First of all, let me say that I don't have a problem with corporations generally. In fact, I have owned or co-owned a number of corporate entities in my business career, and the protections they offer are useful not only to shareholders but also to society at large. In fact, properly applied, it is difficult to see how we could function in the modern business world without them.
But I am continually frustrated by the way in which the corporate identity has swallowed up the ethics of the business world entirely. I don't pretend that there are hard-and-fast rules that businesses must follow or be subject to penalties, but I do believe that a fair market imposes on companies the obligation to operate in ways that are something other than naked advantage-grabbing. Put another way, just because something is legal does not mean it is beneficial to our society or our economy.
To illustrate, I offer a simple principle that everyone has heard of and that for many businesses is an important value: "The customer is always right." That doesn't literally mean that the customer is in fact always right. What it means is, if you want to keep a him as a customer, the customer is right even if you disagree about something. Customers who have the option to go elsewhere will, in a fair market, vote with their feet when they are confronted with a vendor whose policies they don't like.
Recently, a friend of mine made an accounting mistake and ended up slightly overdrawing his business checking account. He had made a few charges using his company debit card that hadn't come through, so his account wasn't yet showing overdrawn, but he knew it was just a matter of time before those charges showed up. He did the responsible thing and put money in the bank, out of his own pocket, to cover those charges before they appeared on his account.
As it turned out, however, the bank has rules that seem designed to take advantage of that situation. They cheerfully took his money, but they waited to apply it to his account until after the debit card charges were applied. They also paid those debits (they didn't decline them), and charged him a $35 fee for each one--which caused his account to be overdrawn even further.
Now, I want to be clear about this: At no time was the bank "out" any money. They actually received his deposit before they paid the debit charges. But, as it turns out, the bank has a processing order, as part of its deposit agreement, that causes debit card charges to be paid before any deposits are credited--even if those deposits are in cash.
In relating his experience, my friend expressed a great deal of frustration for several reasons. He acknowledged that the bank was within its rights to do what it was doing, and he acknowledged that his mistake was the root cause of the problem. But he had been a good customer of the bank for a long time. It wouldn't have hurt the bank to refund his overdraft fees (they did refund one "as a courtesy") in order to keep his business. They did not. So he's voting with his feet and finding another bank.
By the way, because of the overdraft fees, he has a small negative balance in the account. Incredibly, if he does not bring his account balance to zero (which he has said he's not in a hurry to do), the bank threatened to turn the matter over to collections and to report him to ChexSystems, a credit reporting agency that focuses on how customers handle their checking accounts. Since most banks will not open a bank account for someone who has a negative ChexSystems report, meaning that his choices for new bank accounts for his business are limited.
Of course, he protested--to customer service, to the branch manager, and so forth, to no avail. At each step, the people he talked to had sympathy for his position, but each said, "I don't have the authority to change that. It's a bank policy."
The problem with corporations--just like the corporation that operates this bank--is that in precisely the same way that corporations shield shareholders from liability for the acts of the corporation in which they did not participate, corporations insulate the people who operate them from accountability for their decisions that don't rise to the level of a civil tort. Employees who would ordinarily be vested with the authority to fix problems where the corporation is acting foolishly can merely chalk up their behavior to "company policy." There is no social accountability. No one has to look a wronged customer in the eye and take responsibility for a decision.
I recently saw a television advertisement for Enterprise Rent-a-Car, in which Enterprise was touting the authority it gives its front-line employees to solve problems. My interest was piqued because for work I rent a lot of cars--in 2012 alone, I rented cars 26 times, about one every two weeks--and while the experience goes smoothly most of the time, when there is a problem, it's usually a disaster that ends up costing me money or time or both.
As it turned out, the next time I rented a car, I rented from Enterprise. When I arrived in the sweltering heat of mid-summer Phoenix after a long plane ride, the car I had reserved wasn't ready, and it was going to be a 30-minute wait. All it took to cause the rep to spring into action was my "tired face"--eyes askance, lips pursed, a half-sigh--which was entirely involuntary on my part. The rep immediately said, "I can get you in the next size up right now, though." My standard reply to that phrase--which I hear constantly--is "Well, how much is that going to cost me?" I was pleasantly surprised when he said, "Same price. We want you to be completely satisfied." He didn't have to "check with a manager." He just did it.
Enterprise has a company culture that differs from most of its competitors. They genuinely value putting their customers first because they want a customer for life. They recognize that making an extra $10 or $15 off a customer's impatience on one rental is far less important than impressing that customer and keeping him as a customer for life.
Somewhere along the way, most corporations have adopted the view that they exist solely to maximize the value for their shareholders, no matter what. That's true, but it's incomplete. Corporations are really about maximizing value for their shareholders by building a loyal customer base who returns to buy products again and again and again. That doesn't mean maximizing the bottom line every day, but maximizing the total return over the lifetime of the company.
Recently, at a shareholder meeting, Starbucks CEO Howard Schultz made news by talking back to a complaining shareholder. The shareholder was upset because (a) Starbucks had openly supported the successful referendum to establish marriage equality in Washington, (b) as a result, the National Organization for Marriage started a boycott of Starbucks, and (c) the shareholder believed the boycott had hurt sales. Schultz told the shareholder that if the 38% return that shareholder got wasn't enough he was welcome to sell his shares and buy something else.
Could Starbucks have squeezed a few more percentage points out of its business for that shareholder? Maybe. But at what cost? As Schultz put it, Starbucks support of marriage equality was something they did for their more than 200,000 employees, many of whom are young enough to see marriage equality as a social imperative (even if most of them aren't gay). The Tazo® tea leaves aren't hard to read on that question anyway, and Starbucks wants to associate its brand with the right side of history. Schultz has his eye not only on the cups of coffee he won't sell to the last vestiges of a dying breed of bigots, but also on the coffee he hasn't sold yet to tomorrow's customers, who will regard those bigots, at best, as...quaint. Trading a tall today for a venti tomorrow seems like a smart bet.
Starbucks and Enterprise are getting it right. Too bad most corporations haven't figured it out yet.