MGM National Harbor: A Case Study in Trust and Corporate Citizenship
At the end of 2013, MGM Resorts International had the capacity to operate in three states – Nevada, Mississippi, and Michigan. At beginning of 2014, another state was added to that list: Maryland.
The path leading to the Maryland expansion was a multiyear process. In 2012, the state passed Question 7. The bill opened up gaming, including the creation of a new casino in Prince George’s County (adjacent to Washington, D.C). The bill also created a competitive bidding process, which MGM won in late 2013 after besting two other contenders.
The opportunity for the company was obvious. Winning the bid represented a significant expansion of MGM’s operations in the U.S. The location of the resort casino is at National Harbor, a burgeoning tourist destination adjacent to a major population center, and accessible to highways connected to the whole East Coast. And yet, despite a winning design and a strong grassroots campaign, the opportunity was in no way a done deal.
What Was at Stake?
Interestingly, MGM’s hopes for establishing a new resort casino depended, to a significant extent, on its reputation…and resultant public goodwill. By the time MGM submitted its proposal, significant money had already been spent to create it, and to push for its acceptance. Yet even with a very strong proposal, any amount of outcry from the public could derail years of MGM’s hopes and efforts.
What’s interesting about the MGM scenario is that years of future revenue depended on the character of the company. The gaming commission and the community in Prince George’s County both needed to trust MGM. They needed to trust that the company wouldn’t deviate significantly from its proposal. They needed to trust representatives from MGM when they said that 70% of the company’s revenue is from activities outside of gaming. They needed to trust that MGM would be a valuable partner in the community. As one resident put it:
While we welcome the jobs and increased revenue the casino will bring … The company must demonstrate a record of practicing corporate social responsibility within the communities where it has operated. Companies that show indifference to the concerns and wellbeing of the local community should be eliminated from further consideration. – James Boardley, South County Economic Development Association, Inc.
The vote of the gaming commission was the primary chance for the public to sway this influential economic decision. Once the commission approved a bid, the horses would be out of the gate. Trust was the key element at stake. This means that, for at least this moment, corporate citizenship was as important for the future of the company as any other business function. And it showed.
In the last quarter of 2013, each of the three competing bids for the casino at National Harbor went before a committee of the Maryland Lottery and Gaming Control Agency. MGM’s presentation to the commission lasted 1 hour and 5 minutes. Of that time, more than one quarter (26%) was devoted solely to corporate citizenship. Of the four speakers presenting, three of them focused on corporate social responsibility (CSR). One of the speakers was the MGM Board Chair for CSR and another was the Chief Diversity Officer.
In the time devoted to corporate citizenship, MGM talked about its impressive commitments to a diverse workforce and a diverse supply chain. The executives talked about the environmental sustainability initiatives of the company, and how the proposed casino resort will be LEED certified. They talked about the CSR recognitions they had earned, and how both the board and the C-suite were devoted to corporate citizenship.
The focus on corporate citizenship is even more impressive given how much of the proposal needed to be devoted simply to explaining the plan. In the precious minutes MGM had to publicly present before the commission, they were banking heavily on showcasing the company’s track record of character; 18 minutes of the proposal (27%) was squarely about what the proposed casino resort would look like, where it would be situated, how it would interact with traffic, and other assorted logistics. When you add up the time spent on obligatory features of the presentation (i.e. the introduction, wrap-up, and explanation of the plan), you find that these features took up 58% of the presentation time. Which means that, in the time that MGM felt discretion to talk about anything other than the proposal, they spent almost half of it (45%) describing MGM’s corporate citizenship. That’s more time than they spent describing the company’s past financial performance, or examples of their other prominent resorts.
What Was the Effect?
MGM’s presentation was followed with 3 hours of public hearings later in the day. One after the next, in two minute statements, citizens from the local community came to voice their opinions about MGM’s proposal.
During the hearings, many opinions were raised. The majority focused on the economic and logistical effects of MGM’s proposal. Would the proposal create as many jobs as hoped? Would the jobs be the kinds the community wanted? Would it greatly increase traffic? Despite the focus on the resort’s economic influences (rather than social or environmental influences), there were two key signs that the community was swayed by MGM’s commitment to corporate citizenship.
First was that many of the community stakeholders mentioned MGM’s CSR work. In particular, several community members were swayed by MGM’s commitment to source from local and diverse suppliers. Derek Thomas, an attorney and local business owner in the county said:
[Through] minority investment, MGM has already demonstrated that, you know, they’ve moved here. They haven’t been awarded a license, and they’ve moved here and gone out into the community, and demonstrated what they intend to do. And I believe them at their word. … This is definitely the right company. I fully support MGM at National Harbor.
Toya Mitchell, a resident and small business owner reiterated the sentiment:
I’m supporting MGM because of their established corporate culture of supplier diversity. MGM will not have to make up a policy of supplier diversity as they go along because it's already woven into the fabric of their organization elsewhere.
Since their presence in Prince George’s county, MGM has demonstrated their commitment to utilizing local, small, and minority businesses such as mine. I received a call from MGM desiring to do business with my company. I was not only ready and willing, but I was fully able to meet their needs. While [other casino proposals] have suggested the offensive notion that we as residents and business owners need to "wake up," and … support them; MGM's attitude and approach … was the exact opposite. I was treated with dignity and respect by MGM for my capabilities as a business woman. Meeting their demand was met with appreciation, and very importantly to me – prompt payment.
Local business owner John Puckins, spoke more generally to MGM’s dedication for improving local business capacity:
Only MGM has taken the time – year and a half before all this happened – to get involved in our county. They’ve been involved in our non-profits, they’ve been involved in our education system, and they’ve been involved with the small businesses. … They’ve already been talking to financial institutions about how they can help the small businesses get prepared for what’s going to happen in the next couple years, which is really critical. We must get prepared now, and they’ve been talking about helping us get prepared to be able to take on these opportunities. One of the biggest challenges we’ve heard in our county is about our businesses not having the word ‘capacity.’ Yeah, that’s true, but there is time to get ready for that capacity and … MGM has been the sole source involved in helping the business community get ready. …. They are committed to providing capital when necessary and prepared to educate our businesses so they can have access to that capital. MGM is the choice. Thank you.
Another comment about MGM was even more heartfelt. A veteran, Patricia Watts, had the following to say:
Before 2008, I spent the last 22 years in the United States army, and in 2005-2006 I was deployed in Afghanistan … it was my daughter that wrote to MGM and she told them about the situation that I was going through, and some of the struggles. I was coming home on R&R and it was MGM that gave us an opportunity … to just take my mind off of what was going on down range. And those four or five days that I spent at MGM – it did a lot for me to return and complete the mission. And so that alone is one of the reasons why I know [about] MGM and their good faith in the community … that they do things for all people. Maryland has a lot of veterans in the state and I also know that MGM works with veterans a lot so that’s another benefit. … MGM is the partner that I think – that I know – that I want to be with me.
Beyond these heartfelt comments from community members, the second sign of public trust in MGM was not the number of people who mentioned its positive character, but how few people expressed concerns.
I believe them at their word. … This is definitely the right company. I fully support MGM at National Harbor.
Gaming can be controversial for its potential social side effects. Even though MGM’s revenues are driven more by entertainment, dining, and other recreational activities than through gambling, there is always the potential for gaming to be stigmatized. In fact, a few community members did express concern about the social influence of gambling. However, these voices were surprisingly few. The overall focus of comments on logistical issues seems to indicate that the community was not overly concerned with the social and environmental impacts of the company. The quotes above suggest that many in the community felt MGM’s commitment to the county was already proven, which may explain this scarcity of moral concerns.
An Example for other Corporations
The MGM case demonstrates several important things:
- There are times when a company’s character is more than important; it is an essential feature of economic expansion. Not all business expansions are controversial. Some cases barely garner public attention, and in others, the public’s mind is so set that demonstrating character has limited influence. But in cases such as MGM’s, public goodwill and trust were essential. At the moment in which their proposal was considered, traditional market performance (profits, stock price, and operational efficiency) was not enough.
- You may need a track record of social and environmental performance before they become important. MGM could point to multiple examples of their corporate citizenship. They could point to awards showing that they were the best in diversity and CSR. They could show that their existing operations were sustainable. They already had a supplier diversity program in place that could hit the ground running in Prince George’s County. The CEO of the company could speak fluently on the company’s track record. MGM had a demonstrated and credible portfolio of social performance well before they needed to impress the state of Maryland with their trustworthiness.
While MGM no doubt undertook its CSR programs out of a commitment to its employees, its communities, and its environment, the economic importance of these programs cannot be overlooked. The money and effort spent on acquiring MGM’s track record of corporate citizenship must pale in comparison to the importance of expanding its operations into Maryland. This example shows that corporate citizenship is not just the right thing to do, but that there can be unintended secondary benefits for a company’s bottom line.
What the MGM case also shows is that corporate citizenship does reach the public. That community members spent personal time to sit through 3 hours of a public hearing to speak on behalf of the corporation’s CSR efforts is a testament that MGM’s programs are reaching stakeholders. Hopefully, MGM’s example highlights the value of corporate citizenship for all businesses.