The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Wednesday, August 24, 2011

Strategic CSR - Welcome Back!

Welcome back to the Strategic CSR Newsletter!
The first Newsletter of the Fall semester is below.
As always, your comments and ideas are welcome.

Over the summer, a number of important CSR stories emerged,  some of which I will comment on in upcoming Newsletters. Among the doom and gloom of ongoing financial crises, political incompetence, and corporate malfeasance, however, is the enduring belief that for-profit firms remain the beacon of hope for the CSR project. If we are to plot a sustainable future moving forward, it is corporations that possess the capability to mobilize sufficient resources in ways that can make a difference. While a lot of the negative stories seem to find their way into these Newsletters (the media latches onto negative stories more readily than positive stories), this article from The Economist at least starts us off on the right track!

The article in the url below attempts an interesting exercise—to compare the relative influence of IBM and the Carnegie Foundation over the last 100 years. Both organizations were founded in 1911 and, as such, both turn 100 years old in 2011. The Economist’s goal is to identify which organization (for-profit or non-profit) has “done more for society” during its lifespan.

Two things struck me reading the article. First, that it is not a very close contest. While the Carnegie Foundation certainly did some good things early on in its life, it has faded significantly in recent decades. The clinching argument for me was that:

IBM, by contrast, is now as influential as it has ever been, with a stockmarket value of around $200 billion and nearly 427,000 employees, many of them in the developing world. … Its corporate philanthropy has grown steadily, so that its annual grants now exceed those of the Carnegie Corporation.

Second, I think the article speaks volumes of how far The Economist has come regarding CSR that it was willing to even attempt the exercise. I think The Economist of 10 years ago is not even interested in this question and would consider the answer a foregone conclusion. Instead, it makes a valiant attempt to compare the two organizations; so much so that I felt the Carnegie Corporation remained in the running longer than it should have. Rather understating the case for IBM (after pointing out many of the errors made by the firm over the years, including its brush with Hitler and the Holocaust), The Economist concludes:

Judged on the past 50 years, there is a strong case for saying IBM has had more impact than Carnegie—especially if you count its accidental contribution to philanthropy by incompetently failing to stop Mr Gates from creating Microsoft. In part this is because its business, the management of information, has unusually large social benefits, and causes relatively few social or environmental costs.

Ultimately, the weight of evidence sits strongly in favor of IBM. The advantage of the for-profit firm is its ability to adapt and re-invent itself, while the Carnegie Foundation has found its enthusiasm slowly wane over time:

Another reason for Carnegie’s relative decline may be that 100 years is too old for a philanthropic foundation. The absence of an existential threat may have made it too comfortable. IBM transformed itself under Lou Gerstner when it nearly ran out of cash in the early 1990s, and again more recently under Mr Palmisano when Indian rivals threatened to steal its business. By contrast, it is not clear what, if anything, keeps the people in charge of the Carnegie Corporation awake at night. The passage of time saps a foundation of the unique energy of its founder. Carnegie said of the unknown future leaders of his foundation that “they shall best conform to my wishes by using their own judgment.” That much they have done, but he would probably have fared better.

The article is an interesting thought-experiment, but, ultimately, reaffirms that, regarding CSR, while for-profit firms are a big part of the problem, they are also the main hope for a solution.

Take care

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The Centenarians Square Up: IBM v Carnegie Corporation
June 11, 2011
The Economist
Late Edition - Final