Strategic CSR - Bribery

The Wall Street Journal’s Risk & Compliance Journal (http://online.wsj.com/public/page/risk-compliance-journal.html) is interesting and informative, and demonstrates the increasing importance of compliance-related issues today. The risks are multiplied for multi-national firms working across cultures. As the article in the url below indicates, Walmart’s exposure to bribery is increasingly apparent following its Mexico scandal, while the changes it is making in response are beginning to affect performance overseas:

 

“Three years ago Wal-Mart Stores Inc. set out to be India's top retailer by 2015. … Today, Wal-Mart's advance on India is barely moving. The company opened just five wholesale stores in the country last year – well below the 22 planned. This year, Wal-Mart plans to open eight locations, a person familiar with the company's plans said. Part of the reason lies in what people in the industry say is India's labyrinthine process for developing commercial real estate and operating stores. But one of the biggest reasons has been a compliance crackdown at Wal-Mart.”

 

As a result, the consequences for firms (especially for those that are trying to operate with integrity) are growing. A recent newsletter from the WSJ’s Risk & Compliance Journal (summarizing events at a Dow Jones Compliance Symposium) provides some compelling examples of how firms can become enmeshed in convoluted situations that break U.S. law. This has greater consequences for these firms today because this law is increasingly being enforced more stringently by federal agencies:

 

“Susan Angele, the former global deputy general counsel at the The Hershey Co., said that in Japan, it’s customary to give cash gifts at funerals to the bereaved family. Of course, if one of the family members is a government official, such payments could qualify as a bribe under the U.S. Foreign Corrupt Practices Act. Angele said that guidance on the FCPA, recently released by the DOJ and SEC, provided no clues on how to avoid insulting a grieving family. ‘You do the best you can’ in such situations, she said.”

 

“Jonathan Drimmer, assistant general counsel for Barrick Gold Corp. , said he ran into trouble with Saudi Arabia’s ‘value-based billing’ system. The company had inherited a $125,000 service contract in the country, he said, but was surprised when it received a $1 million tab from the contractor. Drimmer said outside lawyers told him that Saudis regularly throw out contracts and charge what they think is the actual value. ‘I said, ‘we’re a multinational, we can’t do that,’’ Drimmer said. ‘The lawyer said, ‘well they can take you to court for not paying, and they’ll probably win.’’”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

Wal-Mart's Path to Power in India Hits Its Limits: The Lawyers

By Megha Bahree

April 2, 2013

The Wall Street Journal

Late Edition – Final

B1

http://online.wsj.com/article/SB10001424127887324373204578373830411211410.html

 

Strategic CSR - Apple & Google

Here’s an interesting question: Should cellphone companies design technical features into cellphones that render them useless if they are stolen?

 

“[Stolen phones are] entered in a new nationwide database for stolen cellphones, which tracks a phone’s unique identifying number to prevent it from being activated, theoretically discouraging thefts. But police officials say the database has not helped stanch the ever-rising numbers of phone thefts, in part because many stolen phones end up overseas, out of the database’s reach, and in part because the identifiers are easily modified.”

 

Cellphones are being stolen at an increasing rate. Cellphone companies benefit from these thefts because consumers buy new cellphones to replace the ones that were stolen:

 

“The cellphone market is hugely lucrative, with the sale of handsets bringing in $69 billion in the United States last year, according to IDC, the research firm. Yet, thefts of smartphones keep increasing, and victims keep replacing them.”

 

At present, neither of the two largest phone operating systems, Apple and Android (Google), are doing as much as they could:

 

“Apple provides some assistance in locating lost or stolen phones with its free software, Find My iPhone, which can find a missing iPhone or remotely erase its data. But the service does not work once the phone is turned off or disconnected from the Internet. … Google does not include any software in its Android operating system to help people locate a missing phone, although some third-party Android apps offer the feature. Mr. Gascón of San Francisco said that was not enough. “What I’m talking about is creating a kill switch so that when the phone gets reported stolen, it can be rendered inoperable in any configuration or carrier,” he said.”

 

So, what should these companies be doing? Should they be creating these theft-proof devices, and potentially hurting themselves financially (both in terms of development costs and lost sales), or should they allow this practice to continue? After all, it is not them who are stealing the phones, right?

 

“In San Francisco, the resale market for stolen phones is thriving, with a new iPhone netting a thief $400 to $500 in cash, said Edward Santos Jr., a police lieutenant who investigates robberies. The starting price of a new iPhone 5, without a contract, is $650.”

 

Stolen electronics are big business:

 

“In the last six months, the San Francisco police have broken up more than half a dozen large-scale stolen electronics operations, uncovering thousands of stolen smartphones as well as laptops in houses and storage units across the Bay Area. In one raid in November, the police found stolen electronics valued at $500,000. The people accused of stealing them told the police they sold their entire inventory every two weeks through flea markets in Oakland, Calif., and by shipping the phones overseas.”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

Cellphone Thefts Grow, but the Industry Looks the Other Way

By Brian X. Chen & Malia Wollan

May 2, 2013

The New York Times

Late Edition – Final

A1

http://www.nytimes.com/2013/05/02/technology/cellphone-thefts-grow-but-the-industry-looks-the-other-way.html

 

Strategic CSR - Dodd-Frank

Unintended consequences are fascinating. They are also a good reason why the best intentions, when designed to upend centuries of economic evolution, often end up making the situation worse (see Strategic CSR – Jevons Paradox and, in particular, Strategic CSR – LED lights). The article in the url below extends this phenomenon to a clause of the Dodd-Frank legislation that is designed to curb CEO compensation:

 

“The irony is that it all came out of such a simple-sounding idea: requiring that the pay of a company’s chief executive be compared to the median salary of its employees. Carrying out the law may well result in costs that are just as obscene as the pay it is disclosing.”

 

This was a short clause (“only 140 words, in a bill that would eventually run about 2,300 pages”) that was inserted at the last minute with no Congressional debate. As with most hastily generated ideas, what seemed simple in conception is proving to be quite complex to implement in reality:

 

“What the section required was that all public companies disclose this median number on worker pay, placed side-by-side to the chief executive’s pay. What could be so hard about making such disclosure, right? It turns out plenty.”

 

The article identifies three main challenges for companies trying to respond genuinely to this provision, the first of which relates to how CEO compensation is actually calculated:

 

“We are decades past the time when manager compensation was simply what you received in a paycheck. Now, compensation includes options, pensions, 401(k) matches, health benefits, parking allowances and other various prerequisites. Calculating this all as one figure — and in particular valuing average stock options for employees as well as top executives — can be difficult.”

 

The second problem relates to the fact that this issue of calculating compensation levels has now been extended to all employees:

 

“Take a multinational conglomerate with 50,000 employees across the globe. That company has the task of not only figuring out the total compensation provided to every employee, but it also has to collect and analyze this information, much of which is in different currencies. And some of this information collection is arguably prohibited by privacy rules in the European Union and other countries like Japan and Canada.”

 

The third problem relates to timing:

 

“The number will fluctuate from day to day [e.g., due to exchange rate movements]. The end result is that what was thought a simple calculation is turning into an exercise that could cost some companies millions.”

 

Not only is this provision of the legislation difficult and expensive to implement, but it is not clear that it will even achieve its intended goals:

 

“… compensation disclosure has been mandated in some form for decades. But instead of empowering shareholders, it has allowed executives to see what others are paid. This has led to a ‘Lake Wobegon’ effect in executive compensation, pushing each chief executive to demand to be paid ‘above average,’ and the result has been ever-increasing compensation.”

 

And there is significant anecdotal evidence that, whatever information is provided, is more likely to be misleading than informative:

 

“If global employees are included, the ratio will be exaggerated by relatively low-paid employees in less-developed countries. The end result is that companies are likely to spend millions for something that is likely to do nothing.”

 

As with most ill-thought-through, politically-motivated legislation, a solution has been delegated to the bureaucrats who understand the complexities the politicians failed to appreciate:

 

“Now, the whole mess is with the S.E.C. to sort out. The agency is expected to announce rule-making on this provision in the next few months.” [Note: The SEC voted in favor of requiring disclosure last Thursday, see: http://dealbook.nytimes.com/2013/09/18/s-e-c-proposes-new-rule-on-pay-disclosure/]

 

The article implies that they will be damned if they do and damned if they don’t:

 

“The hope of companies is that the S.E.C. cuts back on some of the more irrational components of the rule. … The statute, however, is strongly worded, saying the median should be calculated for ‘all employees.’ If the S.E.C. tries to water down the provision as the A.F.L.-C.I.O. suggests, it may lead to a lawsuit in court to strike the rule down by companies themselves.”

 

Another good day’s work in Congress completed.

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

A Simple Solution That Made a Hard Problem More Difficult

By Steven M. Davidoff

August 28, 2013

The New York Times

Late Edition – Final

B7

http://dealbook.nytimes.com/2013/08/27/a-simple-solution-that-made-a-hard-problem-more-difficult/

 

Strategic CSR - British Airways

The article in the url below demonstrates the dangers for firms of ignoring the interests of key stakeholders in an age of rampant social media:

 

“After British Airways lost his father's luggage, Hasan Syed didn't just tweet his complaints at the company. He paid for a ‘sponsored tweet’ to broadcast his frustration directly to British Airways 302,000 Twitter followers.”

 

To be clear—the most notable aspect of this story is not that a disgruntled customer tweeted a complaint about a company acting badly, but that the disgruntled customer paid money to buy space on Twitter to ensure his tweet appeared prominently on BA’s page and was widely read:

 

“The tweet, for which Syed paid an undisclosed sum, appeared prominently in the company's Twitter feed and was read by thousands of other users.”

 

 

The other notable aspect of this story is that BA took eight hours to respond and then did so with the pathetic excuse that they do not get out of bed until 9am local time:

 

“Eight hours after the original posting and the tweet had been picked up by news sites, the airline tweeted back, ‘Sorry for the delay in responding, our twitter feed is open 0900-1700 GMT.’ The company promised to look into the baggage issue.”

 

I think BA has forgotten that the sun never sets on their global operations!

 

Have a good weekend.

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/


Customer buys promoted tweet to complain about British Airways

By Ben Popken

September 3, 2013

NBC News

http://www.nbcnews.com/travel/customer-buys-promoted-tweet-complain-about-british-airways-8C11065474

 

Strategic CSR - Patriotism

I find it fascinating that tax avoidance by companies is not a bigger issue among stakeholders. Particularly in countries where patriotism is an important part of society (such as the U.S. and increasingly in the UK), I would expect to see a direct link between the sense of a firm as a ‘national brand’ and its willingness to pay a reasonable level of tax. If nothing else, paying tax is a base recognition that that firm receives many benefits from the government/population (e.g., educated workers, good logistical and legal infrastructure, etc.) and that these benefits need to be funded by all sections of the community (including foreign-based firms that have a significant operating presence in the country).

 

Gradually, this issue is beginning to surface more regularly in the U.S., although mostly at an individual level (e.g., Mitt Romney was criticized for holding funds offshore in last year’s presidential election). In the UK, there is more of a focus on corporate tax avoidance by foreign firms through campaigns such as Uncut (http://www.ukuncut.org.uk/):

 

“The UK has similar problems with foreign companies operating in the country. For example, Starbucks, the Seattle-based international coffee chain, has been accused of tax avoidance in the UK. Between 1998 and 2011 the company has made £3 billion ($4.8 billion) in sales but paid out just £8.6 million ($13.75 million) in taxes on its 735 stores in the country. In the last three years Starbuck did not pay a penny in taxes in the UK. All told Her Majesty’s Revenue & Customs (HMRC) estimates a total of £32 billion ($51.2 billion) was lost to tax avoidance in the UK in 2011 alone, out of a gross domestic product of $2.5 trillion.”

 

The article in the url below highlights a good example of the problems associated with tax avoidance by firms operating abroad:

 

“Associated British Foods (ABF), a UK company that makes Silver Spoon sugar, pays almost no taxes on its profitable Zambian sugar subsidiary, according to a new ActionAid report. The authors allege ABF has avoided estimated taxes of $27 million since 2007, enough to put 48,000 Zambian children in school. … The company generates a healthy revenue of some $200 million a year and $18 million in profits.”

 

The company is quite innovative in its avoidance:

 

“One way ABF avoids taxes is by contracting out some of Zambia Sugar ‘purchasing and management’ functions to a company in Dublin, Ireland, which happens to benefit from a bilateral treaty that allows cash flows between the two countries to be tax free. ABF also contracts out ‘trade contacts with customers in the European sugar market, transportation of sugar to Europe, foreign currency management and the availability of cost effective credit terms’ to a company in Mauritius which in turn is a subsidiary of a South African company where tax rates are lower than in Zambia. Oddly enough the Irish company has no employees on paper while the company in Mauritius has only one employee. Meanwhile Zambia Sugar profits are paid out to a Dutch company which in turn allows it to pay significantly lower taxes under yet another bilateral treaty, according to ActionAid. In one particularly egregious case, Zambia Sugar borrowed money from a Zambian bank to finance an expansion, but by diverting the loan through an Irish subsidiary, was able to avoid paying taxes on the interest.”

 

What is clear, however, is that this example is not particularly extreme or unusual:

 

“‘We do not allege that any of the companies in this report have done anything illegal,’ write the authors of the ActionAid report. ‘Indeed, sadly their tax practices are not even particularly unusual. A growing litany of examples from Europe and North America suggest that the arrangements we describe here are simply ‘plain vanilla’ business practice for many multinationals.’”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

Sweet Nothing: UK Food Giant Avoids Taxes on Zambia SugarPratap Chatterjee
CorpWatch
February 15th, 2013

http://www.corpwatch.org/article.php?id=15818

 

Strategic CSR - Waste

The article in the url below reviews a book by Elizabeth L. Cline that addresses the consequences of “our never-ending hunt for low-priced clothing.” The over-riding message that is conveyed is one of unnecessary waste:

 

“In her introduction to Overdressed: The Shockingly High Cost of Cheap Fashion, the journalist Elizabeth L. Cline recalls buying ‘seven pairs of $7 shoes’ at Kmart. Regret follows, and soon afterward, a wardrobe inventory. When Cline cleans out her closet she discovers, among other things, 61 tops, 60 T-shirts, 15 cardigans and hooded sweatshirts, 21 skirts and 20 pairs of shoes, most of which she never wore.”

 

My first reaction to this is, ‘Is that all?’ I am guessing there are many with walk-in closets that creak under much greater material excess. But, as the author notes, what she has vastly exceeds what she needs on a day-to-day basis. Perhaps it comes as part of our genetic inheritance from our hunter-gatherer days, but, for some reason, we seem incapable of living within our means. It is a pity, given our obvious capability for ingenuity, that we have created an economic system that seems to impoverish, rather than enable:

 

“A quote from the former Vogue editor Diana Vreeland comes to mind: ‘Give ’em what they never knew they wanted.’ Fast-­fashion retailers like H&M, Topshop and Forever 21 are great at hawking what we never knew we wanted. Not only that, they offer it at steadily reduced prices. … Quality is no longer an issue, because you need clothes to last just ‘until the next trend comes along.’”

 

What is equally interesting is that we are willing to place our very superficial concern for material things above the wellbeing of other humans. In addition to the wasted resources, there are social and human costs to the mass-production of cheap t-shirts. It might improve our lives to have someone else do our hard work for us (“Today, the United States makes only 2 percent of the clothing its consumers purchase, compared with roughly 50 percent in 1990”), but there is nothing sustainable (in an holistic sense) in manufacturing clothes thousands of miles away, shipping them to the West, all for under $10. Ultimately, we are worse off as a result:

 

“The wastefulness encouraged by buying cheap and chasing the trends is obvious, but the hidden costs are even more galling. Cline contends that ‘disposable clothing’ is damaging the environment, the economy and even our souls. … When Cline writes that ‘people crave connections to their stuff,’ she prompts another question: Have we somehow become disconnected from ourselves? If we don’t stop to consider this, we may end up perpetually rushing out to buy more ‘stuff,’ never realizing what we truly need, genuinely want and cannot afford to waste.”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/ 

Attention, Shoppers

By Avis Cardella

February 10, 2013

The New York Times Book Review

Late Edition – Final

21

http://www.nytimes.com/2013/02/10/books/review/overdressed-by-elizabeth-l-cline.html

 

Strategic CSR - Corporate Stakeholder Responsibility

The article in the url below provides some good examples of bad decisions by companies that lost track of their priorities. I see this list and can only think of the potential for what can happen when consumers demand corporate performance that matches their expectations:

The companies featured:

• Coca-cola
• Bank of America
• J.C. Penney
• Instagram
• Netflix

If we could only get consumers (and all stakeholders) to channel their influence to shape socially beneficial change (rather than prioritizing narrow, individual-level concerns), CSR would have a hope!

 

Have a good weekend

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

From Coke to Netflix: Consumers Drive Brands Into Retreat

By Eric Spitznagel

February 20, 2013

Bloomberg Businessweek

http://www.businessweek.com/articles/2013-02-20/from-coke-to-netflix-consumers-drive-brands-into-retreat
 

Strategic CSR - Bangladesh

A follow-up thought on the Bangladeshi factory collapse. The article in the url below raises a good point when it notes that:

 

“One of the perplexing issues with the building collapse is that auditors from the Business Social Compliance Initiative (BSCI) based in Brussels had approved two of the factories in Rana Plaza. It has revealed the failures of auditing on several fronts and the need for businesses to take several unprecedented measures to ensure safety.”

 

This reminded me of the problem of Enron, which won several CSR/ethics awards and was on various Best Companies to Work for-type lists right up until the point that it wasn’t (see Issues: Values, pp. 557-558). Ultimately, we have very little idea how to measure CSR effectively and comprehensively. And, when you are dealing with the complex supply chains of global multi-national firms today (that have tens, if not hundreds, of thousands of supplier factories), it is impossible for any company, let alone a third-party auditor, to have an accurate snapshot of every detail at any single point in time.

 

So, what is the answer—give up? No, not very satisfactory. But, it is worth putting the discussion in context so that responses to these events can be measured and the immediate knee-jerk policy responses they tend to generate can be replaced with more thoughtful innovations around how best to tackle the underlying problem.

 

One other thought. The article also reinforces the idea that:

 

“While it is difficult to know how [the subsequent agreement signed by multiple companies in the US and EU] might be successfully implemented, the accord reveals a shift in corporate social responsibility: it shows how far down the supply chain companies can be held responsible.”

 

While true, two responses that suggest we should not be celebrating prematurely. First, I have seen little substantive debate as to exactly how far down the supply chain responsibility should go. While it seems to be generally accepted that firms should be held responsible for their immediate suppliers; what about the suppliers of those suppliers, and what about their suppliers and sub-contractors (see: Strategic CSR - GAP)? Is responsibility complete and absolute? I am not sure that is very practical when there are hundreds of thousands (millions?) of companies in the supply chain of a company like Walmart. And second, I still have not seen a corresponding argument that argues for responsibility to extend up the supply chain (i.e., to distributors, see: Strategic CSR - Distributors) in the same way that we seek to hold firms accountable for their suppliers.

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/


Dhaka factory collapse: how far can businesses be held responsible?

By Rebecca Chao

May 16, 2013

The Guardian

Late Edition – Final

http://www.guardian.co.uk/sustainable-business/dhaka-factory-collapse-businesses-held-responsible

 

Strategic CSR - BP

The article in the url below offers a defense of BP. Not in terms of attempting to excuse the company for the Deepwater Horizon oil spill, but in terms of how it reacted in the aftermath of the disaster and how the people and companies of Louisiana (or, more specifically, the lawyers who represent them) have attempted to take advantage of BP's goodwill:

 

“You can actually pinpoint the moment when the oil company BP began to get hosed in Louisiana: March 2012. By then, BP had paid out around $6.3 billion to some 220,000 people and businesses in the Gulf Coast region for damages suffered as a result of the 2010 oil spill.”

 

But, in March 2012, BP was forced to settle with a group of Louisiana lawyers who had sued the company, seeking more money for people and companies with only a loose connection (if any at all) to the spill itself. BP suspected this would lead to an increase in fraudulent claims, but did not anticipate the extent to which this abuse would be carried. In July, 2013:

 

“BP finally said ‘enough.’ Over the ensuing months, the company had come to realize that … businesses that not only weren’t affected by the BP disaster but hadn’t even suffered losses were getting millions of dollars. Some had seen increased profits during the oil spill — and still got money. Lawyers started trolling for new clients, trumpeting the fact that claims didn’t have to have any connection to the disaster. Suddenly, BP was facing the prospect of paying tens of billions of additional dollars to people who had no justifiable claim on the money.”

 

As the article correctly points out, we should be outraged at this behavior – not because we should feel sorry for BP, but because of the message it sends to other firms and how it might encourage them to react if they commit a similar transgression in the future:

 

“The next time a big company has an industrial accident, its board of directors is likely to question whether it really makes sense to ‘do the right thing’ the way BP has tried to. Any board comparing BP’s response to the gulf oil spill with Exxon-Mobil’s response to the Exxon-Valdez spill is going to come to the obvious conclusion: Exxon-Mobil’s litigation-to-the-death strategy — which ultimately cost it $4 billion rather than the potential $40 billion liability BP is now facing — was the right one. Is that really what we want as a country?”

 

The definition of CSR we advocate in Strategic CSR emphasizes the importance of a dual responsibility (Chapter 1: What is CSR? p6) – a responsibility on the firm to act, but an equal (if not more important) responsibility on the firm's stakeholders to hold it to account for its actions:

 

“A view of the corporation and its role in society that assumes a responsibility among firms to pursue goals in addition to profit maximization and a responsibility among a firm’s stakeholders to hold the firm accountable for its actions.”

 

An important aspect of any particular stakeholder’s responsibilities, therefore, is restraint – the willingness to subjugate individual benefit in favor of social value, broadly defined. While its actions were the direct cause of the initial problem, BP's actions post disaster were as close to exemplary as I think we can expect:

 

“… although BP’s negligence was unquestionably a significant reason for the spill, its response has been the opposite of the unfeeling corporation. It waived the $75 million liability cap that federal law allows. It has spent, so far, $14 billion cleaning up the Gulf and another $11 billion settling claims of various sorts. It has taken its medicine willingly. Yet its efforts to do right by the Gulf region have only emboldened those who view it as a cash machine.”

 

As a result, it is in our own best interests (as a society) to acknowledge this post-disaster behavior and reward it so that other firms are encouraged to act similarly in the future.

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/


Justice, Louisiana Style

By Joe Nocera

July 9, 2013

The New York Times

Late Edition – Final

A21

http://www.nytimes.com/2013/07/09/opinion/nocera-justice-louisiana-style.html

 

Strategic CSR - Dumb ways to die

Central to the idea of a comprehensive stakeholder model is an organization's willingness (and ability) to communicate with its stakeholders. This YouTube video shows how this can be done effectively:

 

http://www.youtube.com/embed/IJNR2EpS0jw

 

It is a public safety video produced by the Melbourne Metro train system (not something I would usually consider compelling viewing), but this video uses humor to communicate an important message about passenger safety -- and every company has an interest in ensuring its customers do not die.

 

For more information, see the article in the url below.

Have a great weekend

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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 Viral Positivity of ‘Dumb Ways to Die’

By Joshua Brustein

June 21, 2013

Bloomberg Businessweek

http://www.businessweek.com/articles/2013-06-21/the-viral-positivity-of-dumb-ways-to-die

 

Strategic CSR - Goldman Sachs

What is so interesting about the story about Goldman Sachs’ involvement in the aluminum warehousing business, which broke over the summer, is how quickly the firm got out of the business as soon as it’s involvement became widely known. As indicated in the article in the url below, the shift was rapid:

 

“Aluminum deliveries into warehouses run by big banks and trading firms have plunged this summer, highlighting Wall Street's retreat from the once-lucrative commodities business amid stagnant markets, new rules and regulatory scrutiny.”

 

You know a company was doing something wrong when it doesn’t even try to defend its actions once it is caught. As is now apparent, their involvement was a game (a lucrative game) and, once the rules changed, the company moved on—no regrets and no consequences (as of yet):

 

“In its heyday, the firms offered aluminum producers cash, rent discounts and other incentives to put metal into storage rather than selling to users such as brewers and soft-drink makers, according to analysts and traders. Meanwhile, the prolonged time in inventory generated hefty rental income for warehouse owners that more than made up for the incentives paid out.”

 

When you are a company that trades in commodities futures (i.e., betting on future prices), as is Goldman Sachs (and many others), it is helpful to have a significant amount of control over the supply of those commodities to the market:

 

“Industrial aluminum users such as Coca-Cola Co. and aluminum sheet maker Novelis Inc. have complained to the London Metal Exchange that warehouses had artificially slowed the release of aluminum, limiting supply and driving up prices. A MillerCoors LLC executive testified in a Senate banking committee hearing last month that the practices were inflating consumer prices by billions of dollars.”

 

The result of all the sudden scrutiny?

 

“Average daily aluminum shipments to LME warehouses were down 79% in the first 19 days of August from two months earlier, according to data provided by New York-based metals consulting firm CPM Group Inc. August's daily average rate of aluminum deliveries is the lowest since November 2011, CPM Group said. At the same time, the cash incentives dangled before producers by the banks and trading firms that own the facilities have recently dropped to $50 a metric ton from more than $200 this past spring, traders said.”

 

To give you a sense of how much money these market-moving practices could have been earning for the banks:

 

“Raw-materials trading in 2008 generated as much as a third of revenue within large banks' market-making business, which matches buyers and sellers in the fixed income, currency and commodities markets; it now accounts for less than 7%.”

 

Oh, the wonders of transparency:

 

“… warehouse operators including Goldman Sachs Group Inc. and Glencore Xstrata PLC … now are the subject of investigations by several U.S. authorities, including a Senate panel.”

 

Take care

David

 

David Chandler & Bill Werther

Strategic Corporate Social Responsibility: Stakeholders, Globalization, and Sustainable Value Creation (3e)

© Sage Publications, 2014

 

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/

 

 

On Wall Street, a Reversal of Fortune

By Christian Berthelsen and Tatyana Shumsky

August 20, 2013

The Wall Street Journal

http://online.wsj.com/article/SB10001424127887323423804579024900038439822.html