Goldman: Using Philanthropy to Avoid Corporate Responsibility

If Goldman Sachs' decision to apologize (sort of, vaguely) for its role in the global economic crisis and to set aside $500 million to help thousands of small businesses recover from the recession was really--as some have suggested--a "public relations ploy," it is surely, dollar-for-dollar, the least effective investment in public relations in living memory.

If the reactions recorded here and here and here are any indication, Goldman's philanthropic gesture has not enhanced the investment bank's relationship with any of its key publics, and may in fact only have served to underscore the vast difference between what it takes out of the free market system and what it has chosen to give back.

As reputation management consultant and author Peter Firestein asks in his contribution to The New York Times' Room for Debate blog: "When was the last time a company voluntarily took half a billion dollars out of its own pocket, contributed it to the good of others, and still failed to erase the perception that the money amounted to nothing more than a fine or a sentence of community service?"

It's fascinating to me, after spending most of the past five years in Europe, that so many American companies still believe that corporate philanthropy is the same thing as corporate responsibility when in many cases--and this seems to me to be one of them--philanthropy is used as cheap and easy alternative to genuine responsibility: "If we toss a few thousand dollars their way, they'll let us continue operating the way we always have."

But the reactions above suggest that the media and the activist groups and the American public may be waking up to this ploy. They are not prepared to allow big oil companies to purchase the right to pollute the environment in exchange for a few thousand dollars donated to wildlife preservation and they are not prepared to all financial institutions the right to pollute the economy in exchange for a donation to help entrepreneurs.

If Goldman Sachs wants to be seen as a responsible company, as part of the solution rather than as part of the problem, it needs to come a lot cleaner about what it did wrong ("we participated in things that were clearly wrong," is, as the Times points out, irritatingly non-specific) and about what it is going to do to ensure that it doesn't make the same mistakes again. It needs to define what a responsible financial institution would look like, and then provide sufficient transparency so that people can judge whether it is living up to that standard of responsibility.

And it needs to commit to helping the federal government draw up regulations that would prevent the worst excesses of the past decade and provide real, meaningful penalties for firms that do not behave responsibly.

Goldman Sachs is a self-proclaimed "leader" in its industry. But there's a difference between being a leader and just being the biggest, or the richest, or the most powerful.