GE: Good citizen, but where’s the payoff?

“Responsible business,” says Bob Corcoran, “is good business.”

And what’s responsible business? “Make money, make it ethically and make a difference.”

Bob Corcoran

Bob is vice president for corporate citizenship at GE, a 30-year company veteran, and a good guy. We met in 2o04 when we traveled together in Ghana while I was reporting a story on GE’s values for FORTUNE. (See Money and Morals at GE.)  Recently we spoke about GE’s 2009 citizenship report, and about what GE has learned in the past five years from its corporate citizenship efforts, including its high-profile campaign around Ecomagination, which focuses the company, and its marketing, on products and services that help solve the world’s big environment problems.

Inside GE, Ecomagination is deemed a success, so much so that it has spawned a sister initiative (if you can spawn a sister) called Healthymagination, focused on profitably creating better health for more people. GE says that it expects Ecomagination product revenues to grow at twice the rate of GE’s overall revenue between now and 2015.

The logic behind both initiatives is simple, Bob noted. Big global problems demand big solutions from big companies. GE prides itself on “tackling the world’s most complex and pressing problems,” as chief executive Jeff Immelt writes in the report.

The trouble is, the payoff for GE’s shareholders have been disappointing. I didn’t realize just how disappointing until I put together this chart comparing GE’s stock-price performance to the S&P500 and to a couple of its conglomerate competitors, Siemens and United Technologies.

In the past five years, here’s how the numbers look:

GE: -54%

S&P500: -10%

Siemens: +25.3%

United Technologies: +39%

Yikes.

Now, there are a lot of explanations for this. Perhaps the biggest is that  GE, unlike its peers, has been in a couple of business that have suffered in the last five years–GE Capital, its finance operation, and NBC Universal, its TV, cable and Hollywood unit, which is now being spun off into a joint venture with Comcast. Their problems mean that GE’s fundamentals look only a bit better than its stock price: Revenues have grown from $72 billion  (2004) to $157 billion (2009), profits have slid from $16.3 billion (2004) to $11 billion (2009). Profits are back up again this year, and Bob says the company is poised to grow.

In any event, there’s no doubt that GE takes its corporate responsibilities seriously. This citizenship report is thoughtful and detailed, reporting on everything from the company’s greenhouse gas emissions (down by 22% from 2004) and water usage (down by 30% from 2006) to its illness and injury rate (down by 16% in a year) to the number of employees fired (118) as a result of ethics complaints filed with about 700 GE ombudspersons (their word, not mine) around the world. There’s much, much more here.

Behind the numbers are compelling stories. GE writes about reverse innovation–the idea that along with developing high-end products for the US or Europe, the company will create low-cost products in poor countries and then distribute them globally. For example:

In countries like India and China, where per capita incomes are smaller, customers often prefer decent performance at an ultralow cost. This insight led a GE Healthcare team in China to develop a U.S. $1,000 handheld electrocardiogram device and a U.S. $15,000 portable ultrasound — each a fraction of the respective technology’s typical price. Given these markets’ infrastructure challenges and high rural populations, such products have helped meet critical human needs — and demand has followed.

Insights gleaned from China and India can then be used to help deliver health care in the west at lower cost.

Another example: Many environmental NGOs worry about how people will adapt to the impacts of global warming–higher temperatures, water shortages, disease, flooding of low-lying areas and who knows what else–but this isn’t, as far as I know, a mainstream business issue, except perhaps for the insurance industry. To its credit, GE convened a group of sustainability experts last year to discuss the threat and figure out if GE’s businesses could help vulnerable communities prepare.

GE has gotten much better at listening to critics and outside voices, and in working with them. Just this week,  GE said it will expand a partnership with the Environmental Defense Fund to help cities, hospitals and universities save energy by using its “Treasure Hunt” program. GE’s citizenship report includes a commentary by a panel of outside experts, including such CSR gurus as Simon Zadek and Jane Nelson. They write: “Undoubtedly, GE continues to demonstrate leadership in vision, aspiration, strategy and practice on the ground.”

But not leadership in financial performance, alas. After I ran the numbers, I emailed Bob for a comment. Here’s what he had to say:

The company is always managing through a number of factors — product launches, regulation, pension expense, things like that. So we have positives and negatives. But…we are positioned for attractive earnings growth in 2011.
GE is focused on value creation (evident in our second quarter earnings). We’ve repositioned GE Capital for significant profit growth and competitive advantage, our Infrastructure businesses are benefiting from a strong global position and continued R& D investment, we’re focused on process excellence (the foundation of a strong CSR strategy), and our strong cash position gives us lots of flexibility in capital allocation decisions to create long-term shareholder value.
I think as more things come into focus on GE Capital returning to earnings growth, financial regulatory reform, this just gives us tremendous flexibility from a cash standpoint in terms of where we invest and how we grow. Building expertise and value around process excellence. Our margins are good. Our cash flow from operating activities are good. Our risk management has held strong. So I think investors should feel good about that.

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