Strategic CSR - See you in the Fall!

This will be the last CSR Newsletter of the Spring semester. Have a great summer and I will see you in August!

 

I have been doing a lot of thinking recently about the core principles that underpin the concept of strategic CSR. As I mentioned in an earlier Newsletter this semester (Strategic CSR – The End of CSR), the main stimulus for this thinking is a new book I have been invited to write for the United Nations PRME collection (http://www.unprme.org/).

 

I will let you all know when this book is published (scheduled for early 2015). For now, however, I wanted to raise the principle that I have been getting the most pushback on – the idea that shareholders do not own the firm.

 

This position is something I have been researching for the past year-and-a-half and is based on an argument grounded in corporate law. Lynn Stout at Cornell Law School has done particularly good and important work on this issue. This debate has largely missed the management literature (and the rest of the business school, for that matter), but there is a very good 2010 paper in the Academy of Management Review that addresses the issue directly (Lan & Heracleous, ‘Rethinking Agency Theory: The View from Law,’ Vol. 35, Issue 2, pp. 294-314). Writing in Harvard Business Review (http://hbr.org/2010/04/the-myth-of-shareholder-capitalism/ar/1), these two authors conclude from their research that:

 

“Oddly, no previous management research has looked at what the legal literature says about the topic, so we conducted a systematic analysis of a century’s worth of legal theory and precedent. It turns out that the law provides a surprisingly clear answer: Shareholders do not own the corporation, which is an autonomous legal person. What’s more, when directors go against shareholder wishes—even when a loss in value is documented—courts side with directors the vast majority of the time. Shareholders seem to get this. They’ve tried to unseat directors through lawsuits just 24 times in large corporations over the past 20 years; they’ve succeeded only eight times. In short, directors are to a great extent autonomous.”

 

For those of you interested, I would point you towards this statement of corporate law by The Modern Corporation (http://themoderncorporation.wordpress.com/company-law-memo/) and, if you agree with what it says, to sign the online petition. As the statement concludes:

 

“Contrary to widespread belief, corporate directors generally are not under a legal obligation to maximise profits for their shareholders. … Where directors pursue [this] goal, it is usually a product not of legal obligation, but of the pressures imposed on them by financial markets, activist shareholders, the threat of a hostile takeover and/or stock-based compensation schemes.”

 

In terms of pushback when I raise this issue, most people respond by saying that ‘Of course shareholders are the “legally defined” owners of the firm.’ When pushed, however, no one can tell me what law or court decision it is that supposedly determines this fact. If it is so definitively stated in law, then I think it should be relatively easy for someone to be able to point to the relevant law or legal precedent. If that proves to be a challenge, then it seems to me that the issue most people think is decided is, in fact, debatable.

 

Watch this space for more information about the other nine principles that constitute strategic CSR (and the published book) later this year. And, any thoughts on this issue that you would care to pass on would be gratefully received. I am no corporate legal scholar, but I find the arguments of (a growing number of) legal scholars on this question to be compelling and persuasive.

 

Have a great summer.

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 - Markets vs. Governments

The article in the url below weighs the value of markets (and, in particular, for-profit firms) over government mandates in terms of being able to solve the largest problems we face as a society:

 

“… it's multinational corporations, and not governments or non-profits, that have the vast human and financial capital, advanced technology, international footprint, market power and financial motivation to solve the world's the world's most daunting problems.”

 

For example:

 

“… Johnson Controls joined real-estate firm Jones Lang LaSalle to retrofit the Empire State Building for energy efficiency in 2012. The Clinton Climate Initiative and Rocky Mountain Institute also collaborated on the project. The groups estimate the project will cut energy costs by 38%, saving $4.4m annually and reducing carbon emissions by 105,000 metric tons over 15 years. Given that the building sector consumes up to 40% of the world's energy, energy efficiency is key to reducing our energy use. Retrofitting for energy efficiency is good for the world, while also generating profit for Johnson Controls. The power of financial motivation, not just the desire to do good, solved this problem.”

 

The essence of the article, however, is not to demonstrate the isolated brilliance of for-profit firms, but to emphasize the instrumental nature of collaboration. Specifically, the article seeks to demonstrate the self-interest for firms of engaging with stakeholders to solve market-based problems:

 

“… many companies are starting to understand that energy efficiency, poverty reduction and access to healthcare, for example, are preconditions to their success and also offer rewarding business opportunities. Furthermore, customers, employees and investors are driving corporate accountability, transparency and adherence to labor and environmental norms. Reports indicate that businesses that ignore labor groups, grassroots organizations, consumers and civil society do so at their peril.”

 

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/


Business can do what governments can’t: Solve the world’s biggest problems

By Alice Korngold

January 7, 2014

The Guardian

http://www.theguardian.com/sustainable-business/business-government-world-problems-davos-multinational

 

Strategic CSR - CSR Reports

The article in the url below records baby steps towards the goal of more comprehensive CSR measuring and reporting:

 

“Major businesses in Europe will be required to produce social and environmental reports as part of their standard annual report following the passing of a law in the European Parliament.”

 

Unfortunately, of course, the legislative process is far from perfect and the best of intentions are subject to vested interests:

 

“The law was the subject of a lot of last-minute wrangling, with some countries expressing reservations that it would be an additional layer of bureaucracy for businesses. As a result, a considerable degree of flexibility was built into the final form of the legislation.”

In particular:

 

“Companies will be able to choose the relevant indicators against which they should report and a lot of large companies - particularly private companies - will be exempt from the law altogether. Reports will be audited, but don't have a requirement to be verified.”

On the plus side, however:

 

“… as a result of the law, some 6,000 companies will be required to report on areas such as human rights and the environment, diversity, corruption and social issues.”

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/


Mandatory reporting law passed by European Parliament

April 16, 2014

Business Respect

http://www.businessrespect.net/page.php?Story_ID=2799

 

Strategic CSR - Taxes

I have long wondered why corporations avoiding state and federal taxes by incorporating overseas is not a bigger problem than it is. The recent decision by Starbucks to re-locate their European HQ to the UK (in order to pay a ‘fairer’ amount of tax) indicates stakeholders elsewhere are bringing pressure to bear on firms that seek to avoid contributing to the economies in which they operate. In the U.S., however, this issue has lagged. In the face of inaction by the federal government, individual states are gradually beginning to recoup their share of the lost revenue, which is significant:

 

“Offshore tax shelters cost the federal government $30 billion to $90 billion annually, according to a 2013 Congressional Research Service report. The U.S. Public Interest Research Group, which tracks corporate taxes, puts the amount that states lose at $20 billion a year.”

 

The states are doing so by passing legislation that counts revenues booked in overseas countries as taxable income that must be declared on the firms’ state income tax returns:

 

“Oregon enacted a bill last June for the 2014 tax year identifying 39 countries and territories—including Barbados, Liberia, and the U.S. Virgin Islands—as corporate shelters. The state counts profits that corporations and their subsidiaries stash in shelter countries as taxable income, and companies that do business in the state must report it on their state tax returns and pay up.”

 

Some firms will face significantly higher tax bills as a result:

 

“Microsoft, Apple, and IBM accounted for $37.5 billion, or 18.2 percent, of the total increase during the past year. Caterpillar avoided $2.4 billion in U.S. taxes over more than a decade by shifting profits from a parts business to a subsidiary in Switzerland, according to a report issued on March 31 by a Senate committee.”

 

There is scope for many other states to follow suit:

 

“Few of the states that have passed or are contemplating tax-haven legislation are home to a large multinational such as Microsoft, which is based in Washington, or Apple in California, IBM in New York, or Caterpillar in Illinois. Those states would stand to collect far more from such measures. California lost the most to offshore havens in 2011, an estimated $3.3 billion, the Public Interest Research Group reports.”

 

The graphic that accompanies the article provides additional detail:

 

http://images.bwbx.io/cms/2014-04-21/pol_taxes17__01__630b_inline.jpg

 

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/


U.S. States Target Corporate Cash Stashed Overseas

By Mark Niquette

April 17, 2014

Bloomberg Businessweek

http://www.businessweek.com/printer/articles/195661-u-dot-s-dot-states-target-corporate-cash-stashed-overseas

 

Strategic CSR - IPCC

The article in the url below digs a little deeper into the recent IPCC climate change report and the details it uncovers are not encouraging:

 

“The [IPCC] describes itself as ‘policy-relevant and yet policy-neutral’. Its latest report, the third in six months, ignores that fine distinction. Pressure from governments forced it to strip out of its deliberations a table showing the link between greenhouse gases and national income, presumably because this made clear that middle-income countries such as China are the biggest contributors to new emissions. It also got rid of references to historical contributions, which show that rich countries bear a disproportionate responsibility.”

 

This is discouraging, not so much in terms of the overall findings in relation to climate change, but in terms of what it says about the governments that are supposed to negotiate a new climate change agreement (with associated commitments to lower emissions) next year in Paris:

 

“The new report is intended to measure how far governments have met their promises, formalised in 2010, to keep the global rise in mean surface temperatures compared with pre-industrial times to less than 2°C. It says they are miles from achieving that goal and are falling further behind.”

 

Why is this important? Primarily because the only way progress can be made in combatting the effects of climate change is with the coordinated cooperation of governments worldwide:

 

“The IPCC still thinks it might be possible to hit the emissions target by tripling, to 80%, the share of low-carbon energy sources, such as solar, wind and nuclear power, used in electricity generation. It reckons this would require investment in such energy to go up by $147 billion a year until 2030.”

 

In the same fashion that the IPCC gave-in to political pressure not to label those countries that have caused the most environmental damage, The Economist accuses the committee of holding back in terms of the financial consequences of addressing climate change seriously:

 

“These numbers look preposterous. Germany and Spain have gone further than most in using public subsidies to boost the share of renewable energy (though to nothing like 80%) and their bills have been enormous: 0.6% of GDP a year in Germany and 0.8% in Spain. The costs of emission-reduction measures have routinely proved much higher than expected.”

 

As a result:

 

“Of the IPCC’s three recent reports, the first two (on the natural science and on adapting to global warming) were valuable. This one isn’t.”

 

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/


Another week, another report

April 19, 2014

The Economist

Late Edition – Final

73

http://www.economist.com/news/science-and-technology/21600967-options-limiting-climate-change-are-narrowing-another-week-another-report

 

Strategic CSR - Subway

The video in the url below is revealing. It was produced by Consumer Reports following an investigation that compares photos of fast-food items taken from official company ads with photos of the actual food products as served to the reporters who compiled the report:

 

http://msnvideo.msn.com/?channelindex=1&from=en-us_msnhpvidmod#/video/61dfb207-4dcc-46b3-bb52-f1aa3664822e

 

The “worst offender” identified in the video is Subway sandwich shop, which recently appeared in the CSR Newsletters for another, equally unflattering reason (Strategic CSR – Subway).

 

Eat fresh!

 

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/

 

Strategic CSR - Religion

The article in the url below reports on what it claims is “the first fatwa broadly covering ecosystem conservation”:

 

“In January, a holy voice rang out across Indonesia’s archipelago of lush, tropical forests and teeming mangroves. It came in the form of a fatwa, an Islamic edict, which instructed Muslims to stop the illegal trafficking of wildlife.”

 

The fatwa is designed to apply a little divine pressure to produce changes in behavior that are not being achieved through other, more traditional, market and social forces:

 

“As the head of the fatwa-issuing council said: ‘People can escape government regulation, but they cannot escape the word of God.’ This notion is being recognised more and more by secular organisations such as the World Bank and the United Nations, which partner religious-based environmental sustainability programmes.”

 

This is a good thing, right? Well, it is good as long as you believe there is value in religious leaders telling us what we can/cannot do or should/should not do:

 

“Will the fatwa work? Perhaps yes, given that other religious decrees have succeeded where secular conservation campaigns have failed. In Zanzibar last year, for example, an Islamic-based environmental campaign finally convinced fishermen to stop dynamiting coral reefs.”

 

In short:

 

“Initiated by the aid and development organisation Care,which recognised that its secular efforts were not achieving results, the campaign raises the question: do religious-based environmental programmes have practical and psychological advantages over secular organisations for inducing behaviour change?:

 

The more important point, I think, is not whether it will work, but to focus on the underlying mechanisms that allow fatwas to dictate outcomes and then decide whether that is something with which we are comfortable. It seems to me that it is hypocritical of us to herald the announcement of fatwas that seek to advance goals we support, but denounce fatwas that seek to advance goals we do not support. A more consistent response from The Guardian on this issue, therefore, would be a little more suspicion about any form of religious edict that supersedes our individual right to self-determination. It seems to me that we cannot pick and choose the fatwas we support. Either we believe in fatwas as some form of binding word from God that should be used to advance social policy, or we do not. Agreeing with some while denouncing others is hypocritical and, quite frankly, takes us down a dangerous road (just ask Salman Rushdie). The article hints at the darker implications of fatwas when it notes that:

 

“Psychological pressure can, admittedly, be key, with fatwas and other religious edicts resting on this to a degree. But, is a holy decree only successful in so much as it conjures fire and brimstone, inducing fear among followers?”

 

There is also the danger of encouraging religious intervention in questions of science. Again, supporters of this integration of “religion and natural science” need to appreciate the consequences when religion rejects science as well as when it embraces it.

 

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/


Indonesia's fatwa shows religious duty can be a route to sustainable behavior

By Kathryn Werntz

March 24, 2014

The Guardian

http://www.theguardian.com/sustainable-business/religion-environment-wildlife-trafficking-indonesia-fatwa-sustainable

 

Strategic CSR - Media

Much media attention is driven by stories that conform to pre-existing stereotypes. If a particular story fits a particular expectation, for example, it is easy for the media to slot it into a running narrative and easier for the audience to react in the way to which they have been conditioned. In relation to climate change, the prevailing consensus is that politicians are failing to act in the face of overwhelming scientific evidence that the environment is rapidly deteriorating. This perspective appeared to be confirmed when prominent media coverage was given to decisions in Australia and Japan, last year, to cut back sharply on previous commitments that had been made to curtail carbon emissions:

 

“When Tony Abbott became Australia’s prime minister in 2013, almost his first acts were to abolish the country’s Climate Commission and to promise the repeal of a carbon tax. Soon after, Japan scrapped plans to cut carbon emissions by 25% by 2020, citing its post-tsunami shutdown of nuclear-power plants. Such actions in large countries—Japan is the fifth biggest carbon emitter; Australia the 17th—give the impression that the world as a whole is stepping away from environmental rules and laws.”

 

Contrary to this perception, the article in the url below presents a significantly more encouraging story about legislative action on this contentious issue:

 

“In a review published on February 27th of national climate legislation in 66 countries, accounting for 88% of carbon emissions, [GLOBE International, a group of lawmakers, and the Grantham Research Institute of the London School of Economics] calculated that almost half of their parliaments passed climate-change or energy-efficiency acts in 2013. Only Japan and Australia went the other way.”

 

Notably, the report comes with qualifiers:

 

“The review considered only the quantity of legislation, not its quality. It says nothing about whether laws are implemented or effective.”

 

Nevertheless, the fact that legislatures the world over are publicly recognizing climate change as a fact that requires action in response constitutes a level of engagement that is worth noting—particularly so since the view from the U.S. is that politicians often favor faith over science and put personal short-term interest over the long-term health and wellbeing of their country and planet:

 

“The survey … shows that the world’s stock of climate laws has risen steeply, from fewer than 50 in 2000 to almost 500 in 2013.”

 

The planet is not necessarily a safer place all of a sudden, but the report suggests that it might become safer … one day.

 

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/


Law on Mother Earth

March 1, 2014

The Economist

Late Edition – Final

62

http://www.economist.com/news/international/21597964-domestic-climate-legislation-booming-law-mother-earth

 

Strategic CSR - BP

Here are some excerpts from a full-page ad that BP ran in The New York Times recently:

 

“Immediately following the Deepwater Horizon accident, BP committed to restore the environment and help people affected by the spill recover as soon as possible. We waived the statutory liability cap, mounted an unprecedented cleanup, and began paying claims within days.”

 

“Nearly four years later, we’ve spent more than $26 billion. $12 billion of that has gone to paying hundreds of thousands of claims. Over the last two years, most claims have been paid through a settlement agreement designed to compensate the remaining people and businesses with financial losses due to the spill. Unfortunately, that agreement has been implemented in a way that encourages people to exploit it.”

 

BP has been running a long campaign to try and correct the fraud it sees being committed (at its expense) in relation to the payoffs from the fund:

 

“Over the last several months, we’ve shared with you a few of the most outrageous cases of exploitation and other abuse. Exaggerated, even fictitious claims. Fraud within the Settlement Program. And the firing or resignation of senior Settlement Program officials due to misconduct.”

 

In this ad, they attempt to broaden the implications beyond their own resources and question how this miscarriage might affect the way that companies in the future react to PR crises:

 

“What choice will other companies make when faced with the next industrial accident, product defect, or data security breach?”

 

“Will they accept responsibility and do the right thing?”

 

“Or will the lesson be that it’s better to deny, delay, and litigate – with victims potentially waiting decades for compensation?”

 

Here is the title of the ad:

 

“We’ve tried to do the right thing. Will other companies be discouraged from doing the same?”

 

The ad can be viewed at: https://www.thestateofthegulf.com/media/65958/Bp-Ad-3-18-14.pdf

 

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/

 

Strategic CSR - Water

With the drought being experienced in California, together with access to clean, fresh water increasingly a contentious issue among nations worldwide, you would think that water conservation would be more prominent in our collective consciousness. If we were a far-thinking society, we would also be analyzing current water usage, evaluating what makes sense and what doesn’t, and re-assessing our priorities to adapt to the future constrained supply. The article in the url below demonstrates how far away we are from any of those actions. In particular, it analyzes the amounts of water we use to generate different food products with some pretty amazing statistics:

 

“Who knew, for example, that it took 5.4 gallons to produce a head of broccoli, or 3.3 gallons to grow a single tomato? This information about the water footprint of food products — that is, the amount of water required to produce them — is important to understand, especially for a state [CA] that dedicates about 80 percent of its water to agriculture.”

 

What is clear, however, is that, while vegetable usage consumes a lot of water, the amounts pale in comparison to the amount of water we use to make meat:

 

“Beef turns out to have an overall water footprint of roughly four million gallons per ton produced. By contrast, the water footprint for ‘sugar crops’ like sugar beets is about 52,000 gallons per ton; for vegetables it’s 85,000 gallons per ton; and for starchy roots it’s about 102,200 gallons per ton.”

 

This usage is particularly important in relation to “blue water”—the fresh, clean water that we need to survive:

 

“Vegetables use about 11,300 gallons per ton of blue water; starchy roots, about 4,200 gallons per ton; and fruit, about 38,800 gallons per ton. By comparison, pork consumes 121,000 gallons of blue water per ton of meat produced; beef, about 145,000 gallons per ton; and butter, some 122,800 gallons per ton.”

 

In California’s case, not only is the state using too much water to generate meat, it is also using that water to generate meat for others by growing and exporting alfalfa, which is used to supplement feed for grass-fed cattle:

 

“Alfalfa growers are now exporting some 100 billion gallons of water a year from this drought-ridden region to the other side of the world in the form of alfalfa. All as more Asians are embracing the American-style, meat-hungry diet.”

 

Of course, like in any other industry, the beef industry is subject to waste. When the waste is water, however, the consequences seem more immediate and potentially damaging:

 

“Further intensifying this ecological injustice are incidents such as the Rancho Feeding Corporation’s recent recall of 8.7 million pounds of beef because the meat lacked a full federal inspection. That equals 631.6 million gallons of water wasted by an industry with a far more complex and resource-intensive supply chain than the systems that move strawberries from farm to fork.”

 

And, it is not only growing the meat that consumes water, but preparing it, too:

 

“… the Rancho incident reminds us that plants aren’t slaughtered, a process that demands 132 gallons of water per animal carcass, contributing even more to livestock’s expanding water footprint.”

 

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/


Meat Makes the Planet Thirsty

By James McWilliams

March 8, 2014

The New York Times

Late Edition – Final

A19

http://www.nytimes.com/2014/03/08/opinion/meat-makes-the-planet-thirsty.html

 

Strategic CSR - Spirit Airlines

We, as consumers, are very difficult to understand. Without us, no company competing in the consumer market can survive. Yet, in spite of this, we often fail to reward the products and services that we say we seek. The latest example of this is found in the article in the url below, which reports on the cutthroat airline industry:

 

“Spirit Airlines inspires a special kind of wrath among the American traveling public: It's the industry leader in customer complaints by a wide margin. Over the last five years, Spirit's rate of complaints to the Department of Transportation was three times higher than other U.S. airlines. … In spite of the rancor it inspires, Spirit has become the most profitable U.S. airline in terms of its operating margin and return on invested capital. Spirit's 16.2 percent margin is highest among U.S. public airlines, as is its 26 percent return on capital, according to data compiled by Bloomberg.”

 

Things have become so bad that Spirit is famous for being bad at what it does:

 

“The loathing has also inspired a dedicated Twitter feed: @hatespiritair”

 

How does Spirit do it?

 

“Spirit, along with other ultralow-cost carriers, has done all it can to drive ticket prices as close to zero as possible. The point is to attract new customers with low fares, then squeeze them into a spartan, cramped cabin and charge them for any and all amenities: water, carry-on bags, seat assignments, and the like. Spirit's planes pack far more seats in the cabin than do other airlines, 178 on an Airbus A320 -- that's 28 more than on the same plane at United Airlines or JetBlue. And Spirit's seats don't recline.”

 

It is hard to have any sympathy. If we really care about the level of service an airline offers, we need to be willing to pay for it. If we keep being tricked into paying the absolute lowest sticker price, when we have had poor service in the past, then we really do not have anyone to blame but ourselves. More importantly, of course, what message are we sending to firms? Why should they care about customer service if we obviously do not care ourselves?

 

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 most hated US airline is also the most profitable

By Justin Bachman

April 10, 2014

Bloomberg Businessweek

http://www.businessweek.com/articles/2014-04-10/the-most-hated-u-dot-s-dot-airline-is-also-the-most-profitable

 

Strategic CSR - Earth Day!

In honor of Earth Day on Tuesday (April 22), this Newsletter features a review of Elizabeth Kolbert’s new book, The Sixth Extinction: An Unnatural History, which has been getting a lot of attention since it was released earlier this year. This, I think, is not because she is necessarily telling us something that we did not already know, but because (a) she is packaging the information in a way that conveys the full implications of the approaching calamity and (b) she does it in a way that is easily understandable to a wide audience. In short, Kolbert’s thesis is that there have been five major species extinctions in the history of the planet, and we are rapidly heading towards a sixth:

 

“Ms Kolbert, who writes for the New Yorker, uses case studies to document the crisis. Setting out for Panama to investigate a vanishing species of frog, she learns that amphibians are the world’s most imperilled class of animal. Close to her home in New England, a fast-spreading fungus has left bat corpses strewn through caves. On a tiny island off Australia’s coast, she laments the degradation of the Great Barrier Reef by ocean acidification, sometimes known as global warming’s ‘evil twin.’”

 

The consequences of this activity are broad and will be lasting:

 

“By the reckoning of the International Union for Conservation of Nature, two-fifths of all amphibians, a quarter of mammals and an eighth of birds are threatened.”

 

The twist to her argument is that, while natural causes are responsible for the first five mass extinctions (e.g., ice ages, comets from outer space, etc.), the primary responsibility for the sixth lies with humans:

 

“Ms Kolbert glides through the problems humans have created—climate change, incursion into wildlands, the transport of invasive species—with broad strokes. She misses a few chances to emphasise the value of biodiversity, beyond its natural wondrousness and the general interconnectedness of species. Her chapter on bats, for example, does not mention their importance to human food supplies as bug-eaters. … The root cause of the current extinctions is not ambiguous. Humans have already left a mark, and our ingenuity seems unlikely to turn things around.”

 

The message is both stark and overwhelming. As she concludes her book:

 

“‘Life,’ she writes, ‘is extremely resilient but not infinitely so.’”

 

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/


Killing machines

February 22, 2014

The Economist

Late Edition – Final

74

http://www.economist.com/news/books-and-arts/21596914-humanity-having-devastating-effect-diversity-life-earth-killing-machines

 

Strategic CSR - Ecocide

The article in the url below profiles an idea being advanced by the clothes designer/environmental activist, Vivienne Westwood—the concept of Ecocide:

 

“That ecocide – the destruction of ecosystems – is even a concept bespeaks a momentous change in industrial civilisation’s relationship to the planet. To kill something, like Earth, presupposes that it is even alive in the first place. Today we are beginning to see the planet and all its subsystems as beings deserving of life, and no longer mere resource piles and waste dumps. As the realisation grows that we are part of an interdependent, living planet, concepts such as ‘rights of nature’ and ‘law of ecocide’ will become common sense.”

 

The goal is to “enshrine the sanctity of the biosphere in law.” Doing so, however, would involve a level of sacrifice it is not clear we are yet ready for:

 

“The unvarnished truth that environmentalists might not like to admit is that a law of ecocide would hurt the economy as we know it, which depends on an ever-growing volume of goods and services, increased consumption so demand can keep pace with rising productivity at full employment. Today, that requires stripping more and more minerals, timber, fish, oil, gas, and so on from the Earth, with the inevitable loss of habitats, species, and ultimately the health and viability of the entire biosphere.”

 

The result being advocated is a fundamental reform of society as we know it:

 

“Every facet of modern life contributes to ecocide; we should expect, then, that every aspect of life will change in the post-ecocidal era. It is more accurate to say that, instead of hurting the economy, a law of ecocide would transform the economy. It is part of a transition to an economy with less throwaway stuff, and more things made with great care, more bikes and fewer cars, more gardens and fewer supermarkets, more leisure and less production, more recycling and fewer landfills, more sharing and less owning.”

 

There are not many good examples of firms paving the way for such a radical reform. The article did remind me, however, of a quote from The Corporation documentary by the late Ray Anderson of Interface Carpets:

 

“Can any product be made sustainably? … One day early in this journey it dawned on me that the way I had been running Interface is the way of the plunderer, plundering something that is not mine; something that belongs to every creature on earth. And I said to myself, my goodness, the day must come when this is illegal, when plundering is not allowed [and] … people like me will end up in jail. The largest institution on earth, the wealthiest, most powerful, the most pervasive, the most influential, is the institution of business and industry—the corporation, which also is the current present day instrument of destruction. It must change.”

 

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/

 

 

Vivienne Westwood is right: We need a law against ecocide

By Charles Eisenstein

January 16, 2014

The Guardian

http://www.theguardian.com/sustainable-business/blog/vivienne-westwood-law-ecocide-european

 

Strategic CSR - Auditors

Core to the theoretical underpinnings of Strategic CSR is the idea of vigilant stakeholders. While firms have a duty to listen and understand the needs and concerns of their stakeholders, broadly defined, stakeholders have an equal duty to hold firms to account.

 

Along these lines, one of the checks and balances that make capitalism a more effective economic system is the external audit. By verifying the accounts of the firm, auditors convey a halo effect that carries a strong message to investors (who do not have the time or expertize to verify the accounts, but are very interested to know whether they are accurate). Given this, the article in the url below raises some troubling questions:

 

“More than one in three audits inspected by the U.S. government’s audit watchdog were so deficient the auditors shouldn’t have signed off, an official said this week.”

 

The report reveals that, on inspection, the auditors could not provide sufficient evidence to support the claims they were making in their audit:

 

“‘When we look at an audit, the rate of failure has been in a range of around 35 to 40%,’ Martin Baumann, chief auditor of the Public Company Accounting Oversight Board said on Thursday in comments to a New York State Society of CPAs conference. … That doesn’t necessarily mean the underlying corporate financial statements are incorrect, but the audit failures could start to undermine investor confidence, Mr. Baumann said.”

 

It seems that the combination of increasingly complex financial transactions, together with recent tightening of regulations around compliance, suggest that the auditors are not receiving the training and supervision that they need to evaluate effectively what the firm is doing:

 

“The PCAOB has found five common trouble spots for auditors: complex “fair value” measurements for hard-to-price financial instruments, management’s estimates, revenue recognition policies, internal controls, and relying too heavily on the use of data prepared by the company being audited.”

 

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/

 

 

One in Three Audits Fail, PCAOB Chief Auditor Says

By Emily Chasan

January 24, 2014

The Wall Street Journal

http://blogs.wsj.com/cfo/2014/01/24/one-in-three-audits-fail-pcaob-chief-auditor-says/

 

Strategic CSR - 25 years of oil spills

In order to mark the 25th anniversary of the 1989 Exxon Valdez disaster, the graphic in the url below presents vividly the effects of twenty-five years of oil spills in the U.S.:

 

“On March 24, 1989, a tired third mate ran the tanker Exxon Valdez into a reef near Alaska’s Prince William Sound. About 10.5 million gallons of crude oil flooded the waterway in what was then the worst environmental disaster in U.S. history. Although the salmon have returned and most of the spill is gone, stubborn pockets of oil linger at the site even after 25 years and billions of dollars spent on cleanup.”

 

Here are some of the alarming facts that contribute to a devastating cumulative effect:

 

“The [2010] Deepwater Horizon incident spewed out almost 20 times as much crude as the Valdez.”

 

“Hurricane Katrina ravaged oil infrastructure across the Gulf of Mexico in 2005. More than 7.6m gallons poured out of damaged facilities.”

 

“Since 1973, enough oil to fill 692 Olympic size swimming pools has been emptied into U.S. waters.”

 

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/

 

 

Twenty-five Years of Oil Spills

By Evan Applegate

March 13, 2014

Bloomberg Businessweek

http://www.businessweek.com/articles/2014-03-13/25-years-of-oil-spills

 

Strategic CSR - T-shirts

Modern supply chains are highly evolved systems. Think of almost any product and its supply chain will be more complex than we can imagine. In my class, I find it difficult to convey this point to students in a way that re-creates this complexity, but also marvels at the intricacies of the markets that evolved to produce even the seemingly most simple of products.

 

Two resources I have picked-up along the way help in this process. The first, is a video by the Planet Money team at National Public Radio (NPR) who set-out to make a t-shirt and follow their product from design board to store in order to fully understand the process:

 

http://apps.npr.org/tshirt/#/title

 

The second is a quote from Adam Smith’s The Wealth of Nations. It is amazing that Smith was able to comprehend the complexity and beauty of the market and its ability to aggregate the effects of the millions of micro decisions that get made every day in the process of generating products that people demand:

 

“The woollen coat, for example, which covers the day-labourer, as coarse and rough as it may appear, is the produce of the joint labour of a multitude of workmen. The shepherd, the sorter of the wool, the wool-comber or carder, the dyer, the scribbler, the spinner, the weaver, the fuller, the dresser, with many others, must all join their different arts in order to complete even this homely production. . . . Let us consider only what a variety of labour is requisite in order to form that very simple machine, the shears with which the shepherd clips the wool. The miner, the builder of the furnace for smelting the ore, the feller of the timber, the burner of the charcoal to be made use of in the smelting-house, the brick-maker, the brick-layer, the workmen who attend the furnace, the mill-wright, the forger, the smith. . . . Without the assistance and co-operation of many thousands, the very meanest person in a civilized country could not be provided, even according to what we very falsely imagine, the easy and simple manner in which he is commonly accommodated.”

 

As noted in the article in the url below from The New Yorker that reviewed Smith’s ideas, it is the combined effect that is truly amazing:

 

“… all these people working together, absolute harmony among anonymous individuals, motivated not by the will to cooperate but by the pursuit of their own interest … that's what makes the coat.”

 

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/

 

Market Man

By Adam Gopnik

October 18, 2010

The New Yorker

http://www.newyorker.com/arts/critics/books/2010/10/18/101018crbo_books_gopnik

 

Strategic CSR - Crime pays

Some quotes from a fascinating article from The Economist in the url below about how criminal gangs seek out illicit trade for massive profits with little associated risk:

 

"Commodities such as rhino horn and caviar offer criminals two benefits rarely found together: high prices and low risk. Rhino horn can fetch up to $50,000 per kilogram, more than gold or the American street value of cocaine. Get caught bringing a kilogram of cocaine into America and you could face 40 years in prison and a $5m fine. On January 10th, by contrast, a New York court sentenced a rhino-horn trafficker to just 14 months."

 

"… though traditional trafficking in drugs, guns and people is still lucrative, gangs are increasingly moving into lower-risk, higher-reward areas—not just wildlife, but fraud and illegal waste-disposal. The [UN Office on Drugs and Crime] says the value of cross-border trade in counterfeit goods could be as much as $250 billion a year."

 

"Gangs in Britain make around £9 billion ($14.8 billion) a year from tax, benefit, excise-duty and other fraud—not much less than the £11 billion they earn from drugs. In America cigarette-trafficking deprives state, local and federal governments of $5 billion in tax revenues annually. The European Union estimates that losses within its borders from cigarette smuggling, tax fraud and false claims on its funds by organised groups total €34 billion ($46.5 billion) a year. But member states bring fewer than ten cases each a year for defrauding the EU, and sentences tend to be light."

 

What I found most interesting about the article, however, is what is driving the criminal activity—the twin forces of consumer demand and government regulation. In other words, the more governments try and regulate a product that is in demand, the more valuable the illicit trade of that item becomes:

 

"The appeal of such trade is increased, however unwittingly, by governments trying harder to protect what is precious and rare. 'When we finally get it together to agree that we'll only take ten tuna out of the water this year because that's all we can afford to take, that 11th tuna will be worth a lot of money,' says Theodore Leggett of the UN Office on Drugs and Crime (UNODC). As with tuna, so with ebony, ivory and rhino horn—all being regulated more tightly, and all still desirable."

 

And, where we are creating distorted incentives, the motivation to clear things up is also lacking:

 

"If a network of Nigerian scammers based in Amsterdam defrauds French, Australian and American credit-card holders, where does the crime occur? And who has the motivation, not to mention the jurisdiction, to prosecute?"

 

Although governments are increasingly trying to work together, essentially, policing efforts amount to little more than a tax on what is otherwise an incredibly lucrative business:

 

"One [U.S. Fish and Wildlife Service] inspector estimates that for all the peering, prodding and chirping, for all the rewards promised and rhino-horn traffickers caught, the agency picks up perhaps 5% of wildlife brought illicitly into America. For criminals, that is merely a light tax on the profits from the rest."

 

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/

 

 

Earning with the fishes

January 18, 2014

The Economist

59-60

http://www.economist.com/news/international/21594349-globalised-gangs-profit-new-regulations-and-markets-governments-are-struggling