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


Friday, January 29, 2016

Strategic CSR - Robin Hood

The article in the url below engages in an interesting exercise:
 
"Would the world be a better place if the wealthiest gave their fortunes away to the bottom billion?  We tried to answer the question by creating the Robin Hood Index. … The index shows how the net worth of each country's wealthiest person compares to the livelihood of his fellow countrymen by calculating the lump sum in dollars each person living in poverty would get if the assets of the richest citizen were liquidated and redistributed."
 
The associated chart detailing the Robin Hood Index is at:
 
 
As the article notes, the effect varies considerably across countries, with every person living in poverty in Sweden receiving $33,149, while every person living in poverty in India receiving just $59:
 
"The net worth of Bill Gates would turn into a one-off payment of $1,736 if distributed to the neediest 15 percent of Americans."
 
Given that the wealth of the richest person in each country is roughly the same (give or take a billion or ten), what the exercise really demonstrates is that there are many more people living in poverty in India than in Sweden:
 
"[India's richest man] Mukesh Ambani's $19.2 billion net worth … is 13.6 million times more than the gross domestic product of his fellow Indians. Still, with 30 percent of the country destitute, his riches would result in each poor person getting $59, enough for 118 basic meals priced at 35 rupees (50 cents) and consisting of rice, dal, two vegetables, one pickle and three chapatis."
 
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/
 
 
What If The Richest Person in Every Country Gave All Their Money to the Poor?
By Wei Lu
September 21, 2015
Bloomberg Businessweek
 

Wednesday, January 27, 2016

Strategic CSR - Bank of England

To see the challenges we have in incorporating the reality of climate change into practical policies that help make our economic system more sustainable, you just have to look at the pushback Mark Carney (Governor of the Bank of England) received for saying something that is really quite tame:
 
"Mark Carney … declared that the warming climate presented major risks for the global economy and global financial stability, and that businesses and regulators needed to move more quickly to try to contain the potential economic damage even though it may seem uncertain and far off."
 
The effects of climate change, Carney argued, will be far-reaching, although largely unpredictable today:
 
"Consider that a housing bubble largely concentrated in a handful of Sun Belt American states, Spain and Ireland set in motion events that eight years ago caused a financial crisis from which the world economy has still not fully healed. It's easy to imagine how the effects of a shifting climate could similarly ripple through both the financial system and the real economy in ways that are impossible to predict with any precision today."
 
What is more, Carney continued, climate change constitutes "a cost on future generations that the current generation has no incentive to fix." He framed this discussion as one that is potentially existential for the energy industry:
 
"If global governments get more aggressive about restricting carbon emissions, it could mean that billions of investment in oil and gas extraction will be rendered useless and undermine both some of the most widely held investments and the government finances of oil-producing regions."
 
Carney, who made his comments in a speech to a group of insurers in London (article in the first url below), was quickly rebuffed by investors claiming the Governor had "spoken out-of-turn" (article in the second url below). The critics argued that a topic like this does not fall within the Bank of England's remit. Moreover, Carney was accused of missing the point:
 
"Several oil and gas companies, including Royal Dutch Shell, have … argued that the stranded-assets concept overlooks projected demand for energy, especially in fast-growing developing countries."
 
While this is true, what the investors quoted in the article miss is that the idea of stranded assets has nothing to do with potential demand. More specifically, it is tied to the capacity of the planet to absorb the levels of carbon dioxide we are currently emitting (and will continue to emit in the future). Once we realize (collectively) that we face the very real danger of creating an ecosystem that is uninhabitable, the fact that demand for fossil-fuel-based energy has historically been strong is not going to help us much.
 
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/


Climate Change Is a Worry For Central Bankers, Too
By Neil Irwin
October 1, 2015
The New York Times
Late Edition – Final
By Madison Marriage and Richard Stovin-Bradford
October 5, 2015
The Financial Times FTfm
Late Edition – Final
1, 7
 

Monday, January 25, 2016

Strategic CSR - Stock options

The article in the url below presents further evidence to suggest that stock options are not as effective a performance incentive as their proponents would like to believe:
 
"Boards of directors use large packages of stock options to encourage chief executives to attempt bold initiatives with big potential upside for investors. But those options may be spurring CEOs to take excessive risks, according to new research … which linked the size of CEO stock-option grants to the number of product-safety recalls at the chief's company."
 
The effect is substantial:
 
"[The researchers found that] increasing the makeup of CEO pay from 25% options to 75% options raises the probability of a subsequent product recall by 35%."
 
The reason offered is that stock options present executives with a no-lose situation. They constitute a moral hazard in the same way individual traders within the finance industry are encouraged to take risks – the gains are privatized (accruing to the individual and a narrow set of stakeholders) while the risks are socialized (borne by the firm's broader set of stakeholders and, in the last resort, society as a whole):
 
"Unlike stock grants, in which executives lose money when initiatives fall flat, option grants carry little downside for executives. CEOs stand to make a lot of money by exercising stock options if a big bet like a new drug or product pays off. Yet if that bet fails, executives are no worse off."
 
The article also contains a potentially more important finding from the study. It is buried in the final paragraph, but is perhaps more instructive for Boards looking to appoint executives who are least likely to endanger the organization:
 
"The researchers also found that CEOs with tenures of 10 years or more didn't seem to be affected by higher levels of stock-option grants."
 
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/
 
 
Big Stock Options Lead to High Recall Probability
By Rachel Emma Silverman
September 23, 2015
The Wall Street Journal
Late Edition – Final
B7
 
 
 

Friday, January 22, 2016

Strategic CSR - Hot

The article in the url below provides an update on the state of our environment (see also Strategic CSR – Climate data). As you might have guessed, things are bad and will continue to get worse before they improve:
 
“Last month was the hottest August on record, topping out the hottest summer on record, according to data released on Thursday by the National Oceanic and Atmospheric Administration. It was the sixth month this year to set a new record: February, March, May, June, July, and August. This has been the hottest start to a year on record and the hottest 12 months on record. It follows the hottest calendar year (2014), and the hottest decade.”
 
The news is bad all around:
 
“In 136 years of global temperature data, we are in uncharted territory. And this year's extremes are likely to continue as a strong El Niño weather pattern in the Pacific Ocean continues to rip more heat into the atmosphere. There's now a 97 percent chance that 2015 will set yet another record, according to NOAA.”
 
The dynamic chart and other graphics in the article demonstrates viscerally how much hotter 2015 was:
 
“‘Are the record temperatures due to climate change or due to El Niño? The answer is yes,’ said Deke Arndt, chief of NOAA's climate monitoring branch in Asheville, N.C.. ‘Long-term climate change is like climbing a flight of stairs. El Niño is like standing on tippy toes while you are on one of those stairs.’”
 
For an up-to-date graphic detailing how much hotter 2015 was than any previous year on record, see:
 
 
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/
 
 
Scorching Year Continues With the Hottest Summer on Record
September 17, 2015
Bloomberg Businessweek
 

Wednesday, January 20, 2016

Strategic CSR - Welcome back!

 
Welcome back to the Strategic CSR Newsletter!
The first CSR Newsletter of the Spring semester is below.
As always, your comments and ideas are welcome.
 
 
The article in the url below offers its take on the top eight "biggest errors, scandals, and crimes of the world of big business in 2015":
 
1. Toshiba's accounting scandal.
2. FIFA's RICO problem.
3. Goldman Sachs employee uses stolen confidential materials.
4. The dirty business of oil and gas.
5. Millions of kids' personal data hacked.
6. Exxon Mobil deliberately misleads the public about climate change.
7. Volkswagen cheats emissions tests.
8. Turing Pharmaceuticals jacks up prices.
 
I have less issue with the list so much as the ordering. It is not clear why the transgressions of a single employee at Goldman Sachs, for example, should be ranked so much higher than the organization-wide effort by VW to evade public safety regulations (and which has since been linked to "about 59 early deaths in the U.S. alone" – see BusinessWeek article here). It will also be interesting to see the extent to which specific transgressions stand the test of time. I am particularly interested to see whether the Exxon case gains any traction in the courts.
 
To see The Guardian's Top5 scandals that "defined" 2015, see here.
 
Hope you have a great semester.
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/


The 8 Most Outrageous Business Scandals of 2015
By Will Yakowicz
December 23, 2015
Inc.