Strategic CSR - FCPA

The article in the url below reports a recent bribery conviction for Tyson Foods. Following a series of mistakes over a number of years (where the firm ignored several opportunities to start correcting its behavior and, instead, continued to dig itself into a bigger and bigger hole), the SEC charged the firm in February this year with:

“… conspiracy and violating the Foreign Corrupt Practices Act. Tyson agreed to resolve the charges with a deferred prosecution agreement in which it “admits, accepts and acknowledges” the government’s statement of facts, and paid a $4 million criminal penalty. The company paid an additional $1.2 million and settled related S.E.C. charges that it maintained false books and records and lacked the controls to prevent payments to phantom employees and government officials.”

The article is interesting because, beyond the litany of irresponsible behavior exhibited by Tyson Foods (“What were these Tyson officials thinking?”), the author discusses the deeper issue of personal liability for corporate criminal behavior within the FCPA framework:

“It would seem self-evident that if Tyson engaged in a conspiracy and violated the Foreign Corrupt Practices Act, then someone at Tyson did so as well. The statute specifically provides for fines of up to $5 million and a prison term of up to 20 years for individuals, as well as fines of up to $25 million for companies.”

In spite of this provision, individuals rarely get charged under the FCPA legislation, or, for that matter, in relation to white-collar corporate crime in general:

“The Justice Department … points out that in 2009 and 2010 it filed charges against 50 individuals under the Foreign Corrupt Practices Act, up from just two in 2004. This is surely progress, but the Tyson case suggests the problem persists, and not just in bribery cases: witness the widespread public frustration that so few people, as opposed to impersonal financial institutions, have faced criminal charges for actions that contributed to the financial crisis.”

This is no doubt due to the complexity of the issues that are often involved in these crimes, as well as the difficulty in proving guilt beyond a reasonable doubt for a jury without expertise in the nuances of corporate and financial law. Equally, however, it is a result of the lack of resources government agencies have to regulate adequately the laws over which they have jurisdiction. Firms, on the other hand, have far greater resources to protect their executives. In redressing the balance somewhat, the article names the three executives at Tyson most closely involved in the crimes, whereas the SEC letter detailing the settlement with Tyson only mentions their titles. Unsurprisingly:

“None of the three former Tyson executives responded to messages asking for comment.”

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Bribery, But Nobody Was Charged

By James B. Stewart

June 25, 2011

The New York Times

Late Edition - Final

B1

http://www.nytimes.com/2011/06/25/business/25stewart.html

Strategic CSR - David Friedman

Earlier this year I came across the work of David D. Friedman (son of Milton Friedman). He is a proponent of “anarcho-capitalism,” which is defined on Friedman’s Wikipedia page (http://en.wikipedia.org/wiki/David_D._Friedman) as:

“[A system] where all goods and services including law itself can be produced by the free market. … Friedman advocates an incrementalist approach to achieve anarcho-capitalism by gradual privatization of areas that government is involved in, ultimately privatizing law and order itself. … Friedman's version of individualist anarchism is not based on the assumption of inviolable natural rights but rather rests on a cost-benefit analysis of state versus no state.”

Intellectually, I find his ideas interesting, in the same way that a pure version of Communism is an interesting thought-experiment. The practical application of these ideas, however, seems less obvious. In addition, he has adopted his father’s antipathy for CSR (or, at least, what he defines as CSR), which suggests little prospect of reconciliation:

“…my university is big on "sustainability;" it has just been having an extended event designed to boost the idea. I responded to an email urging faculty members to introduce sustainability into one of their classes by asking if it was all right if I argued against it in mine, and suggesting that a program which consisted entirely of presentations on one side of an issue looked more like propaganda than education.”

Friedman is correct, of course, that any program that presents only one side of a story is tantamount to propaganda and any university should feel confident enough to allow a professor to teach an anti-CSR course—you could title it ‘Introduction to Economics’ (J).

Friedman’s conceptualization of CSR (also like his father’s), however, appears somewhat simplistic (see his blog posting criticizing the value of pursuing sustainability at: http://econlog.econlib.org/archives/2011/04/david_friedman_7.html). In Strategic CSR, we raise and address the anti-CSR argument in Chapter 3 (p53), drawing heavily on the work of David Friedman’s father!

Have a good weekend

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Strategic CSR - Alternative Energy

The article in the url below illustrates vividly the barriers to large scale expansion of alternative energy sources.

In short, scaling-up production of these energy sources (e.g., solar or wind) requires large amounts of resources—a cost that defeats the purpose of introducing them in the first place (a reduction in resource consumption). The article details this point in reference to fulfilling California’s commitment:

“…to obtain one-third of its electricity from renewable energy sources like sunlight and wind by 2020.”

In particular, the author highlights the huge amount of land both solar and wind projects require in order to produce a meaningful amount of energy. California’s peak electricity demand is (according to the author) 52,000 megawatts. As such, in order to meet its one-third obligation from alternative energy sources, California will need to generate approximately 17,000 megawatts of alternative electricity:

“Most of its large-scale solar electricity production will presumably come from projects like the $2 billion Ivanpah solar plant, which is now under construction in the Mojave Desert in southern California. When completed, Ivanpah, which aims to provide 370 megawatts of solar generation capacity, will cover 3,600 acres — about five and a half square miles. The math is simple: to have 8,500 megawatts of solar capacity, California would need at least 23 projects the size of Ivanpah, covering about 129 square miles, an area more than five times as large as Manhattan. … Wind energy projects require even more land. The Roscoe wind farm in Texas, which has a capacity of 781.5 megawatts, covers about 154 square miles. Again, the math is straightforward: to have 8,500 megawatts of wind generation capacity, California would likely need to set aside an area equivalent to more than 70 Manhattans.”

There is plenty of land in the California desert, but then distribution becomes a barrier. The article also outlines the environmental impact of such huge projects—endangering plants and wildlife is one concern, while the amount of steel necessary to produce sufficient numbers of wind turbines is another:

“The production and transportation of steel are both expensive and energy-intensive, and installing a single wind turbine requires about 200 tons of it. Many turbines have capacities of 3 or 4 megawatts, so you can assume that each megawatt of wind capacity requires roughly 50 tons of steel. By contrast, a typical natural gas turbine can produce nearly 43 megawatts while weighing only 9 tons.”

The author delivers a strong conclusion:

“Such profligate use of resources is the antithesis of the environmental ideal.”

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

The Gas is Greener

Robert Bryce

The New York Times

June 8, 2011

pA21

http://www.nytimes.com/2011/06/08/opinion/08bryce.html

Strategic CSR - The Jevons Paradox

The article in url below makes you want to throw your hands up in resignation. It focuses on the unforeseen consequences of energy efficiency, particularly in consumer products, such as appliances or cars. While the article does not dispute the more efficient use of energy by these products, it makes a compelling argument that the net energy consumption as a result of their use is often zero (i.e., unchanged) or even positive (i.e., an increase in overall energy use):

“The problem is known as the energy rebound effect. While there's no doubt that fuel-efficient cars burn less gasoline per mile, the lower cost at the pump tends to encourage extra driving. There's also an indirect rebound effect as drivers use the money they save on gasoline to buy other things that produce greenhouse emissions, like new electronic gadgets or vacation trips on fuel-burning planes.”

There is a term for these unforeseen consequences – the Jevons Paradox:

“… named after a 19th-century British economist who observed that while the steam engine extracted energy more efficiently from coal, it also stimulated so much economic growth that coal consumption increased.”

While generally dismissed by environmentalists today, there are important policy implications from this work:

“… if your immediate goal is to reduce greenhouse emissions, then it seems risky to count on reaching it by improving energy efficiency. To economists worried about rebound effects, it makes more sense to look for new carbon-free sources of energy, or to impose a direct penalty for emissions, like a tax on energy generated from fossil fuels. Whereas people respond to more fuel-efficient cars by driving more and buying other products, they respond to a gasoline tax simply by driving less.”

I think the issue of unintended consequences is one of the most important issues for the CSR community to face – particularly in relation to sustainability. I see it again and again; whether it is a government subsidy or tax break for a particular kind of alternative energy, or a new technological innovation that interacts with some other factor (or is applied inappropriately) to generate an unexpected result.

In short, good intentions that seek to subvert market forces and established market practices often result in net neutral or other counterproductive outcomes.

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

When Energy Efficiency Sullies the Environment

By JOHN TIERNEY

1245 words

8 March 2011

The New York Times

Late Edition - Final

1

http://www.nytimes.com/2011/03/08/science/08tier.html

Strategic CSR - FCPA

This article caught my eye, if for no other reason than it is surprising.

The article reports a conviction of three employees from Lindsey Manufacturing Co. under the Foreign Corrupt Practices Act (FCPA) for paying bribes in Mexico. The surprising thing is that this is “the first time a company has been convicted at a U.S. trial in a foreign bribery case.”

Specifically:

“[The] conviction marks the first time a company has been convicted at trial for violations of the Foreign Corrupt Practices Act, which bans the bribery of foreign officials for business purposes. In the law's 34-year history, companies had always pleaded guilty or signed non- or deferred-prosecution agreements with the Justice Department.”

This case reinforces a trend in recent years (starting with the Bush administration) of a more aggressive enforcement of the FCPA by the Justice Department (see Newsletters: January 26, 2011, November 23, 2009, and September 16, 2009), which has resulted in a significantly larger number of investigations being initiated and now, apparently, in the first ever successful prosecution.

Have a good weekend.

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Corporate News: Conviction in Foreign Bribery Case Is First in U.S. Trial

By Samuel Rubenfeld

459 words

11 May 2011

The Wall Street Journal

B4

http://online.wsj.com/article/SB10001424052748703730804576315573205511018.html

Strategic CSR - Alternative Energy

The article in the url below ties together a series of recent accidents/disasters in a way I had not thought of before reading it:

“In April 2010, an explosion in one of Massey Energy's coal mines killed 29 workers. Just weeks later, BP's Macondo well started gushing millions of barrels of oil into the gulf. And more than a month after Japan's large earthquake, the Fukushima nuclear plant is still leaking radiation.”

Add to that the recent report of the spill of contaminated water by Chesapeake Energy in Pennsylvania and you can add natural gas and fracking to the list of problematic traditional energy sources and extraction methods:

“…the spill will galvanize critics of hydraulic fracturing, a process that releases natural gas from shale rock by blasting it with water, sand and chemicals.”

In theory, the market potential for alternative energies is significant due to the problems with existing energy sources. In reality, the current low market share, inadequate distribution infrastructure, and reliance on subsidies mean there is a great deal of inertia to overcome:

“In America, for instance, wind and solar power still provide just 1.4 percent of the nation's total energy diet. And although alternative sources are becoming cheaper, in many cases they still need subsidies.”

The article presents this as an opportunity, rather than a constraint. It could have also argued that we are running out of time to treat this decision as an option.

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

An Opportunity for Green Energy

By CHRISTOPHER SWANN and ANTONY CURRIE

791 words

22 April 2011

The New York Times

Late Edition - Final

2

http://www.nytimes.com/2011/04/22/business/economy/22views.html

Strategic CSR - J&J

The article in the url below presents a pretty damning picture of recent activity at J&J. For example:

“On Aug. 26 last year, DePuy [a unit of Johnson & Johnson] announced a voluntary recall for two types of ASR hips, … but only after 93,000 had been implanted in patients worldwide, including 37,000 in the U.S. … Accusations of selling bum hips are bad enough; the lawsuits allege worse: that DePuy continued to push the hips even after it received preliminary numbers as early as 2007 indicating rising failure rates for both ASR models.”

The article is based on a separate list of all the products J&J has had to recall over the past 3 years (http://www.businessweek.com/magazine/content/11_15/b4223066662101.htm). The accusation is that the firm is no longer making best practice decisions based on its stakeholder-focused Credo (http://www.jnj.com/connect/about-jnj/jnj-credo/), but is making business decisions based on projected profit and loss and in the absence of moral/ethical factors:

“With $28 billion in holdings of cash and short-term securities at the end of 2010, J&J will surely weather the financial blowback from the bad hips. More troubling to customers and stakeholders, however, is that the DePuy recalls may be symptoms of a systemic quality-control problem at the 125-year-old corporation.”

It is hard to put the numbers in this article in perspective without fully knowing the scale of J&J’s operations and how many products it produces and expected industry recall rates, but, at first glance, the numbers seem shocking:

“The DePuy crisis is one of more than 50 voluntary product recalls that J&J has issued just since the start of 2010, covering brand names that read like an inventory of the family medicine cabinet. … In the year ended Mar. 8, 2011, J&J was involved in at least 11 major recalls, as defined by the FDA, almost twice as many as Pfizer, the world's largest health-care-products company by revenue, or Procter & Gamble, the world's largest consumer-products company. "I'm not familiar with another company that has had this many debacles in a very short period of time," says Ira Loss, an analyst at investment research firm Washington Analysis who has followed the FDA for more than three decades.”

It gets worse:

“Moreover, J&J's woes aren't confined to the last couple of years. During the last decade, the company has been repeatedly confronted with claims that it sold a product that was defective, or that carried risks J&J downplayed in its marketing. It has been accused of paying kickbacks and using other financial incentives to promote off-label use of drugs and devices. It has been cited by federal authorities for trying to avoid the publicity of a recall by quietly buying up tainted products. And it frustrated FDA regulators who were urging the company to strengthen quality control at the factories that produced many of the recalled over-the-counter products. J&J has steadfastly denied these claims, but its own annual report for 2010 contains eight pages detailing government criminal and civil investigations and thousands of private lawsuits covering a wide range of drugs, devices, and business practices.”

The article makes a compelling case that J&J has been skirting, or just plain ignoring, best practice in its approach to researching and testing large numbers of its products. The implicit argument is that it is cost-cutting that has driven the change in business practices at the firm. What is ironic, of course, is that J&J’s 1982 Tylenol recall generated probably the most-cited CSR/ethics/crisis management case-study of how to respond to a defective product (Chapter 2: A Stakeholder Perspective, p43). The Credo and the way it shapes (or was thought to shape) behavior within J&J is presented as best-practice in prioritizing among competing stakeholder needs in a way that maximizes both economic and social value. Tellingly:

“At Harvard Business School, however, faculty "became uncomfortable" teaching the popular Tylenol-poisoning case study amid all the J&J recalls, [HBS faculty Sandra] Sucher says. Last month it added another study to the curriculum: "On Weldon's Watch: Recalls at Johnson & Johnson From 2009 to 2010."”

Take care
David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Johnson & Johnson’s Quality Catastrophe

By David Voreacos, Alex Nussbaum and Greg Farrell

April 1, 2011

BusinessWeek

http://www.businessweek.com/magazine/content/11_15/b4223064555570.htm

or

http://money.msn.com/investing/latest.aspx?post=c7faed7f-bc7b-48a7-9db1-db44a6403565

Strategic CSR - News Corp

There are two aspects of the Rupert Murdoch/News Corp scandal that unfolded in the UK over the summer that I think are important, but have not been widely discussed:

1.       While I am certainly no defender of Murdoch, at the time the News of the World was closed it was the largest selling English-language newspaper in the world. Clearly, not only did its readership have no problem with the content of the stories published by the paper (or seem to care how the paper uncovered the information), but they actively sought it out and were willing to pay for it. As such, who is more at fault—Murdoch for providing the content people wanted to read, or the public for continuing to buy it? This speaks to a broader theme we introduced in the second edition of Strategic CSR—the idea of Corporate Stakeholder Responsibility. Until a firm’ stakeholders begin demanding better behavior (and the evidence of unethical behavior has long surrounded Murdoch’s newspapers), we should not be surprised if firms continue to be less than socially responsible.

2.       Of course, the key to the story, as with all good scandals, is to follow the money. This is especially true now that the FBI and U.S. Justice Department have become interested in the case. In addition to investigating whether Murdoch’s journalists hacked into the voicemails of 9/11 victims, the FBI and Justice want to know whether money was paid to the UK police. If true, News Corp (as a U.S.-listed firm) is likely in breach of the Foreign Corrupt Practices Act for paying money (bribes) to a foreign government official to gain some form of competitive advantage. Although the British newspapers are important to Murdoch, the U.S. is where the largest News Corp assets are located and so how the U.S. authorities react to the case will determine its eventual impact on the firm.

Have a good weekend.

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Strategic CSR - Walmart (II)

The best comment I saw on the dismissal of the class action sex discrimination suit against Walmart over the summer was the op-ed article in the url below. Although the link between the argument presented by the author and the legal standing of the class-action suit in the Walmart case is a bit tenuous at times, the author raises some insightful points about how some of the current policies in place at Walmart seem to present more challenging barriers to promotion for women to overcome than men. For example:

“Recognizing that workers steeped in that culture make poor candidates for assistant managers, who are the front lines in enforcing labor discipline, Wal-Mart insists that almost all workers promoted to the managerial ranks move to a new store, often hundreds of miles away. For young men in a hurry, that’s an inconvenience; for middle-aged women caring for families, this corporate reassignment policy amounts to sex discrimination. ”

In essence, the policy:

“… forces ambitious workers to choose between job and family.”

A second example:

“The workweek for salaried managers is around 50 hours or more, which can surge to 80 or 90 hours a week during holiday seasons. Not unexpectedly, some managers think women with family responsibilities would balk at such demands, and it is hardly to the discredit of thousands of Wal-Mart women that they may be right.”

Reading through the article, I thought it would make a good ethical dilemma for in-class discussion. For example, I can see how Walmart would think it more effective for employees recently promoted to a position of authority in charge of discipline if they did not have close social ties with the employees they now have to oversee. It also seems clear, however, that insisting on such a policy firm-wide would be a much more substantial barrier to progress for employees who are least mobile for whatever reason (although family commitments would seem to be a common reason). Is this discrimination, as the author states, or is it an effective business policy derived from years of experience with a particular issue (i.e., how best to enforce discipline in a standardized way across a huge corporation)? Discuss.

BTW: I thought the graphic used in the article to support the author’s political message does so in a powerful way:

http://graphics8.nytimes.com/images/2011/06/22/opinion/22oped/22oped-articleInline.jpg

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Wal-Mart’s Authoritarian Culture

Nelson Lichtenstein

The New York Times

June 22, 2011

pA21

http://www.nytimes.com/2011/06/22/opinion/22Lichtenstein.html

Strategic CSR - Walmart (I)

In case you missed it over the summer, the article in the url below reports the U.S. Supreme Court’s decision on the Walmart discrimination case that the firm has been fighting for the past decade:

“The Supreme Court on Monday threw out an enormous employment discrimination class-action suit against Wal-Mart that had sought billions of dollars on behalf of as many as 1.5 million female workers. The suit claimed that Wal-Mart’s policies and practices had led to countless discriminatory decisions over pay and promotions.”

While not deciding the merits of the case (i.e., whether Walmart actually discriminated against some of its female employees in terms of equal pay and promotion opportunities), the Court decided that the case cannot proceed as a class action. Essentially, this means that, in the eyes of the Court, there was insufficient evidence that Walmart had pursued a systematic policy of discrimination, centrally coordinated.

Walmart’s defense against the class-action was that, because it devolved most hiring and promotion decisions to the local store manager, although individual instances of discrimination may have occurred, they were not a result of the firm’s policies and practices.

Additional background to the case and its possible implications (both for Walmart and for the possibility of future class-actions being brought against all firms) appeared in two additional stories in the paper on the same day:

http://www.nytimes.com/2011/06/21/business/21class.html

http://www.nytimes.com/2011/06/21/business/21walmart.html

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Justices Rule for Wal-Mart in Class-Action Bias Case

By Adam Liptak

June 21, 2011

The New York Times

Late Edition - Final

A1

http://www.nytimes.com/2011/06/21/business/21bizcourt.html

Strategic CSR - Japan

The article in the url below contains one of the more amazing facts from the aftermath of the Japanese earthquake, tsunami, and nuclear power disaster that occurred earlier this year:

“Japanese citizens, long renowned for their diligence in returning lost items, have turned in more than $78 million in cash, most of it from lost wallets that washed ashore and some of it from safes found under rubble, in the aftermath of the devastating March earthquake and tsunami.”

I have often thought that a good indicator of the strength of a society is how quickly it breaks down under stress. When you think about what happened in New Orleans after Katrina and the recent riots and looting in the UK, it is a phenomenal comment on Japanese society that it remained so strong when so much was thrown at it.

I lived and worked in Japan for six years and know that there are significant disadvantages as well as advantages to such strong social rules and norms. I am enormously proud of my ties to Japan, however, when the advantages are on display as an inspiration to other societies greatly in need of a little more structure and discipline.

Have a good weekend.

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

Japanese Residents Return More than $78M in Cash Recovered in Tsunami Debris

August 22, 2011

Ethics Newsline

http://www.globalethics.org/newsline/2011/08/22/tsunami-debris/

Strategic CSR - Welcome Back!

Welcome back to the Strategic CSR Newsletter! The first Newsletter of the Fall semester is below. As always, your comments and ideas are welcome.

Over the summer, a number of important CSR stories emerged,  some of which I will comment on in upcoming Newsletters. Among the doom and gloom of ongoing financial crises, political incompetence, and corporate malfeasance, however, is the enduring belief that for-profit firms remain the beacon of hope for the CSR project. If we are to plot a sustainable future moving forward, it is corporations that possess the capability to mobilize sufficient resources in ways that can make a difference. While a lot of the negative stories seem to find their way into these Newsletters (the media latches onto negative stories more readily than positive stories), this article from The Economist at least starts us off on the right track!

The article in the url below attempts an interesting exercise—to compare the relative influence of IBM and the Carnegie Foundation over the last 100 years. Both organizations were founded in 1911 and, as such, both turn 100 years old in 2011. The Economist’s goal is to identify which organization (for-profit or non-profit) has “done more for society” during its lifespan.

Two things struck me reading the article. First, that it is not a very close contest. While the Carnegie Foundation certainly did some good things early on in its life, it has faded significantly in recent decades. The clinching argument for me was that:

“IBM, by contrast, is now as influential as it has ever been, with a stockmarket value of around $200 billion and nearly 427,000 employees, many of them in the developing world. … Its corporate philanthropy has grown steadily, so that its annual grants now exceed those of the Carnegie Corporation.”

Second, I think the article speaks volumes of how far The Economist has come regarding CSR that it was willing to even attempt the exercise. I think The Economist of 10 years ago is not even interested in this question and would consider the answer a foregone conclusion. Instead, it makes a valiant attempt to compare the two organizations; so much so that I felt the Carnegie Corporation remained in the running longer than it should have. Rather understating the case for IBM (after pointing out many of the errors made by the firm over the years, including its brush with Hitler and the Holocaust), The Economist concludes:

“Judged on the past 50 years, there is a strong case for saying IBM has had more impact than Carnegie—especially if you count its accidental contribution to philanthropy by incompetently failing to stop Mr Gates from creating Microsoft. In part this is because its business, the management of information, has unusually large social benefits, and causes relatively few social or environmental costs.”

Ultimately, the weight of evidence sits strongly in favor of IBM. The advantage of the for-profit firm is its ability to adapt and re-invent itself, while the Carnegie Foundation has found its enthusiasm slowly wane over time:

“Another reason for Carnegie’s relative decline may be that 100 years is too old for a philanthropic foundation. The absence of an existential threat may have made it too comfortable. IBM transformed itself under Lou Gerstner when it nearly ran out of cash in the early 1990s, and again more recently under Mr Palmisano when Indian rivals threatened to steal its business. By contrast, it is not clear what, if anything, keeps the people in charge of the Carnegie Corporation awake at night. The passage of time saps a foundation of the unique energy of its founder. Carnegie said of the unknown future leaders of his foundation that “they shall best conform to my wishes by using their own judgment.” That much they have done, but he would probably have fared better.”

The article is an interesting thought-experiment, but, ultimately, reaffirms that, regarding CSR, while for-profit firms are a big part of the problem, they are also the main hope for a solution.

Take care

David

Bill Werther & David Chandler

Strategic Corporate Social Responsibility: Stakeholders in a Global Environment (2e)

© Sage Publications, 2011

http://www.sagepub.com/strategiccsr2e/

Instructor Teaching Site: http://www.sagepub.com/strategiccsr/

The library of CSR Newsletters are archived at: http://strategiccsr-sage.blogspot.com/

The Centenarians Square Up: IBM v Carnegie Corporation

June 11, 2011

The Economist

Late Edition - Final

64-66

http://www.economist.com/node/18802844