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 19, 2018

Strategic CSR - Carbon emissions

The article in the url below demonstrates how far we have to go before we can even begin to think about achieving sustainability. In spite of all the warning signals, we refuse to even begin taking the steps necessary to preserve the planet:
"For now, however, we're still moving in the opposite direction: Carbon dioxide emissions from the use of coal, oil and natural gas increased 1.4 percent globally in 2017 after holding steady for the previous three years, the International Energy Agency reported on Thursday. That's the equivalent of adding 170 million new cars to the road worldwide."
In particular, there are five drivers of increased carbon emissions identified by the article, each of which would be difficult to surmount (given human nature and the rapidly expanding middle class worldwide); together, they represent a formidable challenge. First, is the growth in Asia:
"Roughly two-thirds of last year's emissions increase came from Asia, where fast-growing countries like China, India and Indonesia continue to rely heavily on fossil fuels as they lift themselves out of poverty."
Second, is the insufficient growth of renewable energy:
"Last year's 'unprecedented' growth in renewables, the I.E.A. said, satisfied only about one-quarter of the increase in global energy demand as the world's economy boomed. Fossil fuels supplied the rest."
Third, is the resilience of coal:
"… coal use rebounded slightly in 2017, rising by 1 percent, driven in part by an increase in coal-fired power in Southeast Asia. A particularly hot summer in China also led the country to run its existing coal plants more often to power air conditioning."
Fourth, is growing affluence and the purchases we make that reflect it, in particular cars:
"Demand for oil rose 1.6 percent last year, much faster than the average annual pace over the previous decade. As oil prices have declined, more people in the United States and Europe are buying larger S.U.V.s, pushing up transportation emissions further."
Fifth, is the insufficient gains in energy efficiency:
"In 2017, the energy intensity of the global economy — a measure of efficiency — improved by just 1.7 percent, a slower pace than in each of the previous three years. The agency noted that many countries appear to be easing up on government policies to improve energy efficiency."
A second article on the same day and the same page of The New York Times reminds us that carbon is only one of the many toxic materials we pump into the environment at an unsustainable rate:
"In the Pacific Ocean between California and Hawaii, hundreds of miles from any major city, plastic bottles, children's toys, broken electronics, abandoned fishing nets and millions more fragments of debris are floating in the water — at least 87,000 tons' worth, researchers said. …  [The so-called garbage patch] is four to 16 times bigger than previously thought, occupying an area roughly four times the size of California and comprising an estimated 1.8 trillion pieces of rubbish."
Take care
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Behind the Increase in Gas Emissions Last Year
By Brad Plumer
March 23, 2018
The New York Times
Late Edition – Final

Tuesday, April 17, 2018

Strategic CSR - Carbon pricing

This week's Newsletters will focus on our consumption of carbon, either directly (via emission levels) or indirectly (via market pricing). To begin, the article in the url below discusses the range of efforts being implemented to tackle climate change in the way recommended by most economists – to price carbon emissions. At some level, this is gaining traction among some governments that are finally beginning to take climate change policy seriously:
"A total of 41 OECD and G20 governments have announced either a carbon tax or a cap-and-trade scheme, or both. Add state and local schemes, and they cover 15% of the world's emissions, up from 4% in 2010."
While impressive on the surface, such schemes (cap-and-trade, in particular) are not comprehensively exposed to market forces and, as such, are subject to distorting political influences. Seeing the day when carbon taxes are coming, however, companies are not waiting to be told what to do:
"Companies are moving faster than many governments on carbon pricing. Nearly 1,400 firms globally with combined revenues of $7trn already use, or soon will, 'internal carbon prices.'"
This is happening at a pace that is not widely recognized:
"Of the 6,100-odd firms which report climate-related data to CDP, a British watchdog, 607 now claim to use 'internal carbon prices.' The number has quadrupled since CDP first began posing the query in its annual questionnaire three years ago. Another 782 companies say they will introduce similar measures within two years. Total annual revenues of these 1,389 carbon-price champions amount to a hefty $7trn. Most come from rich countries, but more developing-world firms are joining them."
In most cases, firms charge departments internally for the amount of carbon they use (whether in production or executives flying to meetings overseas), with the goal of reducing the firm-level total. Microsoft and Disney are both mentioned in the article as early adopters. Shell is also a proponent:
"In his day job as chief executive of Royal DSM, Mr Sijbesma has made the Dutch food producer examine all proposed ventures to check whether the sums still add up if a ton of carbon dioxide cost €50 ($60), well above the going rate of €6 or so in the European Union's emissions-trading system, which is kept low by an oversupply of permits. Where they do not, alternative feedstocks or cleaner energy suppliers must be found. If a project still looks unprofitable, it could be discarded altogether."
What I found interesting in the article, however, is the extent to which firms are differentiating between the short and long term in their planning:
"Besides assessing capital projects at €30 per ton of carbon dioxide, Saint-Gobain, a French maker of building materials, factors in a higher price of €100 per ton when choosing between long-term research-and-development projects. AkzoNobel, a Dutch chemicals giant, uses €50 per ton for most investments, but double that for those with lifetimes of 30 years or more."
Needless to say, implementation is inconsistent across firms. Nevertheless, the fact that so many firms are innovating in this area suggests there is support for governments to introduce a carbon tax, which immediately exposes all carbon-pricing schemes to market forces and all firms to the full costs of production. When (not if) this happens, those firms that are being the most creative and experimental today will see the largest and quickest benefit.
"Such voluntary steps will not stop the planet sizzling. But they help firms prepare for when governments do bring in pricing schemes. In December China launched a market for trading carbon emissions which is the world's largest. The clearest sign of progress would be for similar policies elsewhere to render internal exercises redundant."
Take care
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Low-carb diet
January 13, 2018
The Economist

Thursday, April 12, 2018

Strategic CSR - Shareholder democracy

If the fiction of shareholder democracy needed any more exposure, the article in the url below highlights the weak powers that shareholders have to influence directly the running of corporations. In particular, the article focuses on what it terms "zombie directors":
"They're board members who've failed to get a majority of shareholder votes in elections but continue to serve. From 2012 to 2016 there were a total of 225 instances where directors of public companies got less than half the votes cast, but only 44 directors, or 20 percent, left within the next election cycle, according to a Bloomberg analysis of data from ISS Corporate Solutions Inc. The directors who stayed included 30 who were snubbed by shareholders more than once."
In contrast to many shareholder votes, where the results are nonbinding on management, director elections are binding. Rather than a majority needed to be elected, however, most firms allow directors to be elected with a plurality of votes. This means merely that they need more votes than any other candidate and, since most directors run unopposed, 1 vote is all they need to be duly elected:
"In response to investor and activist complaints, companies have been agreeing to new standards under which directors who don't receive a majority of votes have to submit a letter of resignation. Currently, 54 percent of companies require a director to do so. The hitch: The board usually isn't required to accept those resignations and can reinstate the unelected director."
The article lists a number of such examples, with some directors failing to receive a majority of votes multiple times:
"In each case, the directors reviewed the voting results and chose not to accept the resignations, citing their colleagues' value to the company, according to regulatory filings."
Take care
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With 'Zombie' Directors, It's the Board of the Living Dead
By Jeff Green and Alicia Ritcey
August 10, 2017
Bloomberg Businessweek

Tuesday, April 10, 2018

Strategic CSR - A 'professional'

The article in the url below was written by Frank Abrams for HBR in 1951. At the time, Abrams was 'chairman' of Standard Oil of New Jersey (which later became Exxon). I learned two things about this article from the late, great Bill Frederick. First, that this article (and not the better-known 1953 book by Howard Bowen, Social Responsibilities of the Businessman) represented the beginning of the CSR movement in the U.S.; and, second, that the article was actually ghost-authored by Courtney Brown when she was Dean of the Business School at Columbia University – Brown had previously worked for Abrams at Standard Oil.
I assign this article for my students in the first class of my strategic management course. I do so because Abrams' main point is that, in 1951, the job of being a manager was about to become a profession (and, by implication, the MBA was the vehicle by which this was to occur):
"Briefly, it seems to me that business management in the United States is acquiring more and more the characteristics of a profession."
As I point out to my students, however, today, we are further from that point than we were in 1951. This is clear when you consider the three main characteristics that define what it means to be a professional:
  1. A sense of duty beyond the self.
  2. A certified body of knowledge (governed by an accreditation organization).
  3. A code of ethics.
By these criteria, clearly, a manager is not a professional, even though most business schools label their MBA programs things like the 'professional program.' Nevertheless, it is worth emphasizing what might have been. What strikes me in particular about the article is Abram's vision of the high sense of duty that a manager has to society:
"There is no higher responsibility, there is no higher duty, of professional management than to gain the respect of the general public through objective participation in, and consideration of, national questions, even though these questions in many cases do not relate directly to their immediate business problems."
In fact, Abrams refers to the work of a manager as something closer to a patriotic duty:
"There is an underlying patriotic motive in all of this which an intelligent management thoroughly understands. In a democratic state, only those institutions which so conduct themselves as to deserve, secure, and hold public confidence can survive and prosper. It is a plain ordinary fact that our country, to be strong and constructive in a troubled world, is dependent upon free, competitive institutions to give its people opportunity of self-expression and advancement. If we are to be helpful in advancing our American way of life, we must be willing to show by example that individual objectives can best be served when they are identified with the common good."
The reason that society confers professional status on a particular job is, essentially, for protection. For example, there is a reason why society does not let me open a hospital and start operating on people (like a medical doctor), because they would die if I did. That is the same reason why society does not let me design and build buildings (like an architect), because those structures would fall down. In other words, in order to protect against the potential harm that can be caused by poorly-trained people doing those essential jobs (even if they are confident that they can), society sets very high standards (a form of quality assurance) to minimize the risks. In return for the strict requirements demanded in order to become a professional, society grants a monopoly to that group to practice that particular job (and reap the rewards for doing so).
What is important about this is that there is no such requirements to start up a business and call yourself a manager. Society has decided that it is willing to make the trade-off between risk and reward for business. If you have an idea and think it will be successful in the marketplace, you can form a company and try it out with very few barriers in your way. Of course, if you fail, the business can cause harm, but society is willing to take that risk in the hope of fostering the next Google, or Amazon, or Apple, or whatever the next life-changing company will be.
That is why managers are not professionals and the MBA is not the certified gateway to becoming a manager that it could have been. I'm not saying we would have been better off if the manager was a true professional, but I like to teach this to students to open their eyes about the risks/rewards of business, as well as the lack of understanding in most business schools about what it means to be a true professional. I also like to emphasize the business school's role in failing to create the conditions necessary to bring this about. Having said that, I make the point that, just because management is not a profession does not mean that they, as MBA graduates, cannot carry themselves as a professional by adopting the characteristics of a professional. To this end, the MBA Oath (, see also Strategic CSR – MBA Oath) initiated by Harvard MBAs for graduating students, is a good start.
Take care
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Management's Responsibilities in a Complex World
By Frank W. Abrams
May, 1951
Harvard Business Review
Vol. 29, No. 3

Friday, April 6, 2018

Strategic CSR - Stakeholder expectations

The article in the url below contains some interesting statistics on the extent to which businesses are internalizing and responding to evolving societal concerns:
"On politics, business leaders are risk-averse. They prioritize stability and the status quo. What has changed is the definition of the status quo. Gay and transgender rights, and action on climate change, were once liberal causes. They are now largely mainstream, particularly in big cities that are home to corporate head offices and the educated workers they covet. Businesses have adapted their own plans, policies and attitudes to this new mainstream."
As society evolves, companies need to evolve with them. Those companies that evolve most effectively (a combination of speed and content) will be more successful:
"This changes [CEOs'] cost-benefit calculus: Speak up and embroil yourself in unwelcome controversy, or stay silent and invite the opprobrium of customers, employees, social media and, for some, their own families and consciences. Increasingly, they have concluded that inaction is the riskier path."
What does this shift look like in terms of concrete policies and practices?
"Half of Fortune 500 companies provide transgender inclusive health benefits—up from none in 2002—and 61% offer domestic-partner benefits to gay couples, according to the Human Rights Campaign. … Similarly, nearly half the Fortune 500 has some sort of internal target for greenhouse-gas emissions, renewable energy or efficiency, according to the Carbon Disclosure Project."
Firms reflect the collective set of values held by key stakeholders. As such, they will do what their stakeholders hold them accountable for. To continue down this path, therefore, stakeholders need to be sure to reward those companies that match the values they want to see businesses adopt and punish those firms that transgress those values.
Have a good weekend
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For Business, a New Political Status Quo
By Greg Ip
August 17, 2017
The Wall Street Journal
Late Edition – Final

Tuesday, April 3, 2018

Strategic CSR - Business schools

Over the winter break, I started reading the book From Higher Aims to Hired Hands by Rakesh Khurana. The main message is that business schools have not lived up to the intentions behind their creation. That, rather than build a platform to train managers as professionals (in the true meaning of that term), they have instead morphed into money machines for universities, where revenue generation trumps their educational mission. This message was reinforced by the article in the url below, which is a review of the book The Golden Passport published last year by Duff McDonald. The critique offered by the book (and summarized in the review) is damning:
"Anthropologists in the distant future will make their careers investigating the extraordinary rituals of American business education. As they sift through the wreckage of a civilization that bestowed its highest rewards on individuals trained to ignore its deepest problems, they will be lucky to have as their guidebook Duff McDonald's deliciously iconoclastic history of the Harvard Business School, 'The Golden Passport.'"
The overall message is that business schools have played a large part in producing the managers who have shaped the economy into something that serves the interests of the minority at the expense of the majority. Although HBS is not the only problem, the institution is singled out for particular disdain. Michael Jensen earns particular criticism for his role in propagating the diffusion of agency theory throughout business schools. Michael Porter is also heavily criticized for creating a problem that he then magnanimously offered to help solve (for a price, of course):
"The Monitor Group, the consulting company Mr. porter co-founded, raked in over $100 million from AT&T in the early 1990s—just as the old phone company, flailing around in search of new sources of monopolistic advantage, launched a series of strategic acquisitions that landed it in a ditch. Starting in 2006, Monitor put its expertise in the service of a certain terrorist-sponsoring dictator in Libya. … The strategic foray into the tin-pot sector—which included contracts with the Assads in Syria, as well as the Russians and Saudis—did not keep the consulting firm from bankruptcy. Now, according to the author, Mr. Porter seems convinced his management magic will solve the problems of health care and education. Apparently all we need to get our schools and insurance companies back on track is a little 'strategy.'"
While the critique is good, there is not much offered by the book in terms of possible alternatives. The absence in the review of plausible ways forward is palpable. This applies to the general direction of business school education. I agree with the criticism, but haven't seen an accurate description of why previous models were 'wrong' (e.g., shareholders do not own the firm), or what should be taught in its place (e.g., sustainable value creation). In other words, the discussion around the book (and I read several reviews of it) is not very enlightening and further entrenches an 'unhelpful' view of the role of the firm in society.
I think the principles advocated in Strategic CSR are an important part of that discussion. Complementing these ideas is the work that all of you are doing in your classrooms every day to build a 'better' alternative. How to get HBS (or any other influential actor) to pay attention, though? That is the essential question.
Take care
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Schools of Mismanagement
By Matthew Stewart
April 22-23, 2017
The Wall Street Journal
Late Edition – Final

Friday, March 30, 2018

Strategic CSR - Plastic

It never ceases to amaze me how much we know about the damage we are doing to the planet and, in light of that knowledge, how little we are doing to rectify that damage. The statistics that I include in the CSR Newsletter are usually just the most eye-catching of the articles I read on this topic. There are many more that are equally depressing. Whatever else can be said about the climate change debate, no one can say that we weren't warned. The article in the url below continues that trend, discussing the amount of plastic we produce and how, even though we fully understand the pollution it is causing, we are only ramping-up the amount of plastic in our lives. The amounts are staggering:
"The global plastic binge which is already causing widespread damage to oceans, habitats and food chains, is set to increase dramatically over the next 10 years after multibillion dollar investments in a new generation of plastics plants in the US."
How much, exactly?
"Fossil fuel companies are among those who have ploughed more than $180bn since 2010 into new 'cracking' facilities that will produce the raw material for everyday plastics from packaging to bottles, trays and cartons. The new facilities – being built by corporations like Exxon Mobil Chemical and Shell Chemical – will help fuel a 40% rise in plastic production in the next decade."

According to a graphic in the article, we now produce 300 million tons of plastic a year. To put that in perspective:
"The amount of plastic produced in a year is roughly the same as the entire weight of humanity."
And we have been doing this for a while now:
"… humans have produced 8.3bn tonnes of plastic since the 1950s, with the majority ending up in landfill or polluting the world's oceans and continents. The report warned that plastic, which does not degrade for hundreds of years, risked 'near-permanent contamination' of the earth."
This is a topic that The Guardian has been pushing for a while:
"In June a Guardian investigation revealed that a million plastic bottles are bought around the world every minute with most ending up in landfill or the sea."
The article argues that the current expansion in plastics production is driven by the shale gas boom in the U.S.. With cheaper, more readily available fossil fuels (and without an adequate carbon tax in place), plastic becomes more efficient to produce in larger quantities. In a sign of the permanent nature of the damage being done, the plastic residue being deposited in the sediment that will be discovered by future geologists was one of the two defining criteria (along with nuclear fallout) for the declaration that we have entered a new epoch (see Strategic CSR – Anthropocene).
Have a good weekend
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$180bn investment in plastic factories feeds global packaging binge
By Matthew Taylor
December 26, 2017
The Guardian

Monday, March 26, 2018

Strategic CSR - Unilever

I don't understand the difference between a social enterprise and a for-profit firm. Take this example from the article in the url below about the founding of Unilever:
"To most of Unilever's customers, the state of the world is probably the last thing on their minds as they push their shopping carts through the supermarket, tossing in Ben & Jerry's ice cream, Dove soap, Lipton tea, Hellmann's mayonnaise, and other Unilever products. It's hard to imagine that eco-disasters might someday lead to those items disappearing from shelves. But to Unilever, which was born as a solution to a crisis, the potential for calamity seems real enough. The company got its start in the 1880s, right here in this picture-perfect redbrick village near Liverpool called Port ­Sunlight—named after the world's first packaged, branded bar of soap and the company's founding product. It was created in an effort to stop rampant epidemics and child deaths amid the grinding poverty and squalor of Victorian England. Nearly 130 years later, there is still an acute sense at Unilever that the world needs fixing."
How is Unilever not a social enterprise? The firm uses market forces to solve societal problems, just like all for-profit firms. In contrast, take this example of TOMS Shoes (see Strategic CSR – TOMS Shoes), which is usually described as a social enterprise. It is essentially the same thing (an organization using market forces to solve a societal problem), but just not as effective as Unilever. At best, the value TOMS is adding seems dubious; in fact, it might be doing more harm than good:
"Did you buy TOMS shoes because you want to make the world a better place? If so, you should be a little mad. TOMS, of course, is an accessory company that markets itself like a charity … When someone buys a pair of TOMS shoes in the US, for instance, the company donates a pair of shoes to a child in a poor country like Haiti. … But TOMS and the many other companies like it are the charitable equivalents of yes men. They're telling you what they think you want to hear in order to get what they want (for you to purchase trendy, pricey accessories), not what you need to hear in order to do what you want (to have your purchase to do as much good in the world as it can)."
CSR advocates talk about the need for companies to "do good" instead of focusing on profit as if economic problems and social problems are independent of each other. However, a simple thought experiment highlights the overly-simplistic nature of this forced dichotomy. Is feeding people a social problem or an economic problem? Of course, there are hundreds of for-profit food manufacturers (not to mention the hundreds of thousands of restaurants) that produce food and distribute it widely (and efficiently) to whole populations of people. What about clothing people—a social problem or an economic problem? A visit to the shopping mall will quickly reveal how efficiently for-profit firms have essentially eradicated the supply of clothes as a challenge for all but the most deprived societies. Or, what about providing internet access to every household in the country—economic or social? Certainly, you could make an argument that, today, a family is essentially excluded from many aspects of society if it cannot get online; yet, internet provision in most developed economies is the sole responsibility of the private sector (as it is for the food and apparel industries).
Strategic CSR argues that for-profit firms are the best hope we have to institute change on the scale and speed necessary to make a difference. I tell my students, if you want to "do good" in the world, join a corporation. So-called social enterprises make us feel good, but are more akin to rearranging the deckchairs on the Titanic.
Take care
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Unilever CEO Paul Polman's Plan to Save the World
By Vivienne Walt
February 16, 2017

Wednesday, March 21, 2018

Strategic CSR - Fake news

The article in the url below suggests that placing all the blame for 'fake news' on Facebook, YouTube, and Twitter might have been misplaced. It appears that our willing gullibility also played an important role in the process:
"What if the scourge of false news on the internet is not the result of Russian operatives or partisan zealots or computer-controlled bots? What if the main problem is us?"
It seems that we might actually prefer clear-cut fake news, rather than the messy complexity of real life:
"As a result, false news travels faster, farther and deeper through the social network than true news. [Research] found that those patterns applied to every subject they studied, not only politics and urban legends, but also business, science and technology."
And, in the race for people's attention, it is not very close between fact and fiction:
"False claims were 70 percent more likely than the truth to be shared on Twitter. True stories were rarely retweeted by more than 1,000 people, but the top 1 percent of false stories were routinely shared by 1,000 to 100,000 people. And it took true stories about six times as long as false ones to reach 1,500 people."
This finding is robust to the malign influence of foreign software influences:
"Software robots can accelerate the spread of false stories. But the M.I.T. researchers, using software to identify and weed out bots, found that with or without the bots, the results were essentially the same."
The article gives many more examples to support its conclusion. While it is good to have empirical support for this, it is also not very surprising and fits into the general claim that we get the companies we deserve (just like we get the politicians we deserve) – by extension, I suppose, we get the social media we deserve. The only encouraging conclusion reached by the researchers is that the influence of fake news might not be as great as we fear. The more worrying implications, however, are that we are not consciously shaping our society, it is more like we are defaulting to our lowest common denominators. If the majority succumb to their worst impulses (whether through laziness or ignorance) and abdicate their role in shaping a better society for everyone, it is hard to see how we can tackle the bigger, more consequential problems we face, such as building a more sustainable economy.
Take care
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Why We're Easily Seduced by False News
By Steve Lohr
March 9, 2018
The New York Times
Late Edition – Final

Monday, March 19, 2018

Strategic CSR - GDP

The article in the url below is a great example of why there needs to be more economists engaged in the CSR debate. On the surface, the article is a review of a recent book by David Pilling of the FT, Growth Delusion, that argues against GDP as a measure of national economic wellbeing:
"Like most other offerings in this genre, David Pilling's 'The Growth Delusion' celebrates the predicted demise of our headline measure of how well the economy is doing—and along with it the end of Western capitalism's obsession with 'endless' production and consumption."
The reviewer rebuts the charge that such weaknesses have been ignored by economists, instead suggesting they are well known:
"From the start, prominent critics underlined the failure of GDP to account for the environmental costs of economic growth, a theme struck most forcefully in the 1972 Club of Rome report 'The Limits to Growth.' Less prominently, although no less accurately, feminist scholars highlighted GDP's failure to account for economic value created in the home—which meant that post-1950s GDP and productivity growth statistics were flattered by the new tendency of women to take paid work and purchase items such as microwaves and ready meals. … The people who work with GDP data know, far better than most, how much uncertainty arises from compiling the statistics, seasonally adjusting them and comparing them over time or across countries."
The environmental harm of our current economic model is, of course, well documented. There are other interesting questions raised in the review, such as whether there is any measurable improvement in the economy by "merely shifting the economic value of production in the home into the marketplace." The reviewer's point, however, is that it is easy to criticize. The challenge, of course, is coming up with a better measure that serves our economic needs more effectively. And this, according to the reviewer, depends on how you respond to this central question:
"Is economic welfare better served by a high level of output and consumption or is it necessary for it to grow?"
The reviewer builds the compelling case that, in order to consider dethroning GDP as our primary measure of economic activity, it is important that critics understand what it actually does and why we focus on change in GDP, rather than overall GDP. To this point, the reviewer raises what she thinks is the crux of the debate:
"In other words: Why does momentum matter? Portugal and Greece have similar levels of GDP per capita now, but after 2007 Greece had a massive boom and then a bust. Greeks have had the extra interim output, but it is not obvious they have had the better experience. The point about Japan is similar: At its level of prosperity, does it need more growth? Is it terrible to be a rich, contented, safe country, where people have long life expectancy, a magnificent culture and high quality services, simply because the chosen measure of total economic output is static?"
The answer to this question is central to understanding what GDP does and is, therefore, a direct critique of the title of the book under review:
"The answer lies in the fact that GDP—or any alternative aggregate measure—aims to encapsulate the constant innovation and betterment of life driven by competition in market economies. No single number will do it perfectly. Indeed, a new critique of GDP recently has joined the old ones—namely that it fails to capture the role of new technology in our increasingly digital economies. The concept of GDP, an aggregate measure of output at market prices, does not account for all the value of innovations. Yet over time an increase in GDP is the result of innovation, and so to argue against growth is to argue for an end to innovation. Those who think growth is 'delusional' need to explain what they think should be taken away from people when a new product or service they want comes along, to prevent GDP from growing."
In other words, it is not that GDP implies growth when there really is none (i.e., a "Growth Delusion"), but that it captures innovation and creativity in a society. In other words, it captures progress in its widest sense. If progress equals 'value-added,' then an increase in GDP is an imperfect measure of the growth in overall value created. This review acknowledges that GDP is imperfect, but also that it has so far turned out to be the best measure we have of value creation, society-wide. As such, proposed changes should be incremental, based on this core understanding of what GDP is and what it does, rather than the radical reform that is suggested by the book being reviewed, or other high-profile projects, such as the move to measure Gross National Happiness (
Take care
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Dismal Statistics
By Diane Coyle
February 5, 2018
The Wall Street Journal
Late Edition – Final

Wednesday, March 14, 2018

Strategic CSR - Bribery

If a government passes anti-bribery legislation but then fails to enforce it, does it really care about preventing bribery? The article in the url below reminds us that the enforcement of existing rules and regulations is a choice and that different administrations will put different emphases on different laws according to their own priorities/values/ethics:
"U.S. antibribery enforcement regressed to its mean after a record-setting spike in 2016, according to a report released Tuesday by business antibribery group Trace International."
It is also worth remembering, however, that the level of commitment is a relative measure that varies both within and among countries:
"The U.S. brought 14 foreign bribery cases in 2017, a decline by more than half from the 29 posted a year earlier but roughly in line with the average of the past decade, the group reported. Still, the U.S. brought more cases in 2017 than all other countries combined, Trace said."
So, while the U.S. might not care as much as it used to, or as much as it is possible to care, it still may care more than other countries. So, what does this say about our own commitment to preventing bribery, and our own commitment relative to the commitment of others?
"Europe is a focus for U.S. authorities; U.S. probes involving bribes paid by foreign companies and individuals predominately focus on European countries, the study found. Twenty percent of investigations concerning bribes paid by U.S. companies related to payments to European officials, Trace said. … The U.S. has brought more than two-thirds of the foreign-bribery enforcement cases worldwide over the past 40 years but other countries are starting to pick up the pace."
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U.S Pace of Bribery Enforcement Slows
By Samuel Rubenfeld
March 13, 2018
The Wall Street Journal

Monday, March 12, 2018

Strategic CSR - Corporate activism

The article in the url below comments on the recent surge in corporate activism on a range of issues that firms suddenly find themselves having to help solve:
"In the weeks since the Parkland school shooting, big U.S. companies have found themselves in a familiar position: pressured to act on controversial social and political issues where government won't. It's a trend currently manifested by firms cutting ties to the National Rifle Association and efforts by large investors to reduce exposure to gun-makers. But with U.S. politics more polarized than ever, moving forward on issues that Washington has failed to tackle is increasingly routine for corporate America, from coastal tech giants like Alphabet Inc. to heartland icons including Walmart Inc."
One assumption that underpins this argument, therefore, is that it is the government that is the super-ordinate entity and companies are subservient to it. In other words, the government 'should be' taking the lead and, when they don't, companies 'have to' step up:
"Whether that means more generous benefits for working mothers, support for politically vulnerable groups, or intensifying efforts to fight climate change, companies are stepping into a void once filled by political rhetoric and leadership."
In the Strategic CSR framework, it is the other way around. The government is a stakeholder in the company and brings pressure to bear via regulation. The company is the preeminent organizational form in a capitalist society and all other organizations are subservient. They have their role, but it is the for-profit firm that creates the most value in society:
"There are a variety of reasons companies are taking on the additional costs -- including the bottom line. Consumers, employees, and to some extent even shareholders are newly insistent that companies adopt progressive policies. Some 60 percent of consumers in the U.S. and U.K. say their decisions have been influenced by a company's politics, according to research by public relations firm Weber Shandwick; among them, buying products to show their support is an increasingly popular response."
In this framework, firms 'should be' reacting to the signals/demands/expectations sent by their stakeholders - including the government, but also consumers and everyone else, too. It is central to the job of the manager to understand these expectations. This is difficult. What makes it more so is that the goal should be to remain just a little bit ahead of these evolving demands. What is important, however, is that this is not new. Society has always made claims on firms, from environmental pollution, to the minimum wage, to healthcare and pensions, and today it is guns and gender and sexual equality. As societies become more affluent, the nature of their expectations evolves:
"Polling data suggest that millennials, who will make up 50 percent of the global workforce by 2020, are more attuned to social and environmental issues than their elders. A 2016 study of young employees by Boston-based Cone Communications found that 76 percent consider a company's social and environmental commitments when deciding where to work, compared with 58 percent of the workforce as a whole."
However, I do not buy that Millennials 'care' more than previous generations – they just care about different things, a luxury that reflects our current stage of economic development. In other words, previous generations have tackled many of the basic serious problems (with varying degrees of success), which allows subsequent generations to tackle the problems that remain, or those that have arisen as things like new technology is invented. What is interesting and adds another layer of complexity to the manager's job today is the rise of social media. This democratizes public opinion, which makes it easier for firms to interact with their stakeholders but, ultimately, makes it harder to satisfy the variety and multitude of demands.
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Corporate America Is Taking On Guns and Climate—Issues the Government Won't
By Matthew Campbell and Jackie Simmons
March 1, 2018
Bloomberg Businessweek

Wednesday, March 7, 2018

Strategic CSR - Exxon

Last year, Exxon Mobil's shareholders voted on a motion asking the company to issue a report on its risk exposure to climate change. Although the company was not keen to comply, it has produced a report addressing the issue. The report reaches a very confident, if slightly weird, conclusion:
"Even aggressive climate policies pose 'little risk' to [Exxon's] investments. [The firm] stressed that it expected healthy demand for its products for decades to come, regardless of how strongly countries move to cut emissions. Exxon also played down the impact of electric vehicles on its business prospects."
You can see the full announcement/report here: To say the least, the company's position seems at odds with what the best science (not to mention, common sense) is telling us:
"A paper published in Nature in 2015 estimated that, for the world to have a 50-50 shot at staying below 2 degrees Celsius of warming, the world would have to avoid burning most of the coal reserves currently beneath the ground, half the natural gas, and about one-third of the oil."
Perhaps not surprisingly:
"Exxon laid out a more optimistic view. Oil and natural gas, the company's mainstays, will 'continue to play a critical role in meeting the world's energy demand,' the company said in its report."
Does the company have its head stuck in the sand, or is it confident its lobbyists will prevent any meaningful threat to the status quo?
"Exxon's vast fossil fuel reserves 'face little risk' of being left in the ground, the company said. Less than 5 percent of its reserves would be affected under a 2-degree scenario, the company estimated. Under that scenario, Exxon sees the world's oil consumption dropping only slowly in the next two decades or so, and sees demand for natural gas rising slightly."
A key assumption of the report is that technological innovation will allow the continued burning of fossil fuels:
"Exxon, for instance, has assumed the development of technologies such as carbon capture that would allow the use of fossil fuels to continue with lower emissions."
As we now know, reality is defined by who is shouting the loudest. As such, if Exxon continues to repeat that everything will be OK, perhaps its stakeholders will eventually start to believe it. Or, perhaps not:
"[Exxon did not] detail the risks from the growing number of lawsuits being filed against fossil fuel companies in various states around the United States. In January, New York City sued Exxon, BP, Shell, and other oil companies, demanding billions of dollars in damages to help the city cope with the effects of global warming. 'ExxonMobil's own analysis assumes the world will continue to burn through oil and gas to drive its profits, keeping us on a path toward global temperatures rising well above the 2 degree Celsius threshold,' said Kathy Mulvey, climate accountability manager at the Union of Concerned Scientists."
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Exxon Studies Global Climate Rules and Sees 'Little Risk' to Bottom Line
By Brad Plumer and Hiroko Tabuchi
February 3, 2018
The New York Times
Late Edition – Final