COMPASSION IS GOOD FOR BUSINESS
On September 12th, 2005, Kiril Sokoloff hosted a meeting between the Dalai Lama and 500 business and money-management leaders. The subject: Compassion is Good For Business. Although this may sound obvious, we see few examples of large corporations behaving in a compassionate way.
His Holiness the Dalai Lama and Kiril Sokoloff
What I Learned This Week - December 1st, 2005
The Power of Compassion: “Compassion Is Good For Business”.
This is a series we began in 2001, prior to the WorldCom and Enron business scandals. We made the case that there was little trust between consumers and most big corporations and that this was a very dangerous situation. We argued that a business franchise without trust was a very tenuous enterprise.
For the past four years, we have been relentlessly bearish on the pharmaceutical industry for a variety of reasons, including loss of trust with the American public. We recall vividly the anthrax scare in the U.S. after 9/11.
The Boca Raton headquarters of American Media received an envelope with anthrax, and shortly afterwards, the mailroom at the U.S. Congress was also targeted. Bayer AG's antibiotic Cipro was the best treatment for anthrax. Yet, we recall the company spent weeks dickering with the U.S. government over price.
Instead of offering unlimited amounts of Cipro at a vastly reduced price, or for free, and winning the hearts of the American people, Bayer missed this historic opportunity to win loyalty from this country during a time of great emotional crisis and need. We have also railed against the lack of compassion shown by pharmaceutical companies during the AIDS crisis in Africa. For years, they refused to make AIDS drugs available at a price that African nations could afford.
Finally, after much negative publicity, the drug companies capitulated. But, when you are forced to do something by public opinion, you lose the public relations battle and get no credit.
A more recent example was the historic lost opportunity for the major oil companies during the Katrina crisis.
It was obvious to even the most casual observer that the Katrina-related spike in oil and gas prices would come back to haunt the majors when 3rd quarter earnings were released. And, what a quarter it was—$30 billion in profits for the top 5 domestic operators. Suppose the oil companies had been preemptive, acting compassionately, even if it was solely in their own self-interest. Suppose the CEOs of the 5 major oil companies offered $100 million each in aid to the suffering victims of the hurricane, and used their vast resources to accomplish what the government was unable to. A $500 million price tag, 1.6% of the quarter’s profits, and the oil companies could have won a public relations coup the like of which they have never had since oil was first found in Titusville, Pennsylvania in 1859.
Instead, the oil companies were seen as profiting from the distress and loss of the hurricane victims, a public relations nightmare that will be indelibly imprinted in the American psyche for a very long time. Republican Pete Domenici summarized the quandary as follows: “Polls show that our people have a growing suspicion that the oil companies are taking unfair advantage of the current market conditions to line their coffers with excess profits…My constituents think that somebody rigs these prices, that in the process somebody is getting ripped off.”
We have warned of the risks of an excess profit tax on the major oil companies for several years. Therefore, it should come as no surprise that Senators Schumer and Snowe sneaked a windfall profits tax into the Senate budget reconciliation before Thanksgiving. The Wall Street Journal estimates that the proposal would raise the tax liability of oil companies by an estimated $5 billion next year. An example of what rewards can be reaped from giving can be seen in the brilliant marketing strategy employed by Coca-Cola during World War II. In 1942, Robert Woodruff, Coke’s then chairman, made the following promise: “Every man in uniform gets a bottle of Coca-Cola for five cents, wherever he is, and whatever it costs.”
Due to sugar rationing, at the time, Coke clearly lost money on this offer—short term. Up until World War II, Coke was available worldwide, but was only popular in Canada, Cuba and Germany. Woodruff’s offer was backed by the military because Coke was viewed as intrinsically American and would be an excellent way to boost war-time morale.
During the war, Coca-Cola built bottling plants all over the world to supply American soldiers. By the end of the war, Coke had 64 bottling plants that spanned every continent except Antarctica.
By 1946, Coke had made enormous inroads into markets all over the world and created many loyal customers among the returning soldiers.
Of course, magnanimity in victory is also wise as we saw in the Marshall Plan that rebuilt Europe after WWII. By contrast, the assassination of Abraham Lincoln, as we have written, did more damage to the South than the entire war itself. As Jeff Shaara writes in The Last Full Measure:
“The death of Lincoln ripped apart the nascent healing of a battered nation struggling to put the deep and bloody wounds behind. In the North the outrage grew, and to many it did not matter that the plot had been little more than he mindless actions of a conspracy driven by one fanatic, a man named John Wilkes Booth. The voices of reason were swept away, drowned out by emotional cries of revenge, an emotion that would give fuel to the self-serving needs of powerful men in powerful positions. They would now take control for the weaknesses of Lincoln’s successor, Andrew Johnson, could easily point their fingers into the heart of what had been the Confederacy, using the emotion and the sorrow of a nation to punish those who could too easily be blamed...
“Even the darkest hearts, where resistance to the peace, to the Union, was still hard, it was clear that the assassin’s bullet had taken away much more than one man. Now would come the angry times, a new brutality; not the guns and the blood of war, but something subtle, quiet and powerful. What had not been taken away from the southern people by the great crushing weight of the war would now be taken by a new kind of violence, a policy of reconstruction that would do everything Lincoln would not. The wounds would not be allowed to heal, the vision of the bright future would be pushed aside, replaced by a dark vision of revenge. Instead of healing, the wounds would be probed and ripped, would become scars that would never quite close, would be kept alive with anger and hostility for generations.”
