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


Tuesday, December 9, 2014

Strategic CSR - Business Schools

 
This will be the last CSR Newsletter of the Fall semester.
Have a great holiday break and I will see you in January!
 
 
The article in the url below is a review of a recently published book by William Deresiewicz titled Excellent Sheep: The Miseducation of the American Elite. The book records the effect on students of a higher education system that is defined by merit and intense competition among students who are forced to emphasize resume-building above all else:
 
"For William Deresiewicz the rat race for college admissions—and, later, for entry into the top banks and law firms—has robbed these ultra-high achievers of their passion, intellectual curiosity, purpose and depth. Students today, he suggests, regard their education at elite institutions not as an opportunity to develop their character, but as just another credential, 'an algorithm to be cracked in order to get to the next level,' as one graduate of Deerfield Academy told the author. They chase 'success' with no greater purpose to guide them. And the universities they attend, which regard them increasingly as customers rather than students, do little to provide one."
 
As a result:
 
"Beyond their glowing transcripts and the fact that they have become 'accomplished adult-wranglers,' these students are anxious, depressed and searching for some deeper meaning in their lives. … A Yalie put it more succinctly: 'I might be miserable, but were I not miserable, I wouldn't be at Yale.'"
 
Rather than focus on the students, however, I was drawn to the role played by colleges in creating and maintaining this soul-destroying process:
 
"The author chronicles the gradual process by which the traditional liberal arts education that was once a staple of these schools has given way to the research university agenda, where 'fragmentation and specialization' define the curriculum. Rather than being taught the accumulated wisdom of the past through the great books, students now select from a bland a la carte menu of 'distribution requirements' that leave them without a holistic understanding of the debates and issues that shaped the culture they now live in."
 
The same fragmentation is characteristic of business schools. It seems, in many cases, that the starting point for curriculum development is bottom-up, rather than top-down. By this, I mean that each Department decides how it should teach its particular functional area (marketing, finance, operations, etc.) independently of the other functional areas. A more useful approach would be for the business school as a whole to define its primary purpose as addressing the question: What is the role of the for-profit firm in society? Once the faculty as a whole had sketched out the parameters of how they wanted to answer that question, then individual departments could define how their function should be taught in order to help achieve that broader goal—i.e., how marketing, finance, operations, and so on, can help the firm achieve the role the faculty as a whole think it should be filling. The resulting curriculum/set of courses would be unified and complementary, rather than idiosyncratic and disjointed. Without such a discussion, however, there is little over-arching structure or purpose to the students' business education. In theory, we set ourselves up to train the managers of the future; in reality, we teach them how to perform various tasks (marketing, finance, operations, etc.) with little concern as to whether those tasks add-up to a sum that is greater than the parts. In short, at present:
 
"Nothing adds up … because nothing is designed to add up."
 
Happy Holidays!
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/
 
 
Book Review: 'Excellent Sheep: The Miseducation of the American Elite' by William Deresiewicz
By Emily Esfahani Smith
August 20, 2014
The Wall Street Journal
 

Monday, December 8, 2014

Strategic CSR - JetBlue

The article in the url below records a rare phenomenon – a CEO willing to stand up to Wall Street analysts (see also: Strategic CSR – Unilever). Why does this CEO, in particular, need to defend himself?
 
"Several Wall Street analysts have been agitating for JetBlue Airways to replace Chief Executive Officer David Barger when his contract expires in February. He's too passenger-friendly, they say, and impedes measures that could increase the airline's profitability."
 
His response to the criticism?
 
"'You want to compare my track record to bankruptcies and layoffs?' asked Barger, referring to the Chapter 11 restructurings of Delta, United, and American and the subsequent mergers that radically reshaped all three. 'Go ahead. I'll take that comparison.'"
 
Although Barger has already announced the introduction of some fees (checked bags) and fare increases (business class), he has also makes it clear that "I may be alone among CEOs in the industry, but I don't believe we're a commodity [business]" and the fees, when they arrive, will be introduced "in a JetBlue way." Nevertheless, that is insufficient for some analysts:
 
"The latest nudge for Barger to leave the company came on Aug. 20 when Cowen & Co. analyst Helane Becker upgraded the stock and raised her target price by $5, to $15 per share, partly on the prospect of a CEO change. 'We believe JetBlue could make a management change at the top in order to foster a change in strategy throughout the company,' Becker wrote. 'We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines, although not as extreme.'"
 
Barger's retort?
 
"Barger says his board fully agrees with having the company continue to build its franchise. And in airline years, 15 is just a baby; JetBlue is still building its franchise and adding planes, the CEO says. To the equity analysts, he says: 'It's a free country. You can write what you want.'"
 
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/
 
 
JetBlue CEO Fires Back at Wall Street Analysts
By Justin Bachman
August 26, 2014
Bloomberg Businessweek
 

Friday, December 5, 2014

Strategic CSR - Carbon trading

The article in the url below reports on a recent announcement by the Chinese government that it is planning:
 
"…what will be the world's biggest emissions trading program."
 
The program, which would be launched nationwide in 2016, would immediately become the world's most important market-based model for reducing carbon emissions:
 
"The Chinese market, when fully functional, would dwarf the European emissions trading system, which is now the world's biggest. It would be the main carbon trading hub in Asia and the Pacific, where Kazakhstan and New Zealand already operate similar markets. South Korea will start a national market on Jan. 1, 2015, while Indonesia, Thailand and Vietnam are drawing up plans for markets of their own."
 
The market is designed to significantly alter the country's carbon footprint, which is large and growing:
 
"China has pledged to reduce the amount of carbon it emits per unit of its gross domestic product to 40 to 45 percent below its 2005 levels by 2020."
 
These targets compare to the U.S. government's 2009 commitment to decrease emissions by 17% below its 2005 level by 2020.
 
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/
 
 
China Plans A Market for Carbon Permits
Reuters
September 1, 2014
The New York Times
Late Edition – Final
B2
 

Wednesday, December 3, 2014

Strategic CSR - Divestment

The article in the url below highlights the growing importance of a movement I had been following at a distance, but haven't previously paid much attention to—the divestment of fossil-fuel companies from university and college endowment portfolios (see: http://gofossilfree.org/):
 
"Such divestment is clearly advocated on moral grounds – to save the planet – but is increasingly premised on financial grounds as well – to avoid the risks associated with the carbon bubble and what these stranded assets or unburnable carbon will do to investment portfolios holding fossil-fuel company stocks."
 
In particular, the article draws on the recent IPCC report (see: http://www.ipcc.ch/) that stresses a limit of keeping global temperature rises to 2 degrees Celsius (a "carbon budget"). The implication of such a budget is that "two-thirds of coal, oil and gas reserves would have to be left in the ground, at least until 2050" (a "carbon bubble"). As the author notes:
 
"If two-thirds of known reserves must stay in the ground, then this 'unburnable carbon' would not be monetized, becoming instead a stranded asset or liability that is not being priced into the current valuations of fossil-fuel companies."
 
In other words, either our carbon-intensive global economy will be allowed to continue extracting and burning traditional energy sources at great profit for energy companies (and great expense for the rest of us), or the valuations of these same companies are greatly inflated because they do not account for the possibility that two-thirds of known reserves cannot be monetized. Following the ideas in the article and extrapolating them to their natural conclusions does not appear to result in a situation where both outcomes can occur simultaneously. Either the planet or the fossil-fuel companies should be shorted today:
 
"Fossil-fuel companies, and an economy that subsidizes these (and other emitters) by letting them dump their carbon pollution into the atmosphere for free, would see significant disruptions if and when these externalities are accounted for."
 
This leads us back to the divestment movement. Given that "One can divest fossil fuels and still own a portfolio that remains very carbon intensive," the author advocates a very creative "Multi-pronged approach" that encompasses both engagement, protest, and incentives for carbon-based energy companies. Principally, he sees these three forces coming together in a "smart carbon tax":
 
"Not only would such a tax put a price on carbon so that clean energy can effectively compete, but it would also generate significant revenues, a portion of which could be assigned or recycled right back to the energy companies in the form of transition subsidies that enable them to convert over to sustainable energy. A Smart Carbon Tax would be designed so that a significant portion of proceeds is earmarked for investments in renewable energy, energy efficiency, resource efficiency more broadly, green infrastructure, and so forth. The fossil-fuel companies, as well as others, would be eligible to participate in this revenue stream from the Smart Carbon Tax. These transition subsidies could include expanded investment tax credits, low-interest loans, price supports, and so forth – and should obviously replace current fossil-fuel subsidies. But for such a plan to work, the amount transferred would have to be meaningful and may have to approach or approximate the profits the energy companies forego by leaving the fossil fuels in the ground."
 
An approach that incentivizes the involvement of the energy companies by not inflicting losses on them is essential. The fact that the divestment advocates are 'right' does not make them a solid bet given humanity's demonstrated capacity for self-destruction.
 
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/
 
 
2014 the Year for a Smart Carbon Tax
By Joe Keefe
July 28, 2014
Green Money Journal
 

Monday, December 1, 2014

Strategic CSR - Social impact investing

The theme for this week's Newsletters is social impact investing (Issue: Investor Activism, p285). Aspects of impact investing, which grew out of the socially responsible investing (SRI) industry, have been a part of Strategic CSR since the first edition. The market for investment instruments that satisfy values-based investing demand continues to grow and, according to the article in the url below, has evolved into a new type of fund:
 
"It is an intriguing concept: investing in stocks of companies with female leadership. Backed by studies that say such companies perform better, fund companies are stepping in with investments that snub male-dominated companies, and bet on women."
 
In particular:
 
"Barclays PLC in July launched a Barclays Women in Leadership Total Return Index and related exchange-traded notes, Barclays Women in Leadership ETN. The index is made up of U.S. companies with a female chief executive or at least a 25% female board."
 
According to research that supports the foundation of such tailored funds:
 
"…from 2004 to 2008, Fortune 500 firms with three or more female directors had an 84% better return on sales and a 46% better return on equity. Matterhorn Group [at Morgan Stanley] cites studies by several universities and consulting companies as well that see a correlation between strong financials and women in leadership roles."
 
These funds come with two caveats (according to the article). First:
 
"Female leaders are often appointed in times of poor company performance, so their posts may be precarious, say Michelle Ryan and Alex Haslam, professors at the University of Exeter in the U.K. That 'glass cliff' could make such companies less attractive to investors, the researchers say. Some observers caution, too, that the presence of more female directors is not necessarily the cause of business success, but could instead be a consequence."
 
Second, and equally controversially, there is still considerable debate about the value of mutual funds with higher than average management fees, in general, and SRI funds, in particular:
 
"Robert Goldsborough, a fund analyst at investment-research firm Morningstar Inc., says, 'Over time, these kinds of screens typically produce performance that's on par with the market; typically not better, but not worse.'"
 
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/
 
 
Men Had Their Chance; New Funds Bet on Women
By Daisy Maxey
August 4, 2014
The Wall Street Journal
Late Edition – Final
R1