Amazon Has a Chance to Redefine Corporate Responsibility

Bloomberg View , October 17, 2017

Amazon’s search for a second headquarters presents the opportunity to take seriously the much-abused concept of corporate social responsibility.

The ideal asserts that a good company doesn’t just maximize profits. It acts as a good corporate citizen. But what does that mean?

In practice, “corporate social responsibility” is usually shorthand for embracing left-of-center causes. Companies pay obeisance, and sometimes money, to racial and gender diversity, recycling, women’s health, energy efficiency, gay pride, public schools, sometimes the arts. They use “social responsibility” to signal solidarity with current or potential employees, to draw attention to the brand, or to diffuse criticism for other actions. It serves as employee compensation, brand-building and protection money.

Amazon’s headquarters search offers the opportunity to make it something more.

The concept’s frequent misuse doesn’t make corporate social responsibility a meaningless phrase. A corporation does have ethical responsibilities that go beyond its employees’ individual moral duties, and those responsibilities may sometimes conflict with the short-term interests of shareholders.

To be a good corporate citizen requires acting to protect the efficiency and fairness of the system that allows the company to prosper in the first place. True corporate social responsibility prohibits using political influence to undermine competition and erode legal equality. It means not soliciting favors that hurt rivals or offer advantages unavailable to those without connections.

So Amazon has a choice. It can act as a responsible corporate citizen, viewing its headquarters search as a challenge to get cities thinking about how to create better environments for all sorts of enterprises. Or it can ignore ethics and go looking for handouts.

Local officials face the same decision. They can try to create the best possible environment for their citizens, including the potential Amazon headquarters. Or they can rob Peter to pay Jeff, siphoning money from taxpayers and throwing it at the retail giant.

Amazon’s request for proposals leaves room for either possibility. On the one hand, the company asks locales to spell out potential payoffs: “Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.”

No wonder critics are charging Amazon with looking for corporate welfare, practicing crony capitalism, or even demanding “blackmail.”

But a low cost of business need not entail special favors. And there’s another side to Amazon’s search criteria. The company says that “a stable and business-friendly environment and tax structure will be high-priority considerations” and later emphasizes the importance of a “stable and consistent business climate.” A place where businesses must solicit customized loopholes, rather depending on reasonable and equally applied tax and regulatory policies, is neither stable nor consistent.

Take New Jersey, where Gov. Chris Christie is rushing through special legislation permitting the state to give Amazon up to $5 billion in tax breaks. He wants to sign the bill before leaving office Jan. 16, so “this thing will all be adopted before any new governor comes in and once it’s on the statutes he can’t stop it from happening,” Christie told Observer NJ reporter Christian Hetrick. That doesn’t sound like a stable and consistent business climate. It sounds like crony capitalism of an especially unsavory sort.

Customers love Amazon, and it has earned its popularity by relentlessly focusing on serving them, even at the expense of near-term profits. The company clearly can take the long view.

As it searches for a new headquarters city, it should consider what its high-profile decision says about its values, priorities, and identity.

Does it want to define itself as a scrappy competitor devoted to its customers’ welfare? Or does it to be a lobbying shop looking for protection and subsidies? Does it want to sow further public cynicism, convincing the little guy that the game is rigged? Or to strengthen the rule of law? Even if all it cares about is the bottom line, the company might consider the dangerous resentment that taking the highest bid might generate from the dozens of losers.

Amazon’s primary criteria do in fact benefit the public at large: transportation links, short commutes, strong universities, “a community where our employees will enjoy living, recreational opportunities, educational opportunities, and an overall high quality of life.” It’s not just about the money. A good place to live and do business is a good place for everyone, not just those who can get the mayor on the phone.