Strategic CSR - Diversity

The article in the url below presents an argument against the idea of quotas as a solution for the lack of diversity among the senior executives and directors of large firms. Across the board, the Scandinavian countries have done more than most to advance equal opportunities for women in business:

 

"The region has also led the world in introducing quotas for corporate boards. Norway started the trend, and now requires stockmarket-listed companies to allot at least 40% of board seats to women. Iceland, Finland and some other European countries have introduced similar requirements."

 

These quotas, however, only relate to director positions. The argument behind doing so was that, over time, greater numbers of female directors would create more opportunities for female employees to become managers, executives, and eventually CEOs. While that was the theory, however, there is evidence to suggest that: 1) progress has not been as rapid as anticipated, and 2) that even what progress there has been is misleading. First, is the idea that progress is little different from countries that have not adopted similar quotas:

 

"[The latest Global Gender Gap Index, compiled by the World Economic Forum] ranked Denmark 72nd in terms of the gender gap among senior managers and officials. There may be more women sitting round the table at board meetings, but the person who runs the show is almost always a man: only 6% of Norwegian listed firms had a female chief executive in 2013, little better than the 5% of American companies on the Fortune 500 list that have a woman as CEO."

 

Second, however, the article presents evidence that the progress that has been made is essentially inflated. The quotas only cover listed firms. As such, many of the firms that did not want to or could not comply took themselves out of compliance by becoming private:

 

"Certainly, the [quota] has transformed the boardrooms of Norway's listed companies: female directors have closed the pay gap with male ones, even as their numbers have surged. But look beyond those 'golden skirts' and the picture is more complex. Companies fled the stockmarket as quotas were phased in: Norway's stock of listed firms fell from 563 in 2003 to 179 in 2008. And even among those that remain on the stockmarket, Norway's 6% figure for female CEOs in 2013 is an improvement on the 2% in 2001, but no more of an increase than Denmark, which has no quotas, achieved over the same period."

 

Maybe the ripple effects of the quotas will take longer than expected, especially with the gender discrimination that is so embedded in much of society. Norway's ambitious quota of 40% was passed in 2006 and came into effect in 2008 (for more information on this, see this briefing from The Economist). Certainly, the evidence exposed by the academic research that is presented in the article, however, does not look promising:

 

"… in the first substantial study of the Norwegian reforms, … [there is 'no evidence' that the quotas have done anything] to improve the career prospects of highly qualified women below board level. They have not helped close the gender gap in the incomes of recent business-school graduates. Nor have they done anything to encourage younger women to go to business school in the first place."

 

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 Nordic Mystery

November 15, 2014

The Economist

74

http://www.economist.com/news/business/21632512-worlds-most-female-friendly-workplaces-executive-suites-are-still-male-dominated

 

Strategic CSR - Bribery

The article in the url below marks an important step forward in the campaign to minimize instances of bribery by corporations abroad:

 

"U.K. oil, gas, mining and logging companies will, as of Jan. 1, 2015, have to disclose … payments to foreign governments of more than 86,000 pounds (about $135,000) for taxes, royalties, permits, bonuses and the like, and they'll have to do it on both a country-by-country and project-by-project basis."

 

In other words, rather than merely punishing firms that get caught, this legislation requires the reporting of all payments (legitimate or otherwise) over the minimum amount by energy companies. This is useful because, in the past, firms have cloaked bribes in legitimate-sounding payments, such as consulting fees. Now, all payments will have to be reported, allowing regulators the opportunity to identify suspicious patterns:

 

"The U.K. is the first European Union country to implement an EU directive passed in June 2013 requiring member states to pass laws requiring the disclosures. The first company payment reports will be published in the U.K. in 2016."

 

The hope is that this action in the UK will encourage the SEC to move forward with a similar proposal in the U.S. that has run into strong industry resistance and is currently stalled.

 

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/

 

 

U.K. Implements Extractive Transparency Rule

By Samuel Rubenfeld

December 1, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/12/01/u-k-implements-extractive-transparency-rule-as-sec-delays-standard-further/

 

Strategic CSR - Executive pay

Something that has always struck me as weird about executive compensation is the idea of performance-related pay. I find this weird because the common way to describe how this works in practice is, as the article in the url below repeats, to say that executives should be paid:

 

"… according to their performance."

 

In reality, the executive is not paid according to his/her performance, but according to the performance of the firm. That is, what the executive actually does is not measured, but it is how the firm performs that is measured. This is primarily because it is easier to measure firm performance using one of the narrow accounting measures that exist and very hard to measure how effective an executive actually is. The assumption is, of course, that the performance of the firm is highly correlated with the performance of the executive. This arrangement is therefore very convenient for the executive because a great deal of research in this area suggests that they tend not to make much difference to the firm's performance. At a minimum, the firm's performance is determined by a large number of factors, some of which the executive is responsible for, but many of which s/he is not.

 

While the article in the url below does not focus on this distinction, it does do a good job of highlighting how ineffective many executives are and how, as a result, the idea of pay for performance is somewhat ridiculous on closer inspection:

 

"It is easy to get steamed up about how much executives earn. Some pay packets are ridiculously large: Tim Cook, Apple's boss, was paid $378m in 2011. Some are quite out of line with achievement: Martin Sullivan was paid $47m when he left AIG, despite the fact that, on his watch, the company's share price declined by 98% and the American taxpayer had to lend it $180 billion to keep it from collapsing."

 

In the process, the article, which is a review of a book titled Indispensable and Other Myths: Why the CEO Pay Experiment Failed and How to Fix It, also provides a bit of context in which to place the relatively recent introduction of performance related pay:

 

"During the glory years of the country's capitalism, from the late 1940s to the late 1960s, American bosses were paid salaries like other professionals (performance-related pay was for the lower classes). They were also paid about as much at the end of the period as at the beginning: about $1m a year (in inflation-adjusted dollars) for the heads of America's 50 biggest companies."

 

In the end, however, The Economist favors the overall effect of massive financial incentives (a dynamic economy with the world's best companies), rather than linger on any obscene anomalies, even if the relationship between what the CEO does and how the firm performs remains somewhat murky:

 

"Mr Dorff offers lots of examples of performance-related pay gone wrong. But what about pay that ignores performance? Professions that stick with rigid salary structures lose talent to more flexible ones: one reason why America's school system is in such a parlous state is that high-flyers refuse to join a profession in which the only way to get ahead is to get older. Public companies are already in a war for talent with more flexible entities, such as private companies or hedge funds. It would be an odd world if you could get seriously rich working for a private-equity company but not as the boss of General Electric."

 

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/

 

 

Moneybags

October 25, 2014

The Economist

87

http://www.economist.com/news/business-books-quarterly/21627553-should-ceos-really-be-paid-less-moneybags

 

Strategic CSR - CSR reports

The article in the url below presents an important caveat to the growing numbers of companies that are publishing more and more (and supposedly better and better) CSR/sustainability reports:

 

"Only 128 of the 4,609 largest companies listed on the world's stock exchanges disclose the most basic information on how they meet their responsibilities to society, according to a new report."

 

In terms of "the most basic information," the report states that:

 

"… 97% of companies are failing to provide data on the full set of 'first-generation' sustainability indicators – employee turnover, energy, greenhouse gas emissions (GHGs), injury rate, pay equity, waste and water."

 

Specifically:

 

"More than 60% of the world's largest listed companies currently fail to disclose their GHGs, three quarters are not transparent about their water consumption and 88% do not divulge their employee turnover rate."

 

For the article, these numbers are important because of what they reveal about the companies themselves, rather than the lack of information per se:

 

"The reason these figures are so important is because there is a direct correlation between transparency and companies taking substantive action to improve their performance."

 

Additional questions that arise are: If these reports are not being done well, why do firms do them? What value do they see in the process that justifies the expense? Equally importantly, who reads these reports? And, if they are filled with fluff, why do these people pay any attention to the reports?

 

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/

 

 

97% of companies fail to provide data on key sustainability indicators

By Jo Confino

October 13, 2014

Guardian Sustainable Business

http://www.theguardian.com/sustainable-business/2014/oct/13/97-companies-fail-to-provide-data-key-sustainability-indicators-stocck-exchange-report

 

Strategic CSR - Waste

The article in the url below contains a quiz to test readers on the amount of waste generated in the United Kingdom. Here are a few of the questions:

 

What is the UK's second most binned [trashed] food coming in at 320,000 tonnes per year?

          -  Carrots
          -  Potatoes
          -  Brussel sprouts

To grow all of the food thrown away from UK homes each year, we'd need an area 91% the size of which country?

          -  Wales
          -  Scotland
          -  England

Wasted food and drink costs the average UK family roughly how much a month?

          -  £25
          -  £60
          -  £80

How many bananas are wasted every day in the UK?

          -  444,000
          -  1.4mn
          -  14,000

Go to the article to see the answers.

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/


How much food does the UK waste?
By Hannah Gould
October 13, 2014
Guardian Sustainable Business
http://www.theguardian.com/sustainable-business/quiz/how-much-food-waste-uk-quiz-test-knowledge
 

Strategic CSR - Tax inversion

The issue of corporate tax has arisen lately as companies in the U.S., in particular, try to evade the relatively high headline rates by acquiring or merging with smaller companies in foreign, low-tax economies and re-incorporating their HQ in that economy—a process known as a "tax inversion." In response, the natural thing to do would be for governments to get together to reform the global tax infrastructure. Coming up with a reasonable uniform tax code and universal rate would be in everyone's interests, including the companies who currently dedicate a significant amount of resources to navigate among different regimes. The article in the url below, however, conveys the complexity of such a task, which is being pursued by the OECD:

 

"Launched by the G-20 last year, the overhaul is intended to modernize a web of 3,000 bilateral tax treaties and national tax rules that dates back to the 1920s and allows companies to adopt legal structures designed to shift their profits to the lowest-tax jurisdictions, regardless of where those profits are generated."

 

While inter-governmental agreement might prove challenging, it is merely the first step in a highly convoluted process that must also take place at the national level:

 

"But tax experts warned that agreement between governments on the outlines of new tax rules is a first step that must be followed by changes in domestic legislation in each of the participating countries that could take many years to complete and implement."

 

And, of course, in spite of the inherent common sense of synching the world's tax codes, there are some governments that benefit from the system as currently structured:

 

"Ireland hosts the international operations of a number of U.S. digital giants, and has been among a small number of countries that have faced allegations that their tax codes facilitate questionable tax-planning practices by international firms. But the Irish government has vehemently denied that the country can be characterized as a tax haven."

 

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/


Global Tax Overhaul Gathers Momentum

By Paul Hannon

September 16, 2014

The Wall Street Journal

Late Edition – Final

B1

http://online.wsj.com/articles/g-20-plans-to-overhaul-international-corporate-tax-system-still-on-track-1410868802

 

Strategic CSR - Supply Chain

The article in the url below contains advice for companies on how to generate more responsible supply chains. In particular, the article argues that, although an effective compliance program must be part of this effort, a compliance-alone approach is insufficient:

 

"Some of the best approaches come from those big companies that realize they can only do so much employing a policing approach."

 

Essentially, the article argues that, in order for real results to occur, firms need to be genuinely committed to improving their supply chain practices:

 

"That means working with suppliers on more training and capacity building, and dealing with the root causes of problems in a community rather than the symptoms that manifest themselves in labor abuses or worker safety issues."

 

In effect:

 

"It is too simplistic for companies truly committed to reforming their supply networks to declare a zero-tolerance policy and pull out once problems arise."

 

It has long been the approach of Strategic CSR that mandated compulsion is insufficient to generate the scale of changes we need to see at the speed with which we need to move. It is only when firms understand the strategic value of CSR—that is, they understand that their self-interest is embedded in working towards sustainable value creation, that change on a sufficiently broad basis will occur.

 

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/


The Morning Risk Report: Compliance Not Enough to Sanitize Supply Chain

By Ben DiPietro

September 5, 2014

The Wall Street Journal

http://blogs.wsj.com/riskandcompliance/2014/09/05/the-morning-risk-report-compliance-not-enough-to-sanitize-supply-chain/

 

Strategic CSR - Tipping

The article in the url below outlines what sounds like a great idea:

 

"Imagine there's no tipping. By getting rid of gratuities, a few restaurants believe they'll make life easier for customers, while providing a more stable income to servers."

 

The restaurant featured in the article is doing this to put its customers at ease. In return the new French-style restaurant in Philadelphia:

 

"… intends to offer its staff up to $13 an hour in salary, plus health benefits, but with no tips."

 

The result is that servers get more stable incomes, while customers at other restaurants that have tried this say service improves:

 

"Menu prices might read a bit higher, but diners will know what they'll end up paying at meal's end — probably no more than they would have at an equivalent place where they'd tip."

 

Now the market will tell us whether customers think this is a good idea in Philadelphia, or whether they prefer to pay lower prices and control to what extent they reward/value the service they receive.

 

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/

 

 

Customers Can Keep The Tip—Which Might Please Restaurant Workers

By Alan Greenblatt

October 9, 2014

National Public Radio

http://www.npr.org/blogs/thesalt/2014/10/09/354656429/customers-can-keep-the-tip-which-might-please-restaurant-workers

 

Strategic CSR - Cats and dogs

The expansion of legal rights in our courts continues—from corporations (see: Strategic CSR – March 4, 2011; Strategic CSR – January 27, 2010; and Strategic CSR – October 26, 2009), to the environment (see: Strategic CSR, August 26, 2009), and now to cats and dogs:

 

"Americans have long seen dogs and cats as family members, but the law hasn't always agreed. Until the early 1900s, both animals were deemed so legally worthless that they didn't even qualify as property—and could be stolen or killed without repercussion. But as Americans began to spend millions, then billions, on food, toys and veterinary care for their pets, the law changed. Today, cats and dogs aren't just property; they are the most legally protected animals in the country."

 

Some examples of how the law now accommodates these family pets:

 

"Felony anticruelty laws in all 50 states impose up to $125,000 in fines and 10 years in prison for anyone who abuses animals. The federal Pets Evacuation and Transportation Standards Act, passed after Hurricane Katrina, requires rescue agencies to save pets as well as people during natural disasters. Judges have been increasingly willing to treat cats and dogs like people in the courtroom, allowing custody disputes over pets and granting large awards … including so-called noneconomic damages typically reserved for the death of a spouse or a child. In a few recent court cases, judges even gave dogs their own lawyers."

 

The rising amounts courts are willing to award owners against workers (dog walkers, home cleaning services, pet groomers, etc.) for any negligence that causes the loss of these animals has been steadily rising. In particular, vets are increasingly being exposed to the same malpractice lawsuits that many medical doctors face today:

 

"In 2004, a Los Angeles man won a $39,000 veterinary malpractice verdict for the death of his Labrador mix. The American Veterinary Medical Association warned that 'personhood' for pets could flood the courts, drive vets out of business and ultimately harm dogs and cats by making veterinary services prohibitively expensive."

 

Ironically, although a possible threat today, the article notes that vets were originally the cause of the rising legal status of cats and dogs:

 

"In the 19th century, [vets] would have shared the law's view that pets were worthless animals. Their work focused almost exclusively on economically valuable creatures such as horses and cows. But as these animals began to disappear from U.S. cities in the early 20th century, veterinarians often found themselves out of work. They turned to cats and dogs for the survival of their profession."

 

Where does all this lead? In addition to growing concern among vets:

 

"Firms involved in agriculture and biomedical research fear that personhood for pets could spill over to livestock and lab rats, stymying cures for human diseases and shutting down meat production."

 

A related story about an Argentinian court freeing an orangutan who was recognized as a "non-human person" that had been "unlawfully deprived of its freedom" by being held in captivity at Buenos Aires Zoo, is detailed in this Reuters article:

 

"In a landmark ruling that could pave the way for more lawsuits, the Association of Officials and Lawyers for Animal Rights (AFADA) argued the ape had sufficient cognitive functions and should not be treated as an object."

 

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/


Should pets be people too?

By David Grimm

April 12-13, 2014

The Wall Street Journal

Late Edition – Final

C3

http://online.wsj.com/news/articles/SB10001424052702304058204579491630809550504

 

Strategic CSR - Hippocratic Oath

Building on the idea of an oath for graduating MBA students (http://mbaoath.org/) and a general oath for executives (see: Strategic CSR – Executive oath), the article in the url below proposes a Hippocratic oath for the financial sector. The stated need for such an oath is that:

 

"… despite five years of reform the public retains its distrust for bankers and the services provided fail to meet the diverse financial needs of society."

 

The reason, it is argued, is that the focus of reform was misplaced—falling more heavily on the symptoms of the problem, rather than the cause:

 

"A focus on financial stability alone fails to address the root cause of the crisis, which we believe lies in the inherent lack of virtue among our banking institutions and subsequent ethos. This led to a self-serving culture that influenced the behaviour of bankers."

 

It therefore follows, the authors argue, that a more effective response targets the underlying culture of the finance/investor industry. Rather than trying to impose a "rigid moral regime" to all, however, the authors instead apply what they refer to as the "theory of virtue":

 

"Applying this theory to banking reform means that our banks should, to the best of their abilities, attempt to meet people's diverse financial needs, and should not simply focus on self-enrichment or basic transactional services."

 

In essence, an ethical responsibility that is larger than the individual – a professional responsibility. More specifically:

 

"One way this can be achieved is by requiring all members of the banking profession to affirm a Hippocratic-style oath, where employees publicly voice their commitment to behave in a manner that prioritises customers and recognises that the abuse of their position can have dramatic consequences for society."

 

It is argued that such an oath would reform the culture of the profession, as a whole, as a result of focusing more on the social value banking adds, rather than a personal route to financial success. It would also reposition the image of bankers in the eyes of the wider public:

 

"Lawyers, doctors and architects all hold a professional motive to not only do the best for their client but also adhere to the well established principles of that profession. In medicine, the Hippocratic oath provides a centre-piece for personal responsibility in the profession and their overarching principles. Banking is no different and in the post-crash era, should strive towards professionalism."

 

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/

 

 

Bankers should take a Hippocratic oath to restore virtue to the financial sector

By David Fagleman

July 28, 2014

The Guardian

http://www.theguardian.com/sustainable-business/banking-reform-bankers-hippocratic-oath-report

 

Strategic CSR - Free flow of information

The article in the url below offers an interesting meditation on the loss of control by companies of the debate over their products online (what we discuss in Strategic CSR as "the free flow of information," Chapter 4, Figure 4.5, p161):

 

"The digital revolution has dramatically shifted the balance of power from companies to their critics. Although big firms deploy armies of PR flacks, anyone with a smartphone and a social media account now has the same power to reach a global audience. Whistleblowers once had to photocopy documents and smuggle them out in their underpants. Now they can be shared with the world in a trice, by e-mail or instant messaging."

 

What caught my eye, however, was a statistic demonstrating the devastating operational effects this phenomenon can have for firms today:

 

"In the two weeks after the 1989 Exxon Valdez oil spill in Prince William Sound, in Alaska, Exxon's shares dropped 3.9% but quickly rebounded. In the two months after the Gulf of Mexico spill in 2010 BP's shares fell by half (and have still to recover fully)."

 

Social media increasingly allows small, motivated activists to control the message, spreading bad news ever faster and to greater effect. Whether this shift in power is resulting in better social outcomes is unclear to me at the moment. Either way, companies had better adapt.

 

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/

 

 

Beware the angry birds

By Schumpeter

October 11, 2014

The Economist

76

http://www.economist.com/news/business/21623676-social-media-age-bosses-careers-are-more-vulnerable-ever-beware-angry-birds

 

Strategic CSR - Welcome back!

 

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

 

I hope you all had a good winter break.

 

As I mentioned in the autumn, I have been doing a lot of thinking recently about the core principles that underpin the concept of strategic CSR. The main stimulus for this thinking is a new book that I was invited to write for the UN PRME initiative collection (http://www.unprme.org/). The book has just been published by Business Expert Press (http://www.businessexpertpress.com/books/corporate-social-responsibility-strategic-perspective):

 

 

 

 

The title for the book is Corporate Social Responsibility: A Strategic Perspective. The book details a series of ten principles that I believe provide an intellectual foundation for strategic CSR that better fits with what we know about economic theory and human behavior. As a preview, here are the ten principles that I am arguing define strategic CSR:

1. Business equals social progress.
2. Shareholders do not own the firm.
3. Identifying stakeholders is easy; prioritizing among stakeholder interests is difficult.
4. CSR is not solely a corporate responsibility.
5. Market-based solutions are optimal.
6. Profit = economic value + social value.
7. The free market is an illusion.
8. Scale matters; only business can save the planet.
9. Strategic CSR is not an option; it is business.
10. Milton Friedman was right, the social responsibility of business is business.

 

In particular, I am attempting to redefine CSR as "sustainable value creation." By defining CSR in this way, I believe it moves from being something that is peripheral to strategy and operations (and, as such, something the CEO/executive team can ignore, if they so choose), to being central to the value creating function of the business (something that cannot be ignored). As a result, I think this framework has radical consequences for both business practice and business education.

 

If you have any questions about the book, please let me know.

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/

 

Strategic CSR - Business Schools

This will be the last CSR Newsletter of the Fall semester. Have a great holiday break and I will see you in January!

 

The article in the url below is a review of a recently published book by William Deresiewicz titled Excellent Sheep: The Miseducation of the American Elite. The book records the effect on students of a higher education system that is defined by merit and intense competition among students who are forced to emphasize resume-building above all else:

 

"For William Deresiewicz the rat race for college admissions—and, later, for entry into the top banks and law firms—has robbed these ultra-high achievers of their passion, intellectual curiosity, purpose and depth. Students today, he suggests, regard their education at elite institutions not as an opportunity to develop their character, but as just another credential, 'an algorithm to be cracked in order to get to the next level,' as one graduate of Deerfield Academy told the author. They chase 'success' with no greater purpose to guide them. And the universities they attend, which regard them increasingly as customers rather than students, do little to provide one."

 

As a result:

 

"Beyond their glowing transcripts and the fact that they have become 'accomplished adult-wranglers,' these students are anxious, depressed and searching for some deeper meaning in their lives. … A Yalie put it more succinctly: 'I might be miserable, but were I not miserable, I wouldn't be at Yale.'"

 

Rather than focus on the students, however, I was drawn to the role played by colleges in creating and maintaining this soul-destroying process:

 

"The author chronicles the gradual process by which the traditional liberal arts education that was once a staple of these schools has given way to the research university agenda, where 'fragmentation and specialization' define the curriculum. Rather than being taught the accumulated wisdom of the past through the great books, students now select from a bland a la carte menu of 'distribution requirements' that leave them without a holistic understanding of the debates and issues that shaped the culture they now live in."

 

The same fragmentation is characteristic of business schools. It seems, in many cases, that the starting point for curriculum development is bottom-up, rather than top-down. By this, I mean that each Department decides how it should teach its particular functional area (marketing, finance, operations, etc.) independently of the other functional areas. A more useful approach would be for the business school as a whole to define its primary purpose as addressing the question: What is the role of the for-profit firm in society? Once the faculty as a whole had sketched out the parameters of how they wanted to answer that question, then individual departments could define how their function should be taught in order to help achieve that broader goal—i.e., how marketing, finance, operations, and so on, can help the firm achieve the role the faculty as a whole think it should be filling. The resulting curriculum/set of courses would be unified and complementary, rather than idiosyncratic and disjointed. Without such a discussion, however, there is little over-arching structure or purpose to the students' business education. In theory, we set ourselves up to train the managers of the future; in reality, we teach them how to perform various tasks (marketing, finance, operations, etc.) with little concern as to whether those tasks add-up to a sum that is greater than the parts. In short, at present:

 

"Nothing adds up … because nothing is designed to add up."

 

Happy Holidays!

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/

 

 

Book Review: 'Excellent Sheep: The Miseducation of the American Elite' by William Deresiewicz

By Emily Esfahani Smith

August 20, 2014

The Wall Street Journal

http://online.wsj.com/articles/book-review-excellent-sheep-the-miseducation-of-the-american-elite-by-william-deresiewicz-1408576444

 

Strategic CSR - JetBlue

The article in the url below records a rare phenomenon – a CEO willing to stand up to Wall Street analysts (see also: Strategic CSR – Unilever). Why does this CEO, in particular, need to defend himself?

 

"Several Wall Street analysts have been agitating for JetBlue Airways to replace Chief Executive Officer David Barger when his contract expires in February. He's too passenger-friendly, they say, and impedes measures that could increase the airline's profitability."

 

His response to the criticism?

 

"'You want to compare my track record to bankruptcies and layoffs?' asked Barger, referring to the Chapter 11 restructurings of Delta, United, and American and the subsequent mergers that radically reshaped all three. 'Go ahead. I'll take that comparison.'"

 

Although Barger has already announced the introduction of some fees (checked bags) and fare increases (business class), he has also makes it clear that "I may be alone among CEOs in the industry, but I don't believe we're a commodity [business]" and the fees, when they arrive, will be introduced "in a JetBlue way." Nevertheless, that is insufficient for some analysts:

 

"The latest nudge for Barger to leave the company came on Aug. 20 when Cowen & Co. analyst Helane Becker upgraded the stock and raised her target price by $5, to $15 per share, partly on the prospect of a CEO change. 'We believe JetBlue could make a management change at the top in order to foster a change in strategy throughout the company,' Becker wrote. 'We believe a management change would lead to a change in philosophy and likely morph the model similar to one of Spirit Airlines, although not as extreme.'"

 

Barger's retort?

 

"Barger says his board fully agrees with having the company continue to build its franchise. And in airline years, 15 is just a baby; JetBlue is still building its franchise and adding planes, the CEO says. To the equity analysts, he says: 'It's a free country. You can write what you want.'"

 

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/

 

 

JetBlue CEO Fires Back at Wall Street Analysts

By Justin Bachman

August 26, 2014

Bloomberg Businessweek

http://www.businessweek.com/articles/2014-08-26/jetblue-ceo-david-barger-fires-back-at-wall-street-critics

 

Strategic CSR - Carbon trading

The article in the url below reports on a recent announcement by the Chinese government that it is planning:

 

"…what will be the world's biggest emissions trading program."

 

The program, which would be launched nationwide in 2016, would immediately become the world's most important market-based model for reducing carbon emissions:

 

"The Chinese market, when fully functional, would dwarf the European emissions trading system, which is now the world's biggest. It would be the main carbon trading hub in Asia and the Pacific, where Kazakhstan and New Zealand already operate similar markets. South Korea will start a national market on Jan. 1, 2015, while Indonesia, Thailand and Vietnam are drawing up plans for markets of their own."

 

The market is designed to significantly alter the country's carbon footprint, which is large and growing:

 

"China has pledged to reduce the amount of carbon it emits per unit of its gross domestic product to 40 to 45 percent below its 2005 levels by 2020."

 

These targets compare to the U.S. government's 2009 commitment to decrease emissions by 17% below its 2005 level by 2020.

 

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/

 

 

China Plans A Market for Carbon Permits

Reuters

September 1, 2014

The New York Times

Late Edition – Final

B2

http://www.nytimes.com/2014/09/01/business/international/china-plans-a-market-for-carbon-permits.html

 

Strategic CSR - Divestment

The article in the url below highlights the growing importance of a movement I had been following at a distance, but haven't previously paid much attention to—the divestment of fossil-fuel companies from university and college endowment portfolios (see: http://gofossilfree.org/):

 

"Such divestment is clearly advocated on moral grounds – to save the planet – but is increasingly premised on financial grounds as well – to avoid the risks associated with the carbon bubble and what these stranded assets or unburnable carbon will do to investment portfolios holding fossil-fuel company stocks."

 

In particular, the article draws on the recent IPCC report (see: http://www.ipcc.ch/) that stresses a limit of keeping global temperature rises to 2 degrees Celsius (a "carbon budget"). The implication of such a budget is that "two-thirds of coal, oil and gas reserves would have to be left in the ground, at least until 2050" (a "carbon bubble"). As the author notes:

 

"If two-thirds of known reserves must stay in the ground, then this 'unburnable carbon' would not be monetized, becoming instead a stranded asset or liability that is not being priced into the current valuations of fossil-fuel companies."

 

In other words, either our carbon-intensive global economy will be allowed to continue extracting and burning traditional energy sources at great profit for energy companies (and great expense for the rest of us), or the valuations of these same companies are greatly inflated because they do not account for the possibility that two-thirds of known reserves cannot be monetized. Following the ideas in the article and extrapolating them to their natural conclusions does not appear to result in a situation where both outcomes can occur simultaneously. Either the planet or the fossil-fuel companies should be shorted today:

 

"Fossil-fuel companies, and an economy that subsidizes these (and other emitters) by letting them dump their carbon pollution into the atmosphere for free, would see significant disruptions if and when these externalities are accounted for."

 

This leads us back to the divestment movement. Given that "One can divest fossil fuels and still own a portfolio that remains very carbon intensive," the author advocates a very creative "Multi-pronged approach" that encompasses both engagement, protest, and incentives for carbon-based energy companies. Principally, he sees these three forces coming together in a "smart carbon tax":

 

"Not only would such a tax put a price on carbon so that clean energy can effectively compete, but it would also generate significant revenues, a portion of which could be assigned or recycled right back to the energy companies in the form of transition subsidies that enable them to convert over to sustainable energy. A Smart Carbon Tax would be designed so that a significant portion of proceeds is earmarked for investments in renewable energy, energy efficiency, resource efficiency more broadly, green infrastructure, and so forth. The fossil-fuel companies, as well as others, would be eligible to participate in this revenue stream from the Smart Carbon Tax. These transition subsidies could include expanded investment tax credits, low-interest loans, price supports, and so forth – and should obviously replace current fossil-fuel subsidies. But for such a plan to work, the amount transferred would have to be meaningful and may have to approach or approximate the profits the energy companies forego by leaving the fossil fuels in the ground."

 

An approach that incentivizes the involvement of the energy companies by not inflicting losses on them is essential. The fact that the divestment advocates are 'right' does not make them a solid bet given humanity's demonstrated capacity for self-destruction.

 

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/

 

 

2014 the Year for a Smart Carbon Tax

By Joe Keefe

July 28, 2014

Green Money Journal

http://www.greenmoneyjournal.com/january-2014/smart-carbon-tax/

 

Strategic CSR - Social impact investing

The theme for this week's Newsletters is social impact investing (Issue: Investor Activism, p285). Aspects of impact investing, which grew out of the socially responsible investing (SRI) industry, have been a part of Strategic CSR since the first edition. The market for investment instruments that satisfy values-based investing demand continues to grow and, according to the article in the url below, has evolved into a new type of fund:

 

"It is an intriguing concept: investing in stocks of companies with female leadership. Backed by studies that say such companies perform better, fund companies are stepping in with investments that snub male-dominated companies, and bet on women."

 

In particular:

 

"Barclays PLC in July launched a Barclays Women in Leadership Total Return Index and related exchange-traded notes, Barclays Women in Leadership ETN. The index is made up of U.S. companies with a female chief executive or at least a 25% female board."

 

According to research that supports the foundation of such tailored funds:

 

"…from 2004 to 2008, Fortune 500 firms with three or more female directors had an 84% better return on sales and a 46% better return on equity. Matterhorn Group [at Morgan Stanley] cites studies by several universities and consulting companies as well that see a correlation between strong financials and women in leadership roles."

 

These funds come with two caveats (according to the article). First:

 

"Female leaders are often appointed in times of poor company performance, so their posts may be precarious, say Michelle Ryan and Alex Haslam, professors at the University of Exeter in the U.K. That 'glass cliff' could make such companies less attractive to investors, the researchers say. Some observers caution, too, that the presence of more female directors is not necessarily the cause of business success, but could instead be a consequence."

 

Second, and equally controversially, there is still considerable debate about the value of mutual funds with higher than average management fees, in general, and SRI funds, in particular:

 

"Robert Goldsborough, a fund analyst at investment-research firm Morningstar Inc., says, 'Over time, these kinds of screens typically produce performance that's on par with the market; typically not better, but not worse.'"

 

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/

 

 

Men Had Their Chance; New Funds Bet on Women

By Daisy Maxey

August 4, 2014

The Wall Street Journal

Late Edition – Final

R1

http://online.wsj.com/articles/new-funds-bet-on-companies-led-by-women-1407106294