Demand for Socially Aware Investment Options Not Being Met, Executives Say
Corporate social responsibility is becoming a key factor in the majority of Americans' investment decisions, but few companies are performing well in this area, according to a recent survey. And some mutual fund groups are taking note.
Nearly three quarters of Americans now consider social responsibility in their investment decisions, 12% of whom would buy socially responsible stock even if it led to a lower return on investment, the
Hill & Knowlton survey of 2,594 individuals found.
'If a company can articulate a philanthropic program that ties in with business, that's probably a compelling message for investors because it would justify the activity. But if the companies makes the point that its strategy is tied to the bottom line, that's only going to feed skepticism,' Hill
& Knowlton Director of Worldwide Corporate Practice Harlan Teller warned.
Meanwhile, corporate America's reputation in this area is poor -- just 2% of Americans think that U.S. companies are excellent corporate citizens, while one quarter said companies are 'above average.' The majority, 53%, said U.S. companies are underperforming in this area.
'Companies continually misread the desire by people to invest in companies they feel have principals. Companies never seem to get it, but the public sure does,' said Peter Kinder, president of corporate social research firm Kinder, Lydenberg
The startling thing about U.S. business is that it doesn't ask why two or three generations were so loyal to electric utilities and AT&T Corp subsidiaries. The reason was that they were perceived as operating ethically in communities. Companies these days have lost that message, he said.
'The old Woody Allen line is that 90% of life is just showing up. The electric companies were always there, and it was the same for banks where the senior teller would also be the church treasurer. If companies are going to survive a downturn they have to tend these fences,' Kinder advised.
To improve the public perception of sponsored philanthropy, companies have to involve employees and focus on one area like education, welfare or health instead of taking a more scattered approach, Teller said.
'Companies really need to use employees in a high impact way-it's a lot easier to trust people than it is to trust big institutions. Most Americans are distrustful of big businesses. The more a company can humanize its social programs, the more the community will identify with the company,' he said.
This perception may surprise some company's investor relations executives who could name several socially responsible programs their companies have undertaken, but the survey suggested that most members of the public react to corporate philanthropy with cynicism.