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

To sign-up to receive the CSR Newsletters regularly during the fall and spring academic semesters, e-mail author David Chandler at david.chandler@ucdenver.edu


Wednesday, May 14, 2014

Strategic CSR - See you in the Fall!

 
This will be the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in August!
 
 
I have been doing a lot of thinking recently about the core principles that underpin the concept of strategic CSR. As I mentioned in an earlier Newsletter this semester (Strategic CSR – The End of CSR), the main stimulus for this thinking is a new book I have been invited to write for the United Nations PRME collection (http://www.unprme.org/).
 
I will let you all know when this book is published (scheduled for early 2015). For now, however, I wanted to raise the principle that I have been getting the most pushback on – the idea that shareholders do not own the firm.
 
This position is something I have been researching for the past year-and-a-half and is based on an argument grounded in corporate law. Lynn Stout at Cornell Law School has done particularly good and important work on this issue. This debate has largely missed the management literature (and the rest of the business school, for that matter), but there is a very good 2010 paper in the Academy of Management Review that addresses the issue directly (Lan & Heracleous, ‘Rethinking Agency Theory: The View from Law,’ Vol. 35, Issue 2, pp. 294-314). Writing in Harvard Business Review (http://hbr.org/2010/04/the-myth-of-shareholder-capitalism/ar/1), these two authors conclude from their research that:
 
“Oddly, no previous management research has looked at what the legal literature says about the topic, so we conducted a systematic analysis of a century’s worth of legal theory and precedent. It turns out that the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time. Shareholders seem to get this. They’ve tried to unseat directors through lawsuits just 24 times in large corporations over the past 20 years; they’ve succeeded only eight times. In short, directors are to a great extent autonomous.”
 
For those of you interested, I would point you towards this statement of corporate law by The Modern Corporation (http://themoderncorporation.wordpress.com/company-law-memo/) and, if you agree with what it says, to sign the online petition. As the statement concludes:
 
“Contrary to widespread belief, corporate directors generally are not under a legal obligation to maximise profits for their shareholders. … Where directors pursue [this] goal, it is usually a product not of legal obligation, but of the pressures imposed on them by financial markets, activist shareholders, the threat of a hostile takeover and/or stock-based compensation schemes.”
 
In terms of pushback when I raise this issue, most people respond by saying that ‘Of course shareholders are the “legally defined” owners of the firm.’ When pushed, however, no one can tell me what law or court decision it is that supposedly determines this fact. If it is so definitively stated in law, then I think it should be relatively easy for someone to be able to point to the relevant law or legal precedent. If that proves to be a challenge, then it seems to me that the issue most people think is decided is, in fact, debatable.
 
Watch this space for more information about the other nine principles that constitute strategic CSR (and the published book) later this year. And, any thoughts on this issue that you would care to pass on would be gratefully received. I am no corporate legal scholar, but I find the arguments of (a growing number of) legal scholars on this question to be compelling and persuasive.
 
Have a great summer.
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/
 

Monday, May 12, 2014

Strategic CSR - Markets vs. Governments

The article in the url below weighs the value of markets (and, in particular, for-profit firms) over government mandates in terms of being able to solve the largest problems we face as a society:
 
“… it's multinational corporations, and not governments or non-profits, that have the vast human and financial capital, advanced technology, international footprint, market power and financial motivation to solve the world's the world's most daunting problems.”
 
For example:
 
“… Johnson Controls joined real-estate firm Jones Lang LaSalle to retrofit the Empire State Building for energy efficiency in 2012. The Clinton Climate Initiative and Rocky Mountain Institute also collaborated on the project. The groups estimate the project will cut energy costs by 38%, saving $4.4m annually and reducing carbon emissions by 105,000 metric tons over 15 years. Given that the building sector consumes up to 40% of the world's energy, energy efficiency is key to reducing our energy use. Retrofitting for energy efficiency is good for the world, while also generating profit for Johnson Controls. The power of financial motivation, not just the desire to do good, solved this problem.”
 
The essence of the article, however, is not to demonstrate the isolated brilliance of for-profit firms, but to emphasize the instrumental nature of collaboration. Specifically, the article seeks to demonstrate the self-interest for firms of engaging with stakeholders to solve market-based problems:
 
“… many companies are starting to understand that energy efficiency, poverty reduction and access to healthcare, for example, are preconditions to their success and also offer rewarding business opportunities. Furthermore, customers, employees and investors are driving corporate accountability, transparency and adherence to labor and environmental norms. Reports indicate that businesses that ignore labor groups, grassroots organizations, consumers and civil society do so at their peril.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Business can do what governments can’t: Solve the world’s biggest problems
By Alice Korngold
January 7, 2014
The Guardian
 

Friday, May 9, 2014

Strategic CSR - CSR Reports

The article in the url below records baby steps towards the goal of more comprehensive CSR measuring and reporting:
 
“Major businesses in Europe will be required to produce social and environmental reports as part of their standard annual report following the passing of a law in the European Parliament.”
 
Unfortunately, of course, the legislative process is far from perfect and the best of intentions are subject to vested interests:
 
“The law was the subject of a lot of last-minute wrangling, with some countries expressing reservations that it would be an additional layer of bureaucracy for businesses. As a result, a considerable degree of flexibility was built into the final form of the legislation.”

In particular:
 
“Companies will be able to choose the relevant indicators against which they should report and a lot of large companies - particularly private companies - will be exempt from the law altogether. Reports will be audited, but don't have a requirement to be verified.”

On the plus side, however:
 
“… as a result of the law, some 6,000 companies will be required to report on areas such as human rights and the environment, diversity, corruption and social issues.”

Have a good weekend
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Mandatory reporting law passed by European Parliament
April 16, 2014
Business Respect
 

Wednesday, May 7, 2014

Strategic CSR - Taxes

I have long wondered why corporations avoiding state and federal taxes by incorporating overseas is not a bigger problem than it is. The recent decision by Starbucks to re-locate their European HQ to the UK (in order to pay a ‘fairer’ amount of tax) indicates stakeholders elsewhere are bringing pressure to bear on firms that seek to avoid contributing to the economies in which they operate. In the U.S., however, this issue has lagged. In the face of inaction by the federal government, individual states are gradually beginning to recoup their share of the lost revenue, which is significant:
 
“Offshore tax shelters cost the federal government $30 billion to $90 billion annually, according to a 2013 Congressional Research Service report. The U.S. Public Interest Research Group, which tracks corporate taxes, puts the amount that states lose at $20 billion a year.”
 
The states are doing so by passing legislation that counts revenues booked in overseas countries as taxable income that must be declared on the firms’ state income tax returns:
 
“Oregon enacted a bill last June for the 2014 tax year identifying 39 countries and territories—including Barbados, Liberia, and the U.S. Virgin Islands—as corporate shelters. The state counts profits that corporations and their subsidiaries stash in shelter countries as taxable income, and companies that do business in the state must report it on their state tax returns and pay up.”
 
Some firms will face significantly higher tax bills as a result:
 
“Microsoft, Apple, and IBM accounted for $37.5 billion, or 18.2 percent, of the total increase during the past year. Caterpillar avoided $2.4 billion in U.S. taxes over more than a decade by shifting profits from a parts business to a subsidiary in Switzerland, according to a report issued on March 31 by a Senate committee.”
 
There is scope for many other states to follow suit:
 
“Few of the states that have passed or are contemplating tax-haven legislation are home to a large multinational such as Microsoft, which is based in Washington, or Apple in California, IBM in New York, or Caterpillar in Illinois. Those states would stand to collect far more from such measures. California lost the most to offshore havens in 2011, an estimated $3.3 billion, the Public Interest Research Group reports.”
 
The graphic that accompanies the article provides additional detail:
 
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


U.S. States Target Corporate Cash Stashed Overseas
By Mark Niquette
April 17, 2014
Bloomberg Businessweek
 

Monday, May 5, 2014

Strategic CSR - IPCC

The article in the url below digs a little deeper into the recent IPCC climate change report and the details it uncovers are not encouraging:
 
“The [IPCC] describes itself as ‘policy-relevant and yet policy-neutral’. Its latest report, the third in six months, ignores that fine distinction. Pressure from governments forced it to strip out of its deliberations a table showing the link between greenhouse gases and national income, presumably because this made clear that middle-income countries such as China are the biggest contributors to new emissions. It also got rid of references to historical contributions, which show that rich countries bear a disproportionate responsibility.”
 
This is discouraging, not so much in terms of the overall findings in relation to climate change, but in terms of what it says about the governments that are supposed to negotiate a new climate change agreement (with associated commitments to lower emissions) next year in Paris:
 
“The new report is intended to measure how far governments have met their promises, formalised in 2010, to keep the global rise in mean surface temperatures compared with pre-industrial times to less than 2°C. It says they are miles from achieving that goal and are falling further behind.”
 
Why is this important? Primarily because the only way progress can be made in combatting the effects of climate change is with the coordinated cooperation of governments worldwide:
 
“The IPCC still thinks it might be possible to hit the emissions target by tripling, to 80%, the share of low-carbon energy sources, such as solar, wind and nuclear power, used in electricity generation. It reckons this would require investment in such energy to go up by $147 billion a year until 2030.”
 
In the same fashion that the IPCC gave-in to political pressure not to label those countries that have caused the most environmental damage, The Economist accuses the committee of holding back in terms of the financial consequences of addressing climate change seriously:
 
“These numbers look preposterous. Germany and Spain have gone further than most in using public subsidies to boost the share of renewable energy (though to nothing like 80%) and their bills have been enormous: 0.6% of GDP a year in Germany and 0.8% in Spain. The costs of emission-reduction measures have routinely proved much higher than expected.”
 
As a result:
 
“Of the IPCC’s three recent reports, the first two (on the natural science and on adapting to global warming) were valuable. This one isn’t.”
 
Take care
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/


Another week, another report
April 19, 2014
The Economist
Late Edition – Final
73
 

Friday, May 2, 2014

Strategic CSR - Subway

The video in the url below is revealing. It was produced by Consumer Reports following an investigation that compares photos of fast-food items taken from official company ads with photos of the actual food products as served to the reporters who compiled the report:
 
 
The “worst offender” identified in the video is Subway sandwich shop, which recently appeared in the CSR Newsletters for another, equally unflattering reason (Strategic CSR – Subway).
 
Eat fresh!
 
Have a good weekend
David
 
David Chandler & Bill Werther
 
Instructor Teaching and Student Study Site: http://www.sagepub.com/chandler3e/
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/