Tuesday, October 30, 2012

excerpt from Chapter 6 - flood example

Chapter 6 - page 102


One excellent example of “Constructive Capitalism” came from Home Depot who shut all their stores in the Southwest US during the Austin, Texas floods in late 2013.  As part of their relief effort, the Home Depot shipped warehouses full of supplies and sent their staff to the flooded area to immediately start rebuilding the damaged communities.  The employees were paid in full their regular salary and all their travelling expenses.

Hurricane Katrina in New Orleans (August 2005) was still a fresh memory in 2013, and no one wanted to see the same thing happening in the city of Austin, so Home Depot mobilized almost five thousand employees, delivered untold truck loads of supplies and utilized their management skills to deliver on-ground support to those affected by the floods.  Just to be clear, the Home Depot was not involved at all in the initial rescue or relief effort but rather the rebuilding efforts that followed.  Fortunately, the rescue and relief efforts were pretty well managed as opposed to Katrina, so the rebuilding process could start right away.  The Home Depot did not wait for insurance issues, local zoning discussions or the media.  They just started rebuilding and repairing people’s homes so the owners could move back in.

The effect was immediate and astounding for Home Depot.  Home Depot had forfeited a sizable portion of their marketing budget to fund this effort but certainly reaped the rewards from a business standpoint.  Their brand value sky-rocketed as did their stock price following the Austin floods.  By March of 2015, Home Depot’s stock price had almost tripled to just under $200.  When asked about their efforts at the time to make such a large commitment, the CEO said that he just could not sit back and watch people in trouble when he knew he had the resources at his finger tips to do something about it.  He pointed out that Home Depot was monstrously successful in the South Texas area and that he felt that they should contribute as much as possible.  Many share holders at the time questioned his decision as they felt that the Home Depot was going to potentially forego billions in sales as a result of the rebuilding effort and that the materials should not have been just “given-away”.  Home Depot at the time made it clear to the stock-holders, that as a part of the local business community, they had an obligation to be involved in the rebuilding of its communities whenever required.  It is not moral to profit from the suffering of its customers.  This was revolutionary corporate thinking.

Today, the Home Depot has a regular rebuilding program that goes to disaster areas all over the world and pitches in “on-ground” as required.  They are under no obligation to wait for governmental efforts other than not to interfere with rescue efforts.  

No comments:

Post a Comment