Corporate Social Capital Debuts

We’re beginning to see social capital redefined as an attribute of corporations in addition to the more common use in describing society at an individual level. At the same time, good will, an imprecise corporate attribute is still very much in use but it’s entirely possible that corporate social capital could come to replace it.

Individual social capital can be brought down to the idea of paying it forward, doing something kind for someone else with no expectation of payback. For example, simple courtesies like yielding in traffic might qualify or holding a door for a stranger. Such things don’t scale up on a corporate basis, though.

Corporate social capital became an almost necessary idea with the introduction of another concept, Stakeholder Capitalism. Meant to replace the older concept of shareholder capitalism, stakeholder capitalism is a broader idea. In the new scheme all shareholders are stakeholders but so are employees, customers, partners and local communities. In contrast, Shareholder capitalism looked no further than the owners of a company’s stock to justify a corporation’s actions and existence.

Stakeholder Capitalism is an ascendant, though not yet dominant, concept and the emergence of associated ideas like Corporate Social Capital[1] points in the same direction as other changes now taking place.

Individual social capital can be many things but most commonly it describes people coming together to achieve common purpose, generally in acts that support society in ways that larger organizations can’t. Individual courtesies may induce others to pass on a kind or selfless act creating a network effect but that’s not really measurable.

Sometimes a private citizen performing good works in the community might harvest social capital later such as when running for public office. But there is no quid pro quo implied in the concept. Most broadly speaking the network effects of many people making various contributions to the public good whether overtly or simply by supporting social norms build up a society’s social capital.

Building corporate social capital can take many forms though generally speaking building up social capital through corporate efforts fits the bill. When a corporation engages in efforts to help the community in some way it might be said to be building social capital. Paying for little league baseball uniforms, for instance, is a time-honored way for local corporations to engage with their communities. So are philanthropic contributions to local charities.

At a higher level, if a company decides to engage in philanthropic activities in which it pays its employees to donate some of their time at work to performing good works in the community, the company would be building corporate social capital and so would the employee. In fact, studies show that companies and employees that engage their communities this way each benefit.

Employees that engage in corporate philanthropic activities develop more positive attitudes about their employers as well. These employees are more likely to recommend their companies’ products and services, have greater job satisfaction and have lower job turnover as a result.

All of these attributes may have existed in earlier times, but they were not often tracked and measured. Today in highly competitive markets many companies and their leaders have come to believe that these things make a difference. And with the appearance of stakeholder capitalism, it was just a matter of time before organizations began seeking ways to measure and manage stakeholder-oriented activities.

In contrast, corporate goodwill is an accounting concept that boils down to intangible assets that may not be easily identified and thus not easily quantified. Corporate social capital may not be easily identified either and some might say they are the same. But goodwill is more of a passive thing, it cannot be created and it is usually something acquired with a company when it is bought. It may include a brand’s reputation or customer relationships, so building corporate social capital is in many ways similar to goodwill with one important difference. A company can actively create social capital and measure it.

Building social capital is an important exercise for any corporation seeking to improve its position in a community as well as improving the community itself. Given the new importance of stakeholder capitalism and the multiple constituents a corporation may need to address very soon, understanding how to build social capital is an important tool for helping a corporation to compete. There are now tools and advice available to help corporations of any size to get started. Many large corporations like Salesforce and Accenture have technologies and programs to help.

Another example is United Way Worldwide based in Alexandria, Virginia, the Wikipedia entry says, United Way Worldwide “…is a nonprofit organization that works with almost 1,200 offices throughout the country in a coalition of charitable organizations to pool efforts in fundraising and support. United Way’s focus is to identify and resolve pressing community issues and to make measurable changes in communities through partnerships with schools, government agencies, businesses, organized labor, financial institutions, community development corporations, voluntary and neighborhood associations, the faith community, and others.” That’s building social capital.

There are also organizations like Pledge1Percent that make it their business to help companies of all sizes to build corporate philanthropy programs. More than 10,000 companies of all sizes have worked with Pledge One Percent to structure their corporate philanthropy programs.

At the same time many companies are not waiting for permission and they are simply initiating corporate workplace giving programs. Often these efforts are initiated by employees and supported by corporations. Giving employee time and some resources is all it takes in many cases and because the efforts are employee led they often fit in well with local needs.

As we rethink the purpose of a corporation with the shift from shareholder to stakeholder, we’re seeing new opportunities open up for improving the business to customer and business to employee relationship. It doesn’t take much, just an inclination to take the first step.

[1] UKEssays. November 2018. Definition And Types Of Social Capital. [online]. Available from: https://www.ukessays.com/essays/sociology/definition-and-types-of-social-capital-sociology-essay.php?vref=1 [Accessed 1 February 2021].

Researcher, author of multiple books including “The Age of Sustainability” about solutions for climate change. Technology, business, economics.

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