One of the major discussions I was engaged in at SOCAP09 was on corporate structures. The main reason there is a need for a new corporate structure that accommodates businesses that go “beyond profit” is that company managers have what’s called a “fiduciary obligation” to maximize profits to shareholders. This is rooted in the law, which is rooted in flawed economic theory. This inhibits businesses from practicing discretion when it comes to social and environmental sustainability, because they can technically be sued by shareholders for doing so!

This raises an interesting question about the legality of corporate philanthropy, and is one of many reasons people like myself argue that companies should integrate “doing good” into their core business operations. The concept of cause marketing was born out of this thought:

Philanthropy accounts for less than 1% of corporate expenditures, where marketing accounts for around 15% on average. Through cause marketing, companies can increase their ROI by creating a more loyal customer base while the causes can tap into a much more vibrant source of funding.

Critics of cause marketing often argue that it is disingenuous, does not help the cause as much as giving would, and in some cases hurts the cause more. Here are some critiques that I heard last week at SOCAP:

• Ethos Water, a company that sells bottled water and donates millions toward water sustainability projects worldwide, is doing more harm than good. Selling bottled water is the worse thing you could for the environment.
• The Starbucks (Red) campaign is nothing more than a marketing ploy. For what it costs to produce the (Red) tumbler, for example, only $1 goes to the Global Fund. If the cost of making the fashionable cup were simply donated, it would have a much larger impact!

The counter-argument is that causes are able to tap into lucrative consumer markets and generate funding from a source that otherwise is unlikely to “write a check and put it in the mail.” My post yesterday about the authenticity behind cause marketing and consumer education sparked a comment from Kevin Asuncion, who wrote, “I think consumer taste is shifting towards more socially and environmentally [sustainable companies] as more and more responsible players enter industries,” thus pushing companies toward being more authentic in their cause marketing and CSR campaigns.

I responded that, “one of the coolest things in the cause marketing space has been the fact that cause-driven consumerism has become fashionable, and it is the consumers that end up educating one another on why their brand (and their identity with that brand) is MORE socially responsible than the other. It sparks a good discussion that raises awareness and holds companies accountable.”

So how do you see it?

How big of a barrier to “doing good” is a company’s fiduciary responsibility to its shareholders?

Is cause marketing a more viable funding option for the causes themselves? Or is it exploitative?