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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Thursday, April 27, 2017

Strategic CSR - Jobs

To follow-up on Tuesday's Newsletter, the article in the url below investigates the accusation that excessive government regulation "kills jobs":
"It was in the early days of Ronald Reagan's campaign for president that America first started frequently hearing the term 'job-killing regulations' in response to an increasing number of environmental laws. Reagan criticized the Carter administration for doing a terrible job with the economy, and said these failures were related to Carter's 'continuing devotion to job-killing regulation.'"
Interestingly, research suggests that, while regulations can diminish economic growth and, therefore, employment in one sector or industry, the same regulation usually creates about the same number of jobs in a different/new industry:
"A factory that makes lead additives for gasoline might be shut down because regulations have banned lead additives. But new jobs will then be created at a factory that makes catalytic converters, which are emissions-control devices for cars. Some workers, then, benefit from regulation, while others lose. That doesn't mean that the losses aren't real and painful for the people who held those jobs, but the overall picture is not one that can be accurately characterized by the phrase 'job-killing.'"
Of course, with any evaluation of an economy-wife phenomenon, there is also a lot of noise to go along with the theory. While jobs are created and lost continuously, it is ideologically useful to have the crutch of "burdensome governmental regulation" to blame for run-of-the-mill business failure:
"Job loss and creation is also a normal part of any economy; some companies go out of business because their goods or services are no longer in demand, while other jobs are created as new companies emerge to fill new demands. … That doesn't mean companies don't try to blame regulations for their failures."
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Do Regulations Really Kill Jobs?
By Alana Semuels
January 19, 2017
The Atlantic

Wednesday, April 26, 2017

Strategic CSR - Minimum wage

The article in the url below presents a strong argument in favor of minimum wage jobs:
"Entry-level jobs matter—and you don't have to take my word for it. In a speech last week on workforce development in low-income communities, Federal Reserve Chair Janet Yellen said that 'it is crucial for younger workers to establish a solid connection to employment early in their work lives.'"
Although the author of this article has a dodgy record as an employer (to say the least), I think there is value in his position on this issue. Specifically, he argues that the downside to a significant jump in the minimum wage is heightened in an age of increasing automation:
"In a survey released last month, the publication Nation's Restaurant News asked 319 restaurant operators to name their biggest challenged for 2017. Nearly a quarter of them, 24%, said rising minimum wages. … McDonald's said last November that it would install self-order kiosks in all 14,000 of its U.S. restaurants. Wendy's announced in February it would add kiosks at about 1,000 locations to 'appeal to younger customers and reduce labor costs.'"
While prior research on the effects of a minimum wage suggest that a significant jump discourages entrepreneurs from creating more jobs, the article suggests that, given the increasing ability of machines to replace humans in the workplace, any legislation designed to raise the minimum wage should really be called "the Robot Employment Act":
"The trend toward automation is particularly pronounced in areas where the local minimum wage is high. Eatsa, a 21st-century version of the automat, now lists seven locations in four cities, each of which will be subject to a $15 minimum wage within the next 36 months."
And this problem is only going to become more apparent:
"Taking automation to the next step, Miso Robotics and the owner of CaliBurger announced in March they have developed a robotic arm, called Flippy, that can turn burgers and place them on buns. CaliBurger plans to install them over the next two years in 50 restaurants worldwide."
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The Minimum Wage Should Be Called the Robot Employment Act
By Andy Puzder
April 14, 2017
The Wall Street Journal
Late Edition – Final

Wednesday, April 19, 2017

Strategic CSR - Progress

In evaluating the purpose of the for-profit firm in society, it is useful to occasionally remind ourselves of how far we have come. The article in the url below touches on this subject:
"For most of the time that our species has been around, a man in his thirties had a fair chance of being dead already; a woman, too, often through childbirth. Evading violence, hunger and the elements was a human's daily lot. Even in modern history, people were bonded to the state through conscription or to the land through serfdom. Within memory, there was one role for women (mother), one for men (provider), one permissible sexual taste (straight), and even that was consecrated within marriage."
A large assumption of the framework presented in Strategic CSR is that, although all sectors of society played a part, the invention of the for-profit firm (in particular, the limited liability corporation) is a large reason for these advances – what the article attributes to "material progress." The speed and extent of change is quite remarkable (when you stop to think about it) given the short period of time involved:
"Most people for most of history lived in small communities, had few sexual partners and could not take food or other needs for granted. My friend is just two generations removed from a similar life, and that was on English soil. Now, in a city he shares with almost 9 million others, he goes on a hundred dates a year without having to do anything more strenuous than wait for his numerous apps to make matches. Without working very hard, he has surplus income."
None of this, of course, excuses behavior by firms that transgresses stakeholder expectations, but it does put things in perspective and, perhaps more importantly, should be accounted for among those who seek alternatives to market capitalism. The bar that needs to be cleared is inventing a system that creates more value than the system we currently have. If that bar cannot be cleared, then a more sensible solution is to improve the system we currently have. This is the approach of Strategic CSR, based within a set of assumptions about economic exchange and human psychology that helps us understand how the current system works and how we might end up with behavior from firms we say/think we do not want.
A historical perspective is useful in assessing how best the for-profit firm can benefit us. To be clear, the corporation is a social construction. We can shape it in any way that we please. What is important, however, is that we remember that it is a tool, not an agent with an independent consciousness; as such, it reflects the values of those connected to it (its stakeholders).
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History's luckiest generation: We're getting away with it – For now
By Janan Ganesh
January 14/15, 2017
Financial Times – Life & Arts
Late Edition – Final

Tuesday, April 18, 2017

Strategic CSR - Morality

The article in the url below discusses the extent to which our personal values/morals/ethics are central to who we are as individuals:
"What defines who we are? Our habits? Our aesthetic tastes? Our memories? If pressed, I would answer that if there is any part of me that sits at my core, that is an essential part of who I am, then surely it must be my moral center, my deep-seated sense of right and wrong."
What is interesting, therefore, is to consider how that morality evolves according to context, such as when speaking a foreign language:
"And yet, like many other people who speak more than one language, I often have the sense that I'm a slightly different person in each of my languages—more assertive in English, more relaxed in French, more sentimental in Czech. Is it possible that, along with these differences, my moral compass also points in somewhat different directions depending on the language I'm using at the time?"
While we have known that morality is, to some extent, culturally specific (i.e., different behaviors are deemed to be moral/immoral in different cultures) and time-specific (i.e., different behaviors are deemed to be moral/immoral at different points in time), the article discusses how this variance exists within people as well as among them. In other words, different behaviors by the same person are considered moral/immoral depending on the culture in which the person happens to be at the time. The research summarized in the article operationalizes different cultures in terms of when the person is speaking a different language and found some interesting results:
"[Researchers] found that using a foreign language shifted their participants' moral verdicts. In their study, volunteers read descriptions of acts that appeared to harm no one, but that many people find morally reprehensible—for example, stories in which siblings enjoyed entirely consensual and safe sex, or someone cooked and ate his dog after it had been killed by a car. Those who read the stories in a foreign language (either English or Italian) judged these actions to be less wrong than those who read them in their native tongue."
The explanation offered for this relative morality speaks directly to the level of effort required to speak a foreign language as opposed to a native language:
"According to one explanation, such judgments involve two separate and competing modes of thinking—one of these, a quick, gut-level 'feeling,' and the other, careful deliberation about the greatest good for the greatest number. When we use a foreign language, we unconsciously sink into the more deliberate mode simply because the effort of operating in our non-native language cues our cognitive system to prepare for strenuous activity."
Another explanation offered relies more on the relationship between language, emotions, and memory:
"An alternative explanation is that differences arise between native and foreign tongues because our childhood languages vibrate with greater emotional intensity than do those learned in more academic settings. As a result, moral judgments made in a foreign language are less laden with the emotional reactions that surface when we use a language learned in childhood."
The author's conclusion?
"What then, is a multilingual person's 'true' moral self? Is it my moral memories, the reverberations of emotionally charged interactions that taught me what it means to be 'good'? Or is it the reasoning I'm able to apply when free of such unconscious constraints? Or perhaps, this line of research simply illuminates what is true for all of us, regardless of how many languages we speak: that our moral compass is a combination of the earliest forces that have shaped us and the ways in which we escape them."
This work reminds me of research that looked at the relativity of ethical values by studying the decisions of prison parole boards before and after lunch. It seems that, if you ever find yourself before a prison parole board, they will be less likely to be lenient if they are hungry (see Strategic CSR – Ethics).
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How Morality Changes in a Foreign Language
By Julie Sedivy
September 14, 2016
Scientific American

Wednesday, April 12, 2017

Strategic CSR - United

A key to understanding the full implications of Strategic CSR is the idea that corporations reflect our values; they do not shape those values. In other words, corporations reflect the aggregated values of their collective set of stakeholders (internal and external). To put this succinctly – it is not Walmart that puts Mom & Pop stores out of business; customers do that by choosing to shop at Walmart, employees do it by choosing to work for Walmart, governments do it by providing tax breaks for Walmart, and so on. If you have a problem with Walmart, then you have a problem with American society because it is clear that American society wants Walmart. 90% of U.S. households shop at Walmart at least once a year – I don't know of any other company that consistently receives that level of societal endorsement.
An extension of this idea is that corporations are not the problem; they are the solution. The for-profit firm is simply a tool that we have devised to solve a specific problem – how to allocate scarce and valuable resources. There is a finite set of resources available to us. How to allocate these resources in a way that produces 'optimal' value for the majority is a problem that has challenged humanity throughout our existence. The best solution we have found to date is for-profit firms operating within a market-based, democratic form of capitalism. Once you understand firms are merely a tool, you understand that they will do what we ask of them. If we ask them to pollute the planet (as we are, at present), they will efficiently do that. Equally, if we ask them to preserve the planet, they will find the most efficient means of achieving that goal. They will do what we want them to do – they reflect our collective set of values.
I was thinking about this again in light of United's recent challenges. To what extent is United shaping the airline industry and to what extent is it merely giving us what we, collectively, want – cheap tickets and bare-bones service? The most recent crisis to hit United is made all the more apparent in contrast to last week's news about the airline industry's most recent performance ratings. The one headline that caught my attention there – the low budget carrier, Spirit Airlines, is currently the most profitable U.S. airline; it also has the highest rate of customer complaints. I fail to understand how that can be. If people want the absolute cheapest tickets, why would they then complain if they receive poor service, or their bags get lost, or whatever caused them to complain? If we want good service, we have to understand that there is a cost associated with that. And, if we are willing to pay for good service, we should believe that there are many entrepreneurs out there who would be more than willing to provide it to us. Clearly, when it comes to airlines, however, most of us do not want to pay for that service.
This brings me back to United. I don't necessarily agree with the overall tone of the article in the url below, but it is the most unique perspective I have seen in the acres of coverage on this issue. More importantly, I think it captures effectively the idea that United is merely a reflection of a broader system that we have shaped through our day-to-day decisions. In other words, while it feels satisfying to shoot the messenger, we should always remember that it is we (the firm's collective set of stakeholders) who are sending the message. In the same way that we get the politicians we deserve, we also get the companies we deserve:
"It is commendable and necessary to direct your outrage at this particular corporation, on this particular day, but keep the larger truth in mind: You are not mad at United Airlines; you are mad at America."
Of course, on the flip side, the fact that so many passengers felt outraged at the events and spread the word so quickly suggests a willingness to induce change, …. perhaps. We'll have to see if there are any lasting consequences for United. Past performance suggests we will quickly forget and move on. But, it is worth keeping in mind the next time you purchase an airline ticket. Will you demand better service and pay for it, or are we all heading towards a future filled with versions of Spirit Airlines or Ryan Air (or your lowest-cost carrier of choice)?
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You're Not Mad at United Airlines; You're Mad at America
By Shane Ryan
April 10, 2017
Paste Magazine

Tuesday, April 11, 2017

Strategic CSR - Bribery

The article in the url below about the effects of bribery on firm performance reminded me of other research I have seen before. The research summarized here states that, while bribery helps drive revenue, it does not help drive profits:
"[The research] by two Harvard Business School professors analysed anti-corruption data from 480 multi-national firms based on sales growth, the strength of companies' anti-corruption programs and the type of market the businesses were operating in. When companies with lower end anti-corruption programs entered high bribery markets they achieved 14.1% growth over three years, compared with 2.6 % growth for top compliance companies. But the fast growth was typically offset by other costs, the study found."
In other words, while bribery appears on the surface to pay dividends, it in fact stimulates other costs that end up offsetting any gains. So, while bribery drives revenue growth, it does not increase a firm's profits. The article in the second url below, however, shows that (like much academic research), this empirical reality does not necessarily change behavior:
"Bribery is a way of life for British companies working in emerging markets, with 85pc of managers forced to resort to it to do business, according to a new report. … [The research] claims the vast majority of UK managers operating in these markets resort to the dishonest practice on a monthly basis – often with the tacit permission of their chief executives."
Rather than a choice, however, the article suggests bribery is a way of conducting business in some emerging countries that cannot be avoided. As the researcher notes:
"'It is the managing directors and general managers in country… who are being forced to give bribes to win business. These are good people being forced to do bad things. Boards are doing worse than paying lip service to anti-corruption laws because they are using them to protect themselves while they know bribery is going on.'"
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Study Finds Bribery Increases Sales Not Profits
By Stephen Dockery
March 1, 2016
The Wall Street Journal
Bribery a way of life for companies operating in emerging markets 
By Alan Tovey
October 26, 2016
The Daily Telegraph

Thursday, April 6, 2017

Strategic CSR - Climate policy

The article in the url below presents some statistics that suggest the Trump administration's efforts to turn back the clock on climate change will have little effect:
"'You cannot stop the momentum,' said Sacha Sadan, director of corporate governance for Legal & General Investment Management. … As an example of that trend, Mr. Sadan cited LGIM's launch in November 2016, of an index fund that will rank companies based on their environmental standards. HSBC Holdings invested 1.85 billion pounds in the fund, making it the default equity fund for its employees' defined contribution pension plan. According to the Global Sustainable Investment Alliance, climate change and carbon emissions was 'the most significant overall environmental factor' for socially-minded investors in the U.S., drawing allocation of $2.15 trillion in institutional investor assets in the year ended Dec. 31, 2015. Shareholder proposals focusing on the climate risk are also getting more support, even if none got majority approval over board opposition so far. According to Proxy Monitor, an arm of the Manhattan Institute's Center for Legal Policy that tracks resolutions filed with Fortune 250 companies, 23 of the total 58 environmental-related proposals as of the end of June, 2016, got 26% of the vote, compared with 16% support in 2015 and 14% in the 2006-2015 period. Also, five environmental resolutions received at least 40% support, a record number, said Proxy Monitor."
These data points are reinforced by an op-ed piece by Michael Bloomberg in the article in the second url below, which argues that the momentum (and, therefore, the ability to drive change) on this issue lies at the state and city level, rather than the federal level:
"In both red and blue states, cities — which account for about two-thirds of the country's emissions — are taking the lead in the fight against climate change. More than 130 American cities have joined the Global Covenant of Mayors for Climate and Energy, and all are determined to see that we meet our Paris goal. Their local policies — expanding mass transit, increasing the energy efficiency of their buildings, installing electric vehicle charging stations, creating bike share programs, planting trees, to name just a few — will help ensure we do."
This change, Bloomberg argues, is driven more by bottom-up stakeholder demand, rather than top-down ideology:
"Though few people realize it, more than 250 coal plants — almost half of the total number in this country — have announced in recent years that they will close or switch to cleaner fuels. Washington isn't putting these plants out of business; the Obama administration's Clean Power Plan hasn't even gone into effect yet. They are closing because consumers are demanding energy from sources that don't poison their air and water, and because energy companies are providing cleaner and cheaper alternatives."
Progressive companies recognize this and are not changing plans simply to reflect the fluctuating moods of politicians in Washington:
"This week, many of the 81 major corporations (including Apple and Wal-Mart) that signed a pledge in 2015 to reduce their emissions reaffirmed their commitments, and Anheuser-Busch InBev announced that it aims to get 100 percent of its energy from renewable sources by 2025. (My company is pursuing the same goal.) No mandate from Washington is forcing these companies to act — just their own self-interest."
Take care
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The Case for Climate Rick Investing in Trump Era
By Mara Lemos Stein
March 31, 2017
By Michael R. Bloomberg
March 31, 2017
The New York Times
Late Edition – Final

Tuesday, April 4, 2017

Strategic CSR - Cognitive dissonance

The article in the url below contains some interesting information on Americans' awareness of climate change as a problem, as well as their willingness to pay to solve that problem. It appears that, increasingly, Americans are aware that climate change is real, that it is a human-caused problem, and it is something that needs to be addressed:
"Americans of all political stripes are increasingly worried about climate change. This is undoubtedly good news for those advocating for robust policies to reduce carbon emissions, the main contributor to climate change."
Unfortunately, while awareness is growing, it appears that Americans are much less willing to pay, even a small amount, to solve the problem:
"This is what researchers from the Energy Policy Institute at the University of Chicago (EPIC) and the Associated Press … set out to better understand. Their nationally representative poll found that 43% of Americans were unwilling to pay an additional $1 per month in their electricity bill to combat climate change—and a large majority were unwilling to pay $10 per month. That's despite the fact that a whopping 77% said they think climate change is happening and 65% think it is a problem the government should do something about. Support plummets as the amount of the fee increases."
This response is out of all proportion to the threat posed by climate change, both to the group and to each household individually:
"This is an upside-down result. The best available science tells us that Americans should be willing to pay considerably more, because the damages from climate change are so great—including to them personally. If we use the federal government's estimate of the combined social cost of carbon pollution and apply it to the typical U.S. household's electricity consumption on today's national grid mix, the average household faces damages of almost $20 per month. Yet just 29% of respondents said they would be willing to pay at least that much."
So, the interesting question is how can we keep these contradictory thoughts in our heads at the same time? Humans' well-known capacity for cognitive dissonance allows us to recognize a problem as potentially existential, while at the same time not being willing to sacrifice individually for the benefit of the group. My sense is that the existential threat, even if believed, is perceived as distant, while the costs associated with preventing it are perceived as immediate. We have a collective need for short-term gratification that seems to override our longer term self-interest – there is a reason why so many of us have not saved enough for our retirement. In terms of the climate in the U.S., however, this mechanism seems disproportionately influential. While the article includes examples of different communities around the world that are willing to pay for a clean environment, the data suggests that willingness has yet to emerge in the U.S. As the author concludes:
"This is potentially bad news for climate policy. After all, if 43% of Americans are unwilling to pay even $1 to solve  a $20 problem, the policy landscape is likely to be challenging."
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Few Will Pay for Climate-Change Fight
By Sam Ori
November 14, 2016
The Wall Street Journal
Late Edition – Final