Major paintings, fine art and tapestries are increasingly a badge of success in corporate offices. But is holding and maintaining expensive art really what shareholders want?
Professor Roy Suddaby asks: Why do corporations collect art?
Take from Panmure House Perspectives Issue 2: The very earliest corporations collected art. The Hudson’s Bay Company, which received its royal charter in 1670, was a meticulous collector of North American art, and over the next 300 years amassed a large collection of more than 10,000 indigenous artefacts, antique maps, and oil and watercolour paintings. Anheuser-Busch, the brewing company, similarly began collecting in its founding years by commissioning Western artworks as early as 1890. Such early collections, however, were often the whim of individual executives within the corporation.
As a formalised corporate practice, art collection in US corporations can be traced to an individual executive: David Rockefeller Sr. In 1959, Rockefeller, who was then president of the Chase Manhattan Bank, established the corporation’s first formal art programme. He also promoted the idea of formal art collections in major US companies by establishing, in 1967, the Business Committee for the Arts, whose mission was to encourage the growth of the arts in the US through active partnerships between leading corporations and the arts community. The idea spread quickly throughout the elite business community, and by 1980 more than 80% of Fortune 500 companies had extensive, formal and professionally curated collections.
Art as a brand story
Today, corporate art programmes rival elite public galleries in the scope and depth of their collections. Although it is difficult to obtain accurate statements of the cost of corporate collections, the Swiss financial firm UBS is one of the few corporations to formally value its mid-size collection of 35,000 pieces, which in 2009 was assessed to be worth $150 million. While impressive, this sum grossly underestimates the overall cost to the corporation of acquiring, storing and maintaining such an extensive collection, which clearly indicates a significant financial commitment to the practice. The German financial services firm Deutsche Bank, with more than 100,000 paintings and sculptures, is the largest corporate art collector in the world; this aptly illustrates the size, scope and economic value of the phenomenon.
When asked, corporate executives offer a range of justifications for collecting art. Some suggest that corporate collections help to articulate a consistent image or identity that communicates core values both internally to employees and externally to key stakeholders. Those using this justification tend to have “themed” collections that are built around an important element of the firm’s history or evolution. The global document delivery firm UPS, for example, has constructed its corporate art collections around tapestries and textiles, many of which date from the time of Marco Polo and the Silk Road. Tapestries, the firm’s curator avers, represent the integration of modes of transportation and communication and, as such, reflect the core identity and mission of the corporation.
Similarly, US-based Wells Fargo, the tenth-largest bank in the world, holds one of the most extensive collections of the work of artist Frederic Remington, whose depictions of the American Old West in painting and sculpture capture the soul of a bank that can trace its history back to its origins as a stagecoach company established in 1852. While these justifications for the activity of art collection are plausible, if unverifiable, they fail to fully counter more pointed challenges based on pure economic reasoning. Extensive art collections are expensive to put together, become extremely valuable over time and, once built, reflect a substantial financial commitment. The money involved, some argue, rightfully belongs to the shareholders of the company and should be paid back to them as dividends. Viewed through the cool rational lens of economic reason, large and expensive collections of art could thus be seen as a breakdown in corporate governance. It is somewhat surprising, therefore, that activist shareholders who get exercised about often much more trivial forms of corporate spending seem to be quite accepting of corporate art collections.
The corporation as a social entity
My ongoing research on this subject suggests an alternative and perhaps somewhat more interesting explanation. One must consider corporate art collections within the context of a growing range of related activities that defy rational economic explanation. How do we explain corporate museums and archives? Corporate universities? Corporate police forces and armies? Corporate health facilities? The reality is that the modern Fortune 500 or FTSE 100 corporation is increasingly internalising many of the functions and activities that were once considered the exclusive preserve of the nation state. While there may be some diffuse, long-term benefit of these activities, in the short run they do not directly contribute to the productivity of the corporation as an economic actor.
They do, however, contribute to the legitimacy of the corporation as a social entity. Increasingly, the corporation is evolving into an institutional form that rivals the modern nation state. Perhaps unsurprisingly, this seems to be occurring just as the nation state appears to be entering a long phase of retraction of its traditional roles and responsibilities. So my answer to the question of why corporations collect art is that the corporation is an ascendant social institution. It has proven, on many occasions, better equipped than government to organise resources and address social need. It is no accident that large corporations such as Home Depot and Walmart were the first to bring aid to the victims of Hurricane Katrina, a natural disaster exacerbated by the inability of the US government to predict it and to defend its vulnerable population. It should not be surprising that the modern corporation seeks to assume the core activities of the institution it is about to transcend. Lest we worry too much about greedy corporations taking on the role and responsibilities of government, it might be helpful to consider what Adam Smith thought of the social responsibility of government: “Most government is by the rich for the rich. Government comprises a large part of the organised injustice in any society, ancient or modern. Civil government, insofar as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, and for the defence of those who have property against those who have none.”