Corporate America seeks cover in arms of small business

BOSTON Tue Oct 4, 2011 3:09pm EDT

General Electric Chief Executive Officer Jeffrey Immelt speaks at a news conference in New York, October 21, 2009. REUTERS/Mike Segar

General Electric Chief Executive Officer Jeffrey Immelt speaks at a news conference in New York, October 21, 2009.

Credit: Reuters/Mike Segar

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BOSTON (Reuters) - Facing talk of "class warfare" in Washington and protest marches on Wall Street, some of the biggest players in corporate America are linking arms with small business in what observers see as moves to bolster their images at a time of rising public anger.

Starbucks Corp (SBUX.O) Chief Executive Howard Schultz started the ball rolling on Monday with word that the world's biggest coffee chain was donating $5 million to start a fund dedicated to lending money to small businesses and nonprofit organizations.

General Electric Co (GE.N), the largest U.S. conglomerate, will also tout the virtues of smaller businesses on Thursday when it hosts a meeting in Columbus, Ohio, to discuss how to encourage the growth of mid-sized companies.

Both companies, giants in their own industries, are throwing their weight behind beneficiaries who are generally better regarded in the public eye, in hopes of picking up some of their shine, experts contend.

"Small businesses, entrepreneurs are the corporate equivalent of dolphins. Everybody likes dolphins ... It's a good group to associate with," said Scott Galloway, a marketing professor at New York University's Stern School of Business.

While associating with dolphins may make corporate leviathans seem cuter, it is unlikely to do much to boost the ailing U.S. economy, where unemployment has hovered near or above 9 percent for more than two years, observers said.

"It's mostly a show. The only thing that is going to help the employment situation in the next two years is macroeconomic policy," said Josh Bivens, an economist at the Economic Policy Institute, a Washington think tank.

RISING TENSIONS

The moves come at a time of rising tensions over the heading of the U.S. economy. Last month, U.S. President Barack Obama unveiled a plan to raise taxes on people who make more than $1 million a year -- a move he called the "Buffett rule" in honor of billionaire investor Warren Buffett of Berkshire Hathaway Inc (BRKa.N), who backed the idea.

Republican House Speaker John Boehner was quick to blast the idea, saying it amounted to "class warfare."

Over the weekend, more than 700 anti-Wall Street protesters were arrested in New York after attempting an unauthorized march across the Brooklyn Bridge.

New York City Mayor Michael Bloomberg warned in his weekly radio address that the demonstrations could lead to the sort of unrest seen during the so-called Arab Spring wave of protests in the Middle East.

"You don't want those kinds of riots here," Bloomberg said, according to media reports.

Amid this turmoil, both Starbucks' Schultz, who grew up in public housing, and GE Chief Executive Officer Jeffrey Immelt, a Dartmouth College graduate, have stepped up their involvement on the political stage, though both deny any interest in running for office.

Immelt, a lifelong Republican, in January took the helm of a White House advisory board on the economy and job creation. He has taken flak this year for the company's expected low tax rate, which GE attributes to losses at its finance arm.

GE, which has a hefty finance arm, did benefit from some of the federal programs set up during the credit crisis to back private debt. Starbucks, whose business is not in the financial sector, did not.

Before Schultz, a Democrat, unveiled his fund, to which Starbucks is encouraging customers to make $5 donations, he had already called on wealthy Americans and businesses to stop making campaign contributions to U.S. lawmakers until they found a "fair, bipartisan" deal on the nation's debt, taxes and spending.

NEGLECTED SEGMENT

Small businesses say they are largely neglected by the nation's largest banks, leaving many entrepreneurs to rely on personal borrowing, including credit cards and second mortgages, to fund their ventures. To that extent, they welcome attention from other sources of financing, whether they be Starbucks' "Create Jobs for USA" fund or GE Capital.

"I don't think the banks in the current regulatory environment have the flexibility to experiment, have the understanding of small business. Their focus is elsewhere," said Marilyn Landis, a director and former chair of the National Small Business Association. "I don't see the banks as being significant players any time soon."

But even so, Landis is wary when big companies rush to embrace small businesses.

"We're going to see lots of posturing, lots of grand opportunities," she said. "The question is if any of them will be meaningful."

Starbucks said its only interest in starting the fund is helping the neighborhoods where it sells its products.

"Let there be no mistake: Our concern is about the communities where we do business and where our partners, which is what we call our employees, live and work," said Jim Olson, a spokesman for the Seattle-based chain, adding that Moody's Analytics' top analyst had backed the idea.

For its part, GE Capital said it is just trying to promote the interests of companies to which it lends.

"It's our customer base," said spokesman Russell Wilkerson. "Sure, we have a vested interest here in seeing them do well."

While companies like GE and Starbucks focus on programs that they contend can help with social ills, it is unlikely their overall actions are going to be any different from those of any major publicly traded corporation, one observer said.

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Comments (1)
Writemoney wrote:
Big businesses are smart. I won’t be surprised to see more follow Starbucks. However, Starbucks is asking for $5 donations to help small businesses. Doesn’t look like they’re simply writing big checks to help small businesses. Being a big business isn’t a bad thing; it’s often a sign of growing success. Many big businesses started out small. It’s when big businesses climb into bed with politicians and regulators that problems arise.

Denise
writemoneyinc.com

Oct 05, 2011 5:14pm EDT  --  Report as abuse
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