Financial Strategy, Second Edition

22

Controversy Incorporated

David Cogman and Jeremy M. Oppenheim

Milton Friedman once famously said that “the business of business is business.”¹ Today, however, the search for growth increasingly takes companies into controversial areas in which the rules of the game can't be stated so neatly. Companies developing new high-growth opportunities in fields from technology to education to economic development must often navigate highly public ethical and social concerns and overcome restraints far more subtle than those encountered in standard business practice or law. Increasing numbers of large corporations thus find themselves caught between two seemingly contradictory goals: satisfying the investor's expectations for progressive earnings growth and the consumer's growing demand for social responsibility.

Companies have become more socially responsible primarily because apparent irresponsibility can carry a high price (see Box 22.1). Although many companies now spend significant sums of money to comply with their own codes of ethical conduct, most view these expenditures only as an essential cost of doing business, not as an investment that will provide a return. For some of these companies, however, this spending may well be a source of growth, since many of today's most exciting opportunities lie in controversial areas such as gene therapy, the private provision of pensions, and products and services targeted at low-income consumers in poor countries. These opportunities are ...