The Cost Accounting Of Corporate Social Responsibility

Companies would like us to believe that when they behave in a socially responsible manner they do so because it is the right thing to do. They hope we don’t pull back the curtain to find an accounting wizard sitting at a desk calculating the costs and benefits of social responsibility.

No doubt, some companies do the right thing because it is the right thing. Behaving ethically and responsibly becomes part of the business model, and corporate culture and character. But many companies don’t make social responsibility part of the business model. It is only an initiative or program, driven by the math. They make socially responsible decisions only when the cost accountants tell them to do so.

That certainly appears to be the case for the Washington NFL team, the Redskins, and its major corporate sponsors.

As everyone probably knows, in recent years there has been an increasing chorus of complaints about the offensiveness of the team name being disparaging to Native Americans. Over the past decade or more countless high schools, colleges, and universities have dropped or changed names that made insulting references to Native Americans.

But the noise has not been loud enough, nor the price tag costly enough, to cause the Washington NFL team to consider a name change. In fact, quite the opposite. Team owner Daniel Snyder has repeatedly stated that he has no intention of changing the name, which has been with the team since the 1930s.

Last year, the U.S. Patent & Trademark Office revoked trademark protection for the team’s name because of its derogatory nature. The agency cited laws that preclude trademark protection for disparaging terms. The team then sued the Patent Office to regain its trademark. And the American Civil Liberties Union joined the fray, filing an amici curiae brief siding with the team. The ACLU argues that while the name is no doubt racist, it is nevertheless protected speech by the First Amendment. The case is still pending.

The legal battle should serve as a reminder that just because something is legal does not make it right. CEOs are too quick to delegate social responsibility questions to the legal department. They do so because they confuse ethical issues with legal issues. But that is a separate topic.

According to Forbes, the Washington team is consistently one of the most valuable and profitable franchises in the NFL. Native Americans do not appear to be a substantial enough constituency, or to have enough buying power, for the team, the NFL or team sponsors to be concerned about offending them. Native Americans account for only about two percent of our population, a distinct minority. Their economic power may be even less.

The largest source of sports team revenues derives from sponsorships. Washington’s largest sponsors include FedEx, Bank of America, and Coca-Cola. In a very real sense, the buck stops with the sponsors. If they decide the name should be changed, you can be sure the name will be changed. But so far these companies, which hold themselves out as socially responsible corporations, have been busy starring at their shoes when the team name issue has come up.

It is interesting to contrast the muted reaction among the NFL, the Washington franchise, and the sponsors on this issue to that of the NBA last year when the then Clippers owner Donald Sterling voiced racist remarks. Sponsorships were yanked, rightly so, in a heartbeat. That was the responsible thing to do, but also overwhelmingly the right thing to do from a cost accounting perspective. But those same numbers don’t come into play for the NFL or the Washington team. So they take no action.

Most worrisome is that the real calculus at work here is one not just one of insensitivity, but is one feeding the roots of racial hatred. Could it be that the team and sponsors fear that if they change the team name they will anger a part of their core base, who actually harbor ill-feelings to Native Americans? I hope not, but it is hard not to worry that such is the case.

In any case, it is clear that regardless of the debits and credits, for the NFL, the Washington team, and the businesses that are the major sponsors, social responsibility is about cost accounting, and not about doing the right thing for the sake of it. While we may not expect any more from the NFL, we should expect more from the likes of FedEx, Bank of America, and Coca-Cola.

Perhaps the social responsibility executives at those firms should have their offices moved a little further away from the accounting department.

 

 

 

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