The Coke Machine - Michael Blanding [68]
Of course, there were limits to what a corporation could do—since legally its obligations were to increase profit for its shareholders, not spread its wealth to solve the world’s problems. Henry Ford had found that out in 1916, when his Ford Motor Company was sued for using profits to give discounts to customers instead of dividends to shareholders. The judge in the case sided against him, ruling that “a business corporation is organized and carried on primarily for the profit of its stockholders.” It’s that principle that has caused Joel Bakan to argue that corporations are essentially “pathological” entities—maximizing profit at the expense of any other good—whether workers’ rights, environmental improvements, or even its own customers’ pocketbooks. “The corporation’s legally defined mandate is to pursue, relentlessly and without exception, its own self-interest regardless of the often harmful consequences it might cause to others,” he writes.
That’s not to say that corporations can’t do good, however, so long as their efforts align with their profit motive. The second wave of corporate social responsibility began in the 1970s, when, faced with challenges from consumer advocates like Ralph Nader (and CSPI’s Michael Jacobson), corporations realized that investing in social causes could serve as a kind of insurance against criticism. It was in this era that Coke’s Paul Austin pursued his “halo effect” with hydroponic shrimp farms, desalinization plants, and soybean beverages that he argued could help earn goodwill in the developing world at the same time they helped make Coke’s vision of global harmony a reality.
Surprisingly, the practice of CSR was further entrenched by the Reagan administration, which encouraged voluntary corporate giving as a way to fill the void left from cutbacks in social programs. Even while Goizueta sloughed off the do-gooding subsidiaries acquired by his predecessor Austin, Coke established the Coca-Cola Foundation in 1984 in an effort to “enhance our ability to meet the growing needs of the communities we serve, and to provide the company with an established, forward-looking program of charitable giving.” Historically, of course, Coke had long given to charity, dating back to Asa Candler’s first gifts to Emory University. But while Candler resented the obligation to give, and Robert Woodruff earned the nickname “Mr. Anonymous” for the lengths he went to avoid credit for his charitable giving in Atlanta, Goizueta ensured that the new Coca-Cola Foundation would go out of its way to gain publicity for its actions. “It’s not that we plan to be boastful now, but we plan to step out in our name and give at a level that we can be proud of,” said its first president at the time.
While the Coca-Cola Foundation was ostensibly independent from the corporation itself, it focused its efforts in areas closely aligned with the goals of the company, concentrating particularly in the area of Coke’s most important market—children. Neatly getting around Coke’s policies about advertising to children, Coke instituted a $50 million giving program to elementary and middle schools throughout the 1990s, and followed it up with a $60 million gift to Boys & Girls Clubs that came with an exclusive beverage agreement with the organization in 1997.
In fact, Goizueta was one of the pioneers of “strategic philanthropy,” the newest trend in CSR that emerged in the 1990s. Instead of spreading money around broadly to a number of causes in an effort to be seen as a good corporate citizen, corporations increasingly began tying their nonprofit foundations to the image they