Corporate social responsibility is not a high priority for U.S. organizations. There is a viable alternative to raising taxes on the wealthy and on corporations available to the American economy. This alternative can restore funds to the federal and state governments and decrease the U.S. unemployment rates. It may take courage, but exercising this alternative can result in a win-win situation for the American economy. And it is as simple as fulfilling corporate social responsibility.
Harvard's corporate social responsibility initiative defines corporate social responsibility as encompassing "not only what companies do with their profits, but also how they make them. It goes beyond philanthropy and compliance and addresses how companies manage their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm."
Fulfilling corporate social responsibility helps keep capitalism in check. Harvard's initiative places economic success in part on the organizations that benefit from that success. Currently, American organizations are stockpiling cash while the American economy is experiencing joblessness and loss of disposable income. I can't say I know what they are doing with all that cash. I can say it sits on the balance sheet as a current liquid asset yielded insignificant returns. And I wonder-are these stockpiles a shirking of American corporate social responsibility? The echo from the depths of the economy might say yes.
Seeing all that unproductive cash, I wondered how organizations were obtaining so much cash in a shrinking economy. The average American household's disposable income has shrunk, so consumer spend certainly isn't a major factor. Digging deeper, I realized that many of these American corporations are offshoring jobs and reaching for increased automation in processes. According to the U.S. department of labor, "Cost cutting by U.S. industries in almost every sector of the economy will continue to change the workforce. To reduce labor costs, some jobs are being sent offshore while others are being replaced by technology or are being filled with lower cost workers."
This has real implications for the U.S. economy. As an accountant, I wanted to see the implications, so I decided to do a little analysis on an American organization I was familiar with. Using the annual 10-K reports filed 2007 through 2011 for this U.S. organization, I found that the organization increased net earnings by 36.5% across the five-year period. During this same period, the organization experienced only a 10% increase in cost of goods, and a 25% increase in G&A This same organization, during this five-year period, has offshored a large portion of its back office finance and product production equating to a shift in payroll dollars of approximately $803 million.
Could this organization be remiss in managing their economic, social, and environmental impacts, as well as their relationships in all key spheres of influence: the workplace, the marketplace, the supply chain, the community, and the public policy realm?
The impact of the payroll shift for this one organization on the U.S. economy equates to a 32% loss of federal revenue (individual states of residence lose taxes also). For example, the shift of $803 million dollars in wages and salaries to offshore locations denies the federal government $200 million in individual federal payroll tax, $50 million in social security tax, and $12 million in Medicare tax.
While the economy is composed of many factors, think about changing just this one factor in the U.S. If American corporations could loose their death grip on cash and exercise their American corporate social responsibility, these organizations could infuse the U.S. economy with the jobs that exist offshore. And, as a side note, the organization analyzed in the above example showed a loss in the basic earnings per share of 17.9% during the five-year period.
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