responsibility for the society in which they act, several trends can be identified intended to change how the business world operates.
As Larry Fink, CEO of BlackRock, the largest private investment company in the world, wrote to S&P500 CEOs: “We do not seek profit in the short term; we seek companies with strategies for creating value in the long term.” This concept of creating economic value for all stakeholders indicates the conceptual change corporations are beginning to adopt. In a joint declaration given by 200 top CEOs in the USA, in itself a historic event, the purpose of a business organization was redefined: Not to maximize shareholders’ profits but rather maximize value for all stakeholders in the company: Employees and their families, customers, subcontractors, the community in which the company acts, and the entire country.”
In Israel, too, signs of this conceptual change are evident. Altshuler Shaham investment house offers investors a ‘green’ investment track, and Aviv Funds has launched a track for investment in equitable companies only. Both companies offer investment channels with a combined message – ethical and economic. In 2015, Mifal HaPayis decided to discontinue investment in companies that made haircuts due to ethical considerations and responsibility towards investors. The well-established IBI Company has set up a department for portfolios managed inequitable companies only. Psagot has twice refrained from participation in bond issuances by the Tshuva Group until the return of money it received from Delek Real Estate bondholders.
Benefits for corporations could be direct, like Walmart’s connection with an environmental protection fund, that helps it launch new, environmentally friendly products, and streamline its use of energy and reducing costs. Another example is J.P. Morgan, which in 2015 announced an investment in the City of Detroit to help it in recover from its economic collapse. It thus obtained a new market share of Detroit residents.
Studies show that businesses with social responsibility generate higher revenue for their shareholders and have greater brand value. As a result, one rapidly expanding area is the direction of investments to companies with social impact. The trendy areas are the environment, social issues, and government. Investment funds worldwide increase the scope of their assets and investors when they promise to increase investment in companies providing value in these areas.