Community commitment: the relationship between corporations and communities
by Yasuhiro Morii
Introduction: What is corporate social responsibility? The basic concept of
corporate social responsibility is an obligation beyond that required by the
law and economics, to pursue long-term goals that are good for society. Usually,
socially responsible companies are expected to be profitable (carry their own
weight or fulfill their economic responsibilities), to obey the law (fulfill
their legal responsibilities), to engage in ethical behavior (be responsive
to their ethical responsibilities), and to give back through philanthropy (engage
in corporate contributions). In the last forty years the concept of business
social responsibility has continued to evolve and expand. Today, corporations
have been expected to assume more voluntary social programs. Many corporations
have come to grips with those programs, but some corporations have misunderstood
the meaning of social responsibility. They use the word ³Corporate Social Responsibility²
as a slogan or for their profitability. For example, one company stated on their
ads ³We Care for Our Environment² but they never act or respond to it. Robert
F. Scherer and Crystal L. Owen, stated in their article, ³Consumers tend to
buy the products of a corporation that they perceive to be socially responsible.
In 1991, 45.6% of respondents to a national survey said that they would buy
from a company that contributes to charity.² This survey clearly identify why
those corporations attempt to be socially responsible. This is one of the reasons
why I decide for this research into corporate social responsibility. Although,
I knew many corporations that operate good or bad manners, finding socially
responsible companies was a time-consuming process, because there is no official
guidelines to define what socially responsible is. For example, Company A donates
a lot of charitable funds to the white community but does not do anything for
the black community. Some scholars might say Company A is a socially responsible
because of its donations to the white community. This example may remind you
of the article, ³Political Aftershocks² in Ecology of Fear. In the article,
many people who live in Beverly Hills received FEMA grants, but most of the
people who live in Crenshaw District could not receive FEMA grants. You might
think this is an unfair treatment, but some scholars may say what the government
had done was socially responsible. Another purpose of this project is to find
the companies that operate in a socially responsible manner and define the relationship
between those companies and the communities. I asked some of my classmates about
this social responsibility issue and I found out that most of them believe that
almost every corporation contributes to their communities for profitability.
Then I asked myself, ³Why they do not believe the existence of corporations
which operate in socially responsible manner?² I think those people who do not
know about corporate social responsibility can not get any information of good
corporations, because unlike those bad corporations, good corporations do not
advertise their community contributions. I decided to choose two companies,
Bank of America and Citizens Bank of Canada, because it may convenient for understand
their community contributions by comparing each company. The first task for
this project was to identify which communities or people can be affected by
these banks. Bank of America operates in the southwestern states, mainly in
California, therefore most of the Bank of Americaıs contributions are specially
designed for the communities in California. But once the merger with Nations
Bank completes successfully, Bank of America will affect communities nationwide.
Unlike Bank of America, Citizens Bank is very small and new, but its operation
is very unique. Citizens Bank does not have any branches or the bank provide
services either by Internet, fax, or telephone. Therefore, its customers are
not only the Canadians but also from many other countries. But, the bank mainly
provides the services to Canadians. In the following sections, I would like
to describe and analyze each bankıs community contributions and state some references
which relate to these banks activity. Bank of America: Among the ten leading
employers in the five county area, Los Angeles, Orange, San Bernadino and Ventura
counties, the first four employers are all government organizations and Bank
of America is the fifth leading employers in the area. More precisely, Bank
of America has largest employees among non-government organizations. As of March
1996, Bank of America has 26,563 employees in those five counties and approximately
two third of the total employees work in Los Angeles County. This information
indicates that what Bank of America can affect significantly our daily lives.
Although most U.S. companies didnıt consider of corporate social responsibility
as necessary during the early 1900s, Bank of America was the one of the few
companies who knew the importance of what a corporation should do for community.
A. P. Giannini, founder of Bank of America, stated in 1940, ³In everything we
do we are actuated by one motive to build our neighborhood, our community
and our state. In that way we are building a better America.² This was the base
of the bankıs philosophy. Giannini was the hero among immigrants, farmers, and
laborers, because he was the only one who lent the money to those people. When
he made a loan, he always looked an applicantıs hand. If the hands were calloused,
he figured the person is working, and he loaned money. This was the Bank of
America when it was first established. But time has been changed. As the bank
has grown, Gianniniıs philosophy has disappeared. Unfortunately, some of the
Bank of Americaıs community commitments are not within the scope of corporate
social responsibility. Using corporate responsibility as their slogan is one
of their strategies, and some of their programs were just designed to meet requirements
under the certain regulations. Under the Community Reinvestment Act, all the
depository institutions have to help meet the credit needs of the communities
in which they operate. The goal of this act is to make sure that the financial
needs of the low- and moderate- income neighborhoods are being met. It is important
to mention some of Bank of Americaıs community commitment programs. These programs
are such as ³The Volunteer Time for the Schools Program² which provides the
opportunity for associates (they call their employee ³associate²) to volunteer
up to two hours a week of paid time in K-12 public or private schools. In the
association with Housing and Urban Development committee, they provide ³Neighborhood
Advantage Program,² which helps low- and moderate- income people (income less
than $39,840 in Los Angeles limitations may vary among other states) who wants
to buy a house. This program includes zero down payment home loans to help people
own a house much easier. Also, the company has recently announced a 350 billion
dollar, ten-year commitment to community development lending and investment.
The program includes specific lending and investment goals for affordable housing,
small business, consumer lending, and economic development. Also, as a part
of the commitment, the company pledges to acquire, build, or rehabilitate 50,000
affordable housing units during the next ten years. Two main programs are the
following on which the company spends a tremendous effort to make a better community
they deserve a closer look: (1) Community Catalyst Program and (2) Beyond Sprawl.
(1) Community Catalyst Program: this charitable contribution is especially designed
for Los Angeles County, which is often known as a melting-pot society. In 1997,
the company announced plans of an 80% increase in contributions in Los Angeles
County including $5 million contribution for the Walt Disney Concert Hall in
downtown Los Angeles. Also, the company established a new program called ²Community
Catalyst Award² which started this year. This new program has given an unrestricted
$5,000 donation to non-profit community-based organizations each week throughout
this year. The main purpose of this program is not only to recognize outstanding
examples of grass-roots community development but also to help minorities, homeless,
youth people who are struggling to. The nominees have to meet some of the following
requirements to be eligible: Creating jobs for the unemployed (including
job placement services with post-employment support to clients). Providing
job training services to the unskilled and under-skilled. Producing
affordable housing for low-income and homeless families and individuals.
Increasing home ownership opportunities for first-time home buyers.
Providing child care development services linked to support family services.
Improving neighborhood infrastructure or environment. Helping
families to move from public assistance to gainful employment. Organizing
and developing local leadership in neighborhoods and neighborhood networks.
Improving local educational performance. Note: < http://www.bankamerica.com>
Some of the recipients of this award can give you some indication of what Bank
of Americaıs purpose. Actually, you can categorize those recipients into three
organizations; (a) creating jobs or providing job training to homeless and young
people to help them return to the economic mainstream, (b) to providing or produce
affordable housing for low-income and homeless people, not only to improve their
living, but also to develop their self-esteem, (c) providing educational opportunities
to minorities and young people. (a) The Los Angeles Free Clinicıs Project STEP;
project STEP (Short Term Employment Program) provides job training, job search
and retention workshops, and coordinated case management for homeless and especially
for runaway youth in the Hollywood area, which is sometimes described as ³ground
zero² for the local runaway and homeless youth population. Their goal is to
build their self-sufficiency and help them off the streets. Recall from the
article, ³Half-moon of repression,² the article discusses about a group called
the Peopleıs Republic which goal is to banish the homeless from sight. The Peopleıs
Republic is a complete contrast to the STEP. Other recipients who categorized
in this type of organizations are Gramercy Housing Group, A Place Called Home,
and etc. (b) Habitat for Humanity/High School Initiative; the main purpose of
this program is to provide affordable houses to low-income families and to encourage
high school students to get involve with the community. A selected family who
will receive a zero-interest, 20-year mortgage loan provided by Habitat and
those payments will be reinvested for other projects. Actually, this program
established only a year ago. In June 1998, after nearly a year of fund-raising,
students from six Los Angeles area high schools started to build their first
home in South Central Los Angeles. It took them nearly three months to complete
their mission. After the completion of their first home, they are looking forward
to turn this trend into a nationwide campaign. Other organizations within this
category are Upward Bound House, Portals, and etc. (c) Centro Latino de Educacion
Popular; this program was designed to provide service for illiterate Latino
adults. Their mission is to help them improve their English skills and other
functional skills. By improving their skills, the organization seeks to open
the door for further education and an improved standard of living. Other organizations
within this category are Korean American Coalition, Youth Employment Systems/YouthBuild,
and etc. (2) Beyond Sprawl: this is a joint report sponsored by Bank of America
and association with the California Resources Agency, Greenbelt Alliance, and
the Low Income Housing Fund. This report calls for a ³new sense of urgency²
about managing growth in California in order to improve the stateıs competitiveness
and quality of life. The report stated that, ²We are no longer afford the luxury
of sprawl. Our demographics are shifting in dramatic ways. Our economy is restructuring.
Our environment is under increasing stress. We cannot shape Californiaıs future
successfully unless we move beyond sprawl² and also, ³it is meant as a wake-up
call to all Californians that the sprawl issue has a new urgency in the state,
and that all of us can play a role in addressing the problem.² This report argues
that if the current trend does not change, the negative effect of sprawl could
become be significant. For example, because of the increase of dependency on
the automobile, the cost of air pollution has increased. Furthermore, due to
the sprawl, driving distance and hours have increased. According to the report
³The South Coast Air Quality Management District estimated that air pollution
in the four-county Los Angeles area costs $7.4 billion per year, or about $600
per resident.² Also, they believe that sprawl will lure middle-class residents
from older neighborhoods and will create destructive economic segregation and
robs social stability of those neighborhoods and the distribution of income
will also become more skewed, becoming increasingly difficult for low-income
people to escape poverty. Therefore, in order to resolve these problems and
many others, they hope that immediate actions should be taken, including increased
investment of capital and resources in inner cities and older suburban areas,
especially investments that create new jobs: higher-density development on the
suburban fringe; and requiring new developments at the metropolitan fringe to
pay their full cost, including costs associated with new road construction,
development of new water supplies, and mitigation of environmental problems.
So far details of Bank of Americaıs community contributions have been explained.
Most the people might think their commitment is socially responsible, but there
are a few articles which state that its commitments are not socially responsible.
Bank of America has only two minorities among its thirty directors, and there
are only two African-Americans, two Hispanics, and two Asians among its 100
managers. This fact indicates that the bankıs decisions are made by white-oriented
value judgment. A good example is that less than one-half of one percent of
the dollar value of the loan portfolios of Bank of America was invested in African-American
communities in 1990. More precisely, more than 99% of their loans were invested
in other than African-American areas. Actually, this is a common practice among
financial institutions in California. For example, Mitsui Manufactures Bank,
the U.S. subsidiary of the Japanese bank, and the worldıs second largest bank,
admitted that it had made no home and business loans to African-Americans. Also,
there are no African-Americans or Hispanics on its board of directors and none
of the seventy-seven business people on its California advisory boards was a
minority. But, recently, this trend has been changed. Including Bank of America,
many financial institutions have found profitability by lending to small business
and minorities, including African-Americans. They are also recognizing that
grass-roots lending to poor communities can be a sustainable, attractive and
profitable portfolio option. There are some reasons for these changes. First,
California and the Western states, driven by new small businesses, are once
again leading the U.S. economy in growth. Second, those financial institutions
realized that lending in low-income communities has as a good record on repayments
as do that in wealthier neighborhoods. For example, Family Savings holds $270
million in mortgagees, 85% of them in central Los Angeles, and there is no greater
loss ratio than in any other Southern California area. Los Angeles Times. Sep
25, 1997, reported that Bank of America pledged $140 billion in loans over 10
years to lower-income and minority borrowers, but this is not charity, just
good business. Also, the lenders or financial institutions typically commit
to community loan programs when they want support for a merger or acquisition.
Thatıs been the case in 1992, which Bank of America promised to lend $12.1 billion
in low- and moderate-income areas over 10 years as a condition of its merger
with Security Pacific Bank. Moreover, this commitment was not made voluntarily.
Actually, Bank of America was forced to pledge this lending by the Greenlining
Coalition, a California coalition of sixteen major organizations representing
African-Americans, Asians, Hispanics, small businesses, churches, consumers,
the disabled, women, and veterans. Although the commitment was not voluntarily
set, it was fulfilled in less than five years. Based on that experience, Bank
of America decided that lending to lower-income borrowers was profitable and
could be done with an acceptable level of risk. According to Bank of America,
³May 20, 1998, Bank of America has announced a $350 billion, 10-year commitment
to community development lending and investment, by far the largest and most
comprehensive program ever for community development lending by a United States
bank.² This commitment also serves the same purpose of. The reason for this
commitment is most likely because of the current merger process between Bank
of America and Nations Bank (As of November 1998, the merger has been approved
by the Justice Department). The employees of Bank of America tend to just let
the customers wait in a long line, because they see the customers as numbers
in front of them. Also, Consumer Reports, stated that including Bank of America,
there are nine banks in California which offers a checking account that charge
a fee for in-branch deposit or withdraw. It is almost impossible to find this
type of checking account in any other state. Although Bank of America has other
kinds of checking accounts, the bank should not have such checking accounts,
if the company is really trying to contribute to the communities. Fortunately,
this trend has been changing. In 1997, Bank of America launched a $60 million-plus
advertising campaign, in order to change its impersonal image. The new campaign
has been more focused on consumers as individuals than previous ads, ³Banking
on America.² Their new slogan is ³How can we help with the next 50 years?² According
to Marnie Delaney, Bank of America senior vice president and director of advertising,
³We need to demonstrate we understand what is going on in peopleıs lives and
show we have the desire to help at a time when people are pretty confused.²
Also, as a part of the campaign, employees were asked to view an eleven-minute
videotape, which encourages them to see customers as individuals and to understand
their needs. According to Dalaney, ³We want our employees to think about customers
not just as numbers in front of you but as people who have just gotten married,
or as people who have had experiences employees can identify with.² In order
to find out about the bankıs current conditions, I attempted to collect some
information from Bank of America by sending e-mail with some questions. Unfortunately,
the bank has never replied. Perhaps the questions were perceived is too critical.
Instead of collecting data from Bank of America, I decided to make a questionnaire
(See Appendix A) and asked ten customers of the bank to answer the questions.
In order to make abroad survey, questionnaires were taken in two different time
ranges. The first five questionnaires were taken from 11:00 AM to 1:00 PM, and
rest were taken from 2:00PM to 4:00PM. Also, the majority of people who cooperated
with these questionnaires was women. The reason for this is probably because
of the time range. While I was taking the questionnaire from a lady, either
Caucasian or Hispanic and around mid-forties, she started asking me questions
about what I know about Bank of America. I was so confused, but I explained
to her about the bank. Then she told me, ³I think I should consider taking out
all of my little savings from them.² Statistically, it is not reliable to make
decisions based on the ten questionnaires, but I believe that Bank of Americaıs
service has not been changed yet. Probably their services need more improvement.
Two articles contrary to those ten questionnaires were found. Both were issued
by research corporations which mainly research for companies, which relate to
the corporate social responsibility issues. One company has stated that Bank
of America is one of the 100 Best Corporate Citizens and 75 Best Companies for
Hispanic Opportunity. Another company has stated that Bank of America is one
of the honor-roll companies. Although I do not have a good impression towards
their community commitments, I somewhat agree with their report, ³Beyond Sprawl.²
This report reminds me of two articles in Ecology of Fear: ³Greening the Urban
Desert² and ³The Last landscape.² Both articles criticize urbanization. Some
scholars have argued that if the state carries out Beyond Sprawlıs plan, the
cost would hurt the state. But we have to act now, instead of passing this problem
to future generations. Citizens Bank of Canada: Citizens Bank was formed by
Vancouver City Savings Credit Union (VanCity), the largest credit union in Canada.
Citizens Bank is not only the newest national bank but also it is the first
branchless bank in Canada. The bank also provides financial services 24-hours
a day, seven days a week. Credit Union Management. Dec 1996, reported, ³Richard
Wafer, Vice president of Vancouver City Savings Credit Union, has argued that
Citizens Bank of Canada will use technology to provide a lower-cost alternative
to existing banks that carry heavy branch networks.² It might be true that the
bank is using a lower-cost alternative, but if the bank provides better service
by cutting its cost, that is a form of corporate social responsibility. Jim
Lyon stated, ³Citizens Bank has a solid reputation for leadership in corporate
responsibility.² When Citizens Bank first set out to create a new bank, they
had a clear idea that they didnıt want to be just another financial institutions.
This is one of the reasons why the bank is operated based on corporate social
responsibility. According to Citizens Bank, ³The concept of Corporate Responsibility
is the cornerstone of our operations. And as such, it affects and is reflected
in everything we do. Every decision we make. Every action we take. It is also
reflected in the banking products we develop, and how they can be used in positive
ways. It involves the relationship we have with our employees and the kind of
workplace and culture we are creating together. It defines the partnership we
have with our members, and how we encourage members to have a voice in our operations
and the direction we take what issues we support, what actions we take to
address them.² In order to be a socially responsible bank and to be a new way
of banking institution, the bank place great emphasize on their objectives;
(1) to create better workplace for their employees, (2) to put its memberıs
voice back into banking, and (3) to disclose its activities to the public. (1)
Work place. The bank has striven to design its workplace in a manner comfortable
and efficient for all employees. Their work philosophy is based on the principles
of democracy, equality, and respect for individuals. Therefore, the bank works
with a non-hierarchical structure. More precisely, the bank place great value
on teamwork, open communication, and collaboration. A company who has this type
of structure can grow rapidly. Starbucks is a good example. This chain stores
became a big company in rapid pace, because it had non- hierarchical structure.
Also, Citizens Bank has many programs, which provide better a workplace for
its employees. Examples are tuition reimbursement for secondary education, employee
assistance and legal referral, superior vacation entitlement, flexible work
schedules, and so on. According to Citizens Bank, ³human relations is about
more than policies or programs or pay checks. Itıs about working together to
build a workplace in which everyone is able to meet their personal goals, and
everyoneıs involvement contributes to our success.² (2) Memberıs Voice. Citizens
Bank believes that people want their voice heard in banking. Therefore, the
bank has made peopleıs opinions a key part of its commitment to being a leader
in corporate social responsibility. In 1997, in order to bring this commitment
to life, Citizens Bank sponsored its first forum in four major Canadian cities.
The purpose of the forum is to share with people, including its members, about
how corporations affect families, communities, the environment, and the country.
Each forum had a different focus: how people and communities are coming together
and sharing ideas for the childrenıs futures, how corporations are redefining
and expanding the concept of corporate social responsibility and how business
can play a major role in the socially and environmentally sustainable, how individuals
and communities must begin to assume greater responsibility for themselves.
Some corporations have forums, but the objectives are somewhat different from
that of Citizens Bankıs. Their objectives are either to advertise their operations
or to acquire new customers. Unlike those corporations, the main purpose of
Citizens Bankıs forum is to listen the voice of its customers and communities.
(3) Public Disclosure. When the bank started their service, it set high expectations
for itself, because the bank wanted to be a new kind of bank which listens to
members and is actively involved in supporting positive social changes. Due
to its high expectations, the bank decided to create its own report card. By
disclosing their report card to the public, the bank can get feedback and evaluation
from the public. Based on this feedback and evaluation, the bank can improve
its service and products. This is the most unique attempt ever taken by a financial
institution. The guideline of the report card was based on the Guidelines for
Corporate Social Performance published in 1997 by the Canadian Business for
Social Responsibility (CBSR) and was conducted the review by CoreRelations Consulting
which specializing in monitoring and managing corporate social performance.
Their social report card measures their performance in certain key areas. Those
areas are such that community development, diversity, employee relations, environment,
international relationships, markets practices, and fiscal responsibility. The
scoring system which laid out in the CBSR guidelines, is based on three levels:
0. This indicates that the policy / program does not exist at the company.
It may also highlight a poor performance record in the subject area.
1. This score indicates that the policy / program is in the development or implementation
phase. It may also highlight an average performance record in the subject area.