Would Moving Early Retirees to the New Public Health Care Exchanges Raise Corporate Social Responsibility Issues?


As someone who teaches Business Ethics and Corporate Social Responsibility to undergraduates and graduate students, I've been interested in the evolution and broadening of the concept of CSR. What began as largely corporate philanthropy has emerged into the areas of human rights, environmental responsibility, community development and public policy. As we have studied company CSR reports we have learned that where one draws the line seems idiosyncratic to each firm at this point. However, last week I interviewed a CHRO of a large US-based multinational whose description of what is going on regarding benefits in his/her firm caused me to wonder whether or not it falls the domain of CSR and thus should demand consideration by CHROs.

In my conversation with the CHRO, s/he suggested that health and safety are important concerns within the company's business, so they have no problem with investing lots of money in health care and health insurance for their employees. However, they have promised to provide coverage to their retirees, but the level of coverage is relatively ambiguous. Because they are retired, there is a less compelling business case for providing a "Cadillac" plan like that offered to employees. Add in that there are over 3 times as many "legacy" retirees as current full-time employees, and this company's likely strategy is to push the pre-65 retirees out of the current private health insurance plan and into the ObamaCare public "exchanges" in 2014. Because retiree health insurance is expensive and the costs keep growing, this could result in a significant (and unsustainable) liability being taken off the company's books.

So, from a company perspective and the ethical/fiduciary responsibility to shareholders, this is a no-brainer. The company saves money and the retirees get health insurance (in most cases heavily subsidized by the federal government.) However, because of the heavy subsidy from the government, putting the retirees into the exchanges simply moves that liability to the taxpayer. So, from a societal perspective, this is simply taking an unsustainable private burden and shifting it to become an unsustainable public burden.

When John Sculley was the CEO of Apple during some of their worst times, he was quoted as describing Apple's condition as being like they were in the middle of a lake in a boat with the hole in the bottom. He said that each successive leader at Apple was finding ways to bail out the water so the boat wouldn't sink. The question he (and other leaders) had failed to ask was "What about the hole?"

Companies can shift the unsustainable cost burden to the government, but the burden will remain unsustainable. I wonder if companies that truly want to be socially responsible have to ask the question "What about the hole?" My guess is that better solutions to fill the hole will come from the private sector than will come from the public sector. I think that falls under the category of Corporate Social Responsibility. What do you think?