Here's another question for citizen-shareholders: What should be corporate America's philanthropic response to the aftermath of Sept. 11?
Some will say, simply enough, that it should be huge: Corporations have a lot of money, so they should make large financial contributions to various relief efforts and charitable campaigns. But how large is large? Should the size of the corporate donation be gauged against the size of the corporation's profits? Should companies in some sectors give more than others? Is it wrong for a firm to give nothing at all?
Within 48 hours of the attacks, Reuters figured that various American firms had offered up $50 million to various relief efforts. DaimlerChrysler and Microsoft both pledged $10 million. General Electric also pledged a reported $10 million. And Walt Disney offered $5 million.
Those are big numbers, but maybe they lack context. Microsoft (publisher of Slate) had profits of more than $9 billion last year. General Electric has profits of more than $12 billion. Disney earned about $920 million. One recent estimate holds that DaimlerChrysler is on track to have an operating loss of more than $2 billion in 2001. So, there's some context. Disney's pledge is smaller in raw dollar terms than GE's and Microsoft's, but it's much larger in relation to profits. Does any of this mean that any particular company's donations are more admirable than the others?
Or, perhaps, more foolish? There has long been a rather strong feeling in some corners of the business world that corporations have one duty and one duty only, which is to make money for their shareholders. In the long run, this argument goes, this is what keeps a firm competitive and innovative and keeps the profit motive pristine, which is the best thing for America, and indeed for the world. Obviously believers in that idea would hold that corporations shouldn't give away any money at all, now or ever.
Well, you say, surely it's just a small and extreme fringe who would hold such views in relation to the September attacks. But I don't know about that. Isn't recovering our economic stability, getting back on the growth path—not to mention boosting share prices—supposed to be more important than ever these days? And so doesn't it follow that companies' real patriotic duty is to grow earnings, period? If that is so, then isn't DaimlerChrysler doing a disservice not only to its American shareholders, but by extension to the commonweal, by giving away money when it's not earning any? What about Disney, which has pledged its millions at a time when it appears to be facing a profit squeeze because tourism is off?
Now consider another angle. Assuming you think companies should give money, should some give more than others? Take oil companies. Why are U.S. troops stationed in Saudi Arabia, one of Osama Bin Laden's apparent motivations for his heinous acts? You can't say it any more concisely than Deputy Secretary of State Richard Armitage did on Frontline: "It's very essential … that we protect our access to the oil which flows out of the Persian Gulf." In light of that, does it seem that oil companies ought to pitch in more than others? ExxonMobil (2000 profits of more than $17 billion, tops in the Fortune 500) has donated $5 million and says it will go as high as $20 million in matching "employee, retiree, dealer, and distributor contributions around the world on a three-to-one basis." Planned mergees Chevron and Texaco (combined 2000 profits about $8 billion) have pledged $5 million apiece. Is it enough?
What about the defense industry? The first Reuters story referenced above was sent to me by helpful "Moneybox" reader Angie D., who wonders whether some corporations are really giving enough and who in passing mentions Northrop Grumman. On Sept. 18 that company announced a $1 million gift toward relief efforts, a good deal less, in absolute terms, than others mentioned here. Its profits last year were $600 million, but it seems likely that, along with other defense firms, it will have a better year in 2001 as a result of the attacks and the U.S. response to them. Certainly that's the view reflected in their share prices. Does this scenario suggest an obligation to give more to relief efforts?
Perhaps the defense firms ought to issue stock options to the relevant charities, using their Sept. 10 closing as the exercise price. Maybe that sounds glib, and maybe this whole line of questioning is misguided. The point is, cheerleaders for the citizen-shareholder idea seem to believe that having a large investor class should make it easy to sort out what's appropriate, and what's smart, and what's proper in the relationship between corporate America and America broadly defined. But to me, it all seems more complicated than ever.