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


Monday, January 30, 2017

Strategic CSR - Walmart + bribery

The article in the url below revisits Walmart's bribery scandal in Mexico (see Strategic CSR – Walmart in Mexico and Strategic CSR – Walmart), which I thought had wrapped-up a long time ago:
 
"Wal-Mart Stores Inc. tried and failed to settle a foreign-bribery probe that has stretched for five years and cost the company more than $820 million, according to people familiar with the federal investigation."
 
Since its original focus on operations in Mexico, the scope of the investigation has broadened considerably, which explains the growing cost to Walmart:
 
"The Justice Department and SEC investigations were largely driven by a 2012 series of articles in the New York Times portraying details of possible misconduct at Wal-Mart in Mexico. The investigation spread to other regions where Wal-Mart does business, including Brazil, India, and China. A final settlement is expected to cover multiple countries, the people said."
 
Apparently, towards the end of a presidential administration, firms with outstanding investigations push to settle them with the team they know (and who are familiar with the history of the case), rather than wait for the incoming team that may impose different and more burdensome terms. In this case, Walmart was unable to reach agreement with the DoJ and SEC before Obama left office:
 
"'Wal-Mart and the government are very far apart in terms of a settlement,' one of the people [familiar with the federal investigation] said Thursday."
 
Apart from learning that this investigation was still ongoing, however, I was more interested to see what appears to be the main obstacle to a conclusion:
 
"The people familiar with the probe said one major sticking point has been Wal-Mart's eligibility to continue accepting food stamps in its 5,300 Wal-Mart and Sam's Club stores in the U.S. after a settlement is reached. A company that pleads guilty to a federal crime can lose its right to win government contracts -- a penalty that could block Wal-Mart from the $71 billion food-stamp program. The retailer, one of the largest sellers of groceries, is also one of the biggest beneficiaries of food-stamp spending."
 
How important, exactly, are food stamp customers to Walmart?
 
"The loss of food-stamp shoppers would be a blow to Wal-Mart, which each year receives some 18% of the money spent through the Supplemental Nutrition Assistance Program, or SNAP. That represented about $13 billion in sales last year."
 
Although this is a small percentage of the firm's almost $500 billion annual revenues, it still represents a significant transfer of funds from the government. As such, this amount represents a subsidy that allows the firm to operate at a much lower cost than competitors. And I would guess that a similarly large number is involved in terms of Medicare and Medicaid healthcare payments for employees who do not receive insurance directly from the firm. Tax breaks to locate stores in particular geographic, economically-deprived regions also no doubt help pad Walmart's bottom-line. There are good arguments on both sides for these payments to exist and continue. What I find funny, though, is the widespread belief that the U.S. economy is a free market. The inefficiencies introduced by the various political biases on both sides of the fence reduce competition and support firms that would otherwise struggle or even fail, preventing the creative destruction that is so fundamental to the effective functioning of the capitalist system.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Wal-Mart Stuck in Probe Limbo
By Joann S. Lublin, Aruna Viswanatha, and Sarah Nassauer
January 28-29, 2017
The Wall Street Journal
Late Edition – Final
B1
 

Wednesday, January 25, 2017

Strategic CSR - Fake news

The article in the url below discusses the impact of 'fake news,' a term that it defines as follows:
 
"Fake news has a real meaning — deliberately constructed lies, in the form of news articles, meant to mislead the public. For example: The one falsely claiming that Pope Francis had endorsed Donald Trump, or the one alleging without basis that Hillary Clinton would be indicted just before the election."
 
Beyond this already broad meaning, however, the author argues that the use of this term has become distorted and is now used deliberately to obfuscate any story that the target does not like:
 
"… though the term hasn't been around long, its meaning already is lost. Faster than you could say 'Pizzagate,' the label has been co-opted to mean any number of completely different things: Liberal claptrap. Or opinion from left-of-center. Or simply anything in the realm of news that the observer doesn't like to hear. … Glenn Kessler, who writes The [Washington] Post's Fact Checker, put it this way: 'People seem to confuse reporting mistakes by established news organizations with obviously fraudulent news produced by Macedonian teenagers.'"
 
While the author's conclusion is that we should do away with this "rhetorical weapon" and, "Instead, call a lie a lie. Call a hoax a hoax. Call a conspiracy theory by its rightful name," my interest is the extent to which the fake news phenomenon has the potential to impact companies (rather than political or social discourse). If fake news can skew people's opinions to the point that it influences voting behavior, the same process could certainly influence consumers' purchase behavior. After all, a purchase is nothing more than a vote of confidence for a particular product or business model.
 
Companies have to walk a fine line on this issue. On the one hand, they need to be responsive to their key stakeholders (and social media enables this). On the other hand, not everyone who has a voice is necessarily a legitimate stakeholder or, perhaps more accurately, does not necessarily represent the collective interests of a key stakeholder group. In other words, just because someone has a voice and the drive to use it does not make their concern one that the firm needs to address. When that occurs, it is up to the firm's other stakeholders to make sure a lone voice does not distort the firm's decision-making processes and implement a policy that does not serve the interests of a broad range of stakeholders. While social media has grown to the point that it can drive the news (across all segments in society), the phenomenon of fake news reinforces the idea that the motivation to voice is not always 'helpful' or in the interests of the majority.
 
For more on this topic, the article in the second url below contains advice from "several crisis management executives" as to how firms should respond if they become the target of fake news.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/


It's time to retire the tainted term 'fake news'
By Margaret Sullivan
January 8, 2017
The Washington Post
By Ben DiPietro
January 20, 2017
The Wall Street Journal
 

Monday, January 23, 2017

Strategic CSR - Star Wars

The movie industry today is big business, with ever-larger sums riding on the backs of what seem like fewer and fewer franchises and their associated stars. The article in the url below indicates the extent to which the movie studios understand this and are seeking to monetize the risks involved:
 
"The death of Carrie Fisher, a much-loved actor in the 'Star Wars' movies, left a hole in the force for fans. It may also burn a hole in the pockets of underwriters, syndicated under Lloyds of London. They may have to fork out as much as $50m to meet Disney's claim for its loss. The studio, which owns the sci-fi saga, had wisely taken out so-called contractual-protection insurance (CPI) in case death thwarted a contractual obligation: in Ms Fisher's case to film and promote future 'Star Wars' episodes."
 
I have discussed the social and ethical issues surrounding the ability of firms to insure the lives of their employees before (see Strategic CSR – Employees). What is interesting in the article below is the extent to which it demonstrates movie studios rely on specific individuals:
 
"When Paul Walker, an actor in 'The Fast and the Furious,' a series of action movies, died in 2013 while filming the seventh instalment, Universal Pictures had to spend considerable effort (and dollars) to make his on-screen persona live on. This included hiring body-doubles and digitally inserting Mr Walker into the movie with hundreds of computer-generated images."
 
Beyond a basic functional ability, franchise movies (and popular sports teams) become associated with specific individuals, faces, voices, which are hard to replace. While companies understand this, it doesn't mean it is always easy to quantify the value of such individuals. CPI has been developed by the insurance industry to deal with this problem:
 
"… the value of a film star to a studio, or a striker to a football club, … depends on all sorts of things, especially timing. This is where contingency insurance, such as CPI, comes in. Unlike a life policy, how much of the $50m Disney receives depends on how it now calculates and justifies the losses caused by Ms Fisher's death. This could include, for example, her role in boosting sales of storm-trooper figurines."
 
While CPI establishes a process (and, over time, precedent) for valuing the life of someone who is essential, it is less easy to pinpoint the extent to which such quantification eats away at our moral foundations. In spite of knowing that a firm's investment in an employee (particularly a star actor or athlete) constitutes an asset that should be protected, it still feels as though the company is taking something that doesn't belong to it. This is especially so when the quantification of the employee's future value remains subjective and ambiguous. Perhaps this should be irrelevant, but this feeling is enhanced if the employee has not taken out life insurance themselves. While this may not matter or apply in Ms. Fisher's case (or of other stars), increasingly firms are taking out insurance on more and more of their employees, some (many?) of whom cannot afford to take out life insurance themselves. In doing so, firms use the criteria, not that the employees are essential to the business, but that it would be inconvenient to replace them. While I understand that the firm pays the premium levied by the insurance company and this is a risk/reward transaction somewhat removed from the individual themselves, what happens when a badly written policy builds-in incentives for firms to profit from the employee's death? Additionally, should the firm be allowed to benefit more than the employee's family from the event? To what extent is an employee's life something that can be hedged by the firm?
 
"With rock stars remaining on stage into their dotage and long-running sequels one of the surest ways to make money in Tinseltown, the risks of losing a 'key human' (or on occasion animal) are growing. That creates business opportunities for insurers, so long as they remain prudent and don't become star-struck."
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/
 
 
Death Star
January 7, 2017
The Economist
Late Edition – Final
57
 

Thursday, January 19, 2017

Strategic CSR - Welcome back!

 
Welcome back to the Strategic CSR Newsletter!
The first newsletter of the Spring semester is below.
As always, your comments and ideas are welcome.
 
 
The debate between voluntary and mandatory compliance is central to promoting CSR. Whether you think more socially-responsible behavior can be imposed or coerced, as opposed to incentivized, speaks volumes as to where you stand on many CSR issues. With this in mind, the new year brought a raft of new laws in cities and states across the U.S. (and overseas)—all related to topics that are of concern to the CSR community. The article in the first url below chronicles some of these new laws:
 
"In cities and states across the U.S., the new year brings a flurry of new laws addressing everything from soda consumption and sick leave, to semiautomatic weapons and catfish catching."
 
A range of new soda taxes is highlighted in the article:
 
"More than a year after Berkeley, Calif., introduced the nation's first tax on sweetened drinks, other cities are jumping on the bandwagon. Philadelphia's 1.5-cent-per-ounce tax on sugary and artificially sweetened drinks has taken effect. Bay Area voters in San Francisco and Oakland also approved a penny-per-ounce tax on sugary beverages, the same rate as Berkeley's. And Boulder, Colo., residents, approved the nation's steepest soda levy, at two pennies an ounce—or a $1.35 extra—for a two-liter bottle."
 
In contrast to these laws, which are all designed to curb anti-social behavior, the article in the second url below introduces a new French law that is designed to promote socially-beneficial behavior:
 
"If the world does not envy the French enough already for their generous vacations, universal health care and fine food and wine, the arrival of 2017 brings this: a newly created 'right to disconnect.' Though ridiculed in some quarters as a ban on work-related email after hours, it is not quite that. But it is born of the enlightened view that it is actually beneficial for people not to work all the time, and that workers have the right to occasionally draw the line when their employer's demands intrude on evenings at home, treasured vacations or Sundays with friends and family."
 
While the issue of banning after-hours email has caught all the media attention, there is evidence to suggest that not being constantly on-call benefits both employees and employers. As noted in an earlier Newsletter (Strategic CSR – Productivity), past experience suggests that employees that work less intensively are more productive:
 
"The new provision in the labor law does not ban work-related emails, but does require that companies with more than 50 employees negotiate a new protocol to ensure that work does not spill into days off or after-work hours."
 
There are a number of other French laws mentioned in the article that will be of interest to the CSR community.
 
Take care
David
 
 
Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e
Strategic CSR Simulation: http://www.strategiccsrsim.com/
The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

 
Taxes, Guns, Beer Included in New Laws
By Jacob Gershman
January 5, 2017
The Wall Street Journal
Late Edition – Final
A3
 
 
'Right to Disconnect' From Work Email and Other Laws Go Into Effect in France
By Alissa J. Rubin
January 3, 2017
The New York Times
Late Edition – Final
A6