The Profit Motive Has a Limit: Tragedy
September 7, 2005
Good corporations aren't made to be good charities. They are, after all, stewards of other people's money, and their mandate is to make a profit. The best of them focus on that mandate with ruthless efficiency.
Perhaps that explains Wal-Mart Stores Inc.'s Dickensian initial decision last week to give thousands of employees at stores devastated by Hurricane Katrina only three days of additional pay. When the money ran out ... well, are there no poorhouses? Are the prisons full?
But Wal-Mart Chief Executive Lee Scott was quick to recognize that his company's relentless cost-cutting culture needed to be set aside in the aftermath of this tragedy. By Wednesday, he had told his troops to pull out all stops. Wal-Mart then became the biggest corporate benefactor of the Bush-Clinton Katrina Fund, pledging $15 million in cash. It also gave a million dollars each to the Salvation Army and the American Red Cross. By the end of the week, the company was offering workers displaced by the floods as much as $1,000 in emergency assistance (roughly three weeks' wages, tax-free) and guaranteeing them replacement jobs at any store in the country.
In addition, Wal-Mart shipped more than 100 truckloads of merchandise to evacuation centers in Texas, Louisiana, Mississippi and Arkansas. It offered residents of affected areas a seven-day emergency supply of prescription drugs free. And it donated at least a dozen Wal-Mart buildings for use as shelters, food banks, staging areas and police command centers.
The devastation of Hurricane Katrina has shaken the way everyone -- even those cosseted in comfortable corporate suites -- looks at the world. It's a graphic reminder of how thin the line is that separates a stable, secure society from chaos.
After peering into that chaos with the rest of us last week, many corporate leaders responded generously.
Mr. Scott says he and his wife watched the events unfold on television, and by Wednesday morning, he knew extraordinary action was needed. With some 34,000 employees affected by the storm, "we are such a part of the fabric of these communities that you have a responsibility to respond," he said.
Marriott Corp., with 2,800 employees at 15 hotels in New Orleans, also took action. The company is paying its workers through the end of September, and housing its own refugees in the ballroom of the Houston Airport Marriott, where the company tries to help them find temporary housing and jobs. "This is really something else," says CEO J.W. Marriott, who is on the phone at least twice a day with his crisis-management team. "It's a much more complex thing than the World Trade Center, where we lost a hotel and lost two associates. Then, we knew where the people were. But here, we've only found a little more than a third of our people."
The corporate response to Katrina was boosted in part by a program set up by the Business Roundtable in the aftermath of the Asian tsunami called the Partnership for Disaster Relief. Even before the hurricane touched down in New Orleans, Steve Odland, the CEO of Office Depot Inc., called the Roundtable suggesting the new program be put into action.
On Monday morning, as the hurricane was ripping through the Gulf Coast, Roundtable Chairman Hank McKinnell, the CEO of Pfizer Inc., sent a letter to all the other CEOs whose companies belong to the group requesting their assistance. By yesterday, that effort had raised more than $100 million in cash and in-kind contributions.
Mr. Odland's Office Depot led the way, offering some $17 million of office supplies, water, batteries and school supplies to help the city of New Orleans and the evacuees. "We're headquartered in South Florida," Mr. Odland explains. "We've witnessed six hurricanes in recent years. We've become hurricane experts."
As for the obligation to shareholders, Mr. Odland says that if his charity efforts help New Orleans recover, it will help his company as well. Mr. Scott calls it a balancing act. "We can't send three trailer loads of merchandise to every group that asks for it," he says. He tells of being in Houston on Monday, and talking to someone who wanted Wal-Mart to donate 2,000 blankets to help refugees. Mr. Scott turned down the request. "We have to, at the end of this, have a viable business," he explains.
How has big business responded to the hurricane crisis? Write to me at business@wsj.com.
