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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Monday, March 10, 2014

Strategic CSR - Corporate Stakeholder Responsibility

The article in the url below provides a good example of what firms can get away with if there are no negative consequences for bad behavior—in this case, poor customer service:
“For all the usual complaints—such as ‘I hate dealing with this company’ or ‘These guys are the worst at customer service’—about the usual suspects from the ranks of cable and Internet providers, airlines, and banks, it turns out they just don’t have much incentive to care. The companies you hate are making plenty of money.”
The situation becomes worse if, in fact, there is a positive consequence for bad behavior:
“… the trend is actually downward, suggesting that the most-hated companies perform better than their beloved peers. … Your contempt really, truly doesn’t matter to these companies, with no influence on the bottom line. If anything, it might hurt company profits to spend money making customers happy.”
The interesting thing about this challenge, however, is ‘Who is the stakeholder at fault?’ for this situation:
“For cable-TV providers, an industry whose customers famously have few options, happy users could be a waste of money and bad for shareholders. And so many of us angry subscribers are also the shareholders through, say, our retirement accounts.”
The article focuses on consumers, but what can a consumer do if all the firms in an industry are equally bad or if there is essentially no competition? If this is the case, then it is likely another stakeholder (other than the consumer) that is failing in its responsibility to hold the firm(s) to account—perhaps the government failing to regulate, or a supplier failing to uphold best practice, or the stockmarket failing to invest in companies that will focus on delivering long-term value. Somewhat worryingly from the consumer perspective:
“Basically, the customer-service scores have no relevance to stock market returns. … the most-hated companies, no matter how narrow or broad you define them, always beat the most-loved companies.”
But, education is at the heart of mass-action. As such, the first step lies with educators (broadly defined) to understand the scale of the change needed and convey that challenge honestly to the wider public:
“This means that public engagement still lies at the heart of the challenge of climate change, but it is a form of public engagement that goes way beyond plastic bags. And any public campaign that treats minor behavioural change as a valid goal in itself is also taking a radical stance: complicity in a dangerously warmer world.”
Take care
David Chandler & Bill Werther
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Proof that it pays to be America’s Most-hated Companies
By Eric Chemi
December 17, 2013
Bloomberg Businessweek