The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Monday, September 18, 2017

Strategic CSR - Charity

In the aftermath of the devastation caused by Hurricane Harvey in Texas, local companies have been pledging donations to help with the rebuilding effort:
"Chevron, an energy giant with several offices in the Houston area, pledged $1 million to post-Harvey disaster relief efforts. So did Exxon Mobil and Dow Chemical, two companies with facilities hit by the storm. Companies in less regional industries also donated: Amazon offered to match $1 million in donations to the American Red Cross, while Verizon promised $10 million. Walmart, which took a front-line role in the clean-up after Hurricane Katrina, sent truckloads of emergency supplies to the affected area. In all, corporations have pledged more than $65 million to help clean up the wreckage from Harvey, according to a Wednesday morning estimate by the U.S. Chamber of Commerce."
This is necessary because early estimates suggest that the cleanup bill will be substantial:
"Hurricane Harvey may be one of the costliest natural disasters in American history, according to initial forecasts. Moody's Analytics has estimated that the storm's damage may be as much as $50 billion, though it is hard to know at such an early stage."
In explaining these donations (and demanding more), the article in the url below argues that local corporations have a duty to donate funds to the clean-up effort because they, themselves, had received large amounts of funds (e.g., tax relief, startup funds, etc.) previously. In other words, the article suggests these companies have an obligation to "repay" any benefits they received to conduct business in the area:
"As Houston recovers, its business community should feel especially compelled to help. That is partly because Houston and the surrounding area, as well as the state of Texas, have been generous to big business in recent years, showering companies with tax breaks, subsidies and other perks in an effort to keep them happy and create new jobs. Houston has benefited from the presence of large corporations, adding thousands of jobs and becoming one of the fastest-growing cities in America. But those companies have benefited, too — sometimes to the tune of hundreds of millions of dollars."
This is an unhelpful representation of the idea of "corporate citizenship." Although the money being donated by the companies can be described as charity, it is not correct to use the same term to describe the money those same companies received. They were not altruistic handouts, but incentives that were offered because those companies were in demand. The battle to secure a second Amazon HQ currently underway here in the U.S. will further demonstrate the lengths local governments are willing to go to attract big businesses:
"The donations announced for Harvey relief are generous by the standards of corporate philanthropy. Some of the donations are smaller, though, than the amounts many companies have gotten from the region's generous economic development programs."
I believe that companies absolutely should donate funds to help with the cleanup, but not for the reason stated in the article. It has nothing to do with 'paying back' the benefits they received in the past. Presumably, the companies have already delivered on whatever the quid-pro-quo was for them to receive those payments in the first place. Instead, corporations should donate because they have a stake in rebuilding the communities directly affected by the hurricane. They want those communities to recover as fast as possible because it will help them return to business as fast as possible. In other words, the reason for them to donate is a forward-looking argument (we have a direct stake in the future of these communities), rather than a backward-looking argument (we owe something from the past to those communities). The difference is the difference between a mainstream argument for CSR and the argument underpinning strategic CSR.
Take care
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Will Big Business Repay Houston's Generosity
By Kevin Roose
August 31, 2017
The New York Times
Late Edition – Final

Wednesday, September 13, 2017

Strategic CSR - United (follow-up)

As a follow-up to the Newsletter I sent last semester about United's treatment of its passengers (Strategic CSR – United), the article in the first url below reinforces the idea that all the airline is doing is providing the level of service for which we are willing to pay:
"On Tuesday, the carrier released its first financial statement that included the period after security officers forcibly removed a 69-year-old passenger, Dr. David Dao, from a plane. The incident left him bloodied and disheveled and left United facing widespread calls for a boycott. Nearly three months later, it appears that all the public anger has not hurt the company's bottom line."
In case you needed reminding, the online version of the article has the video of the forced removal embedded in the story. Not only did the video (and subsequent #boycottUnited campaign) fail to hurt the airline, however, it thrived in its aftermath:
"United reported a profit of $818 million in the most recent quarter, ending in June, up 39 percent compared with last year. Sales rose, too, as more customers booked flights with the carrier, amid rising demand for air service over all. In a separate report this month, United said that it had more than 71 million passengers during the first half of the year, up 4.2 percent compared with last year."
While I understand that there are complex issues involving the failure of anti-trust law to provide a competitive industry for domestic U.S. flights and that the price of airline fuel drives profits to some degree, the stunning results (39% growth, year-over-year) suggest we are also gluttons for punishment:
"The results point to an underlying principle about the airline business: Passengers, by and large, look for the most convenient and cheapest fares, not which airlines claim to offer the best service."
Or, as a longer discussion about seat space in the article in the second url below puts it:
"Faced with a choice between discomfort and higher fares, most travelers choose discomfort."

Given such results, what is the United CEO to takeaway from the experience? Should he risk his airline by providing a higher quality product and charging accordingly, or should he give passengers what they say they do not want, but what seems to be the only thing for which they are willing to pay?
Take care
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United Airlines Profit Rises Despite Boycott Threats Over Passenger Treatment
By Micah Maidenberg
July 18, 2017
The New York Times
By Justin Bachman
August 17, 2017
Bloomberg Businessweek

Monday, September 11, 2017

Strategic CSR - PayPal

It is difficult to understand how companies get away with presenting fictitious earnings that result from their preferred accounting measures (which, as far as I can see, are basically whatever the firm wants its numbers to be). Needless to say, the resulting earnings differ significantly from those that would be produced using GAAP principles. While firms also have to report those GAAP numbers, they are allowed to bury them and highlight their non-GAAP numbers, instead. As the article in the url below notes, this happened recently with PayPal's second-quarter financial results, which were published at the end of July:
"Revenues grew to $3.14 billion in the quarter that ended in June, an increase of 18 percent over the same period last year. Total payment volume of $106 billion was up 23 percent, year over year. Even better, PayPal's favored earnings-per-share measure — which it does not calculate in accordance with generally accepted accounting principles, or GAAP — came in at 46 cents per share, 3 cents more than Wall Street analysts had expected. The company has trained investors to focus on this number, rather than on the less pretty GAAP-compliant numbers most companies are judged by."
The main concern of the article is the amount of compensation paid as stock options, which (for some hard-to-explain reason) PayPal excludes as a cost:
"How could stock-based compensation — which is a company expense, after all — have helped PayPal's performance in the quarter? Simple. The company does not consider stock awards a cost when calculating its favored earnings measure. So when PayPal doles out more stock compensation than it has done historically, all else being equal, its chosen non-GAAP income growth looks better."
How much better, exactly?
"Under generally accepted accounting principles, PayPal reported operating income of $430 million in the second quarter of 2017. That was up almost 16 percent from the $371 million it produced in the same period last year. But under PayPal's alternative accounting, its non-GAAP operating income was $659 million in the June quarter, an increase of almost 25 percent from 2016. So what's to account for the added $230 million in operating income under PayPal's preferred calculation? Most of it — $192 million — was stock-based compensation PayPal dispensed to employees in the June quarter and added back to its results as calculated under GAAP."
How is it that investors are quite happy to accept this? It clearly presents a distorted view of the firm's performance. Perhaps it is just that people see what they want to see and some firms are favored by investors, for whatever reason:
"PayPal's stock has been on a tear this year, up almost 50 percent since January. At a recent $59, its shares are trading at over 40 times next year's earnings estimates. It is clearly an investor darling, providing all the more reason to dig into its numbers."
You might not be surprised to know that there are other stakeholders in PayPal who also stand to benefit from the practice:
"The company says it has three main metrics for calculating its managers' performance pay each year. One of those measures, its proxy shows, is non-GAAP net income. So, as PayPal awards more and more stock to its executives and employees, non-GAAP net income shows better growth. And the greater that growth, the more incentive pay the company awards to its top executives."
Take care
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Making PayPal's Numbers Shine
By Gretchen Morgenson
August 6, 2017
The New York Times
Late Edition – Final

Wednesday, September 6, 2017

Strategic CSR - Whole Foods

The article in the url below about Whole Foods' recent struggles is half right. It is correct in noting that Whole Foods is struggling, but incorrect in the underlying reasons for its difficulties:
"It's hard to think of a better poster child for 'conscious capitalism' than Whole Foods Market, the high-end grocery store that made a name for itself selling organic produce in feel-good, mood-lit stores. These days, the chain is floundering and a potential buyout is on the horizon. What does that say about the conscious capitalism it championed? … Whole Foods was supposed to be different. John Mackey, the company's chief executive, has long argued that Whole Foods is wired differently — that it runs on a 'conscious capitalism' model that outsmarts the competitive pressures of our for-profit system through creativity and innovation. … The Whole Foods founder penned his treatise in response to the growing consensus that capitalism is doing irreparable harm to the planet and the people who live on it. Our for-profit system is increasingly viewed as a zero-sum game in which ecological destruction, climate change and rising inequality are firmly linked to the rapacious behavior of multinational corporations. Mackey agrees that humans are harming the planet, but he doesn't think the problem lies in capitalism. Free-market capitalism, according to Mackey, is actually a 'beautiful,' 'heroic' system that, properly harnessed, can operate 'in harmony with the fundamentals of human nature' and the planet."
All of this is true. Fundamentally, however, the article misses the point about the root causes of Whole Foods' struggles. Yes, there are business decisions that the firm could have made that would have better protected it from competition. But, conscious capitalism is not the reason for the firm's decline. In essence, Whole Foods' sales are declining due to a lack of stakeholder support, particularly customers, who have been persuaded that products on offer at Walmart and Kroger (for example) are essentially the same as those offered at Whole Foods. As such, they see no reason to pay the higher prices that Whole Foods generally charges.
In reality, however, these customers are failing to distinguish between the low cost model pursued by most supermarkets and the differentiated model pursued by Whole Foods (something that might be threatened under Amazon's control). With food, as with many products, you get what you pay for and there is a price premium associated with quality. To draw an analogy, people are confusing a Toyota Corolla with a BMW 7 series because both cars are capable of getting you from A to B. Just because this is true, however, does not mean the two cars are comparable or even close to being the same product.
With all business models, stakeholder engagement represents either an endorsement or a rejection of what is on offer. Irrespective of what might be in our best interests, our perceived best interests take precedent. And, if customers no longer perceive Whole Foods to be a better value proposition, or they perceive a different company to be offering the same value at a lower price point, they will go elsewhere.
Whole Foods is essentially a premium product that, by definition, has a ceiling to its potential growth. Not everyone can afford or wants to shop at Whole Foods, just like not everyone can afford or wants to drive a BMW 7-series. The key, however, is to understand the underlying economic drivers – not be confused that products that are fundamentally different are really the same thing:
"Attractive as the conscious capitalism model may be, we simply can't rely on companies to deliver dignified workplaces, equitable models of food production or a better relationship between consumers and the planet. All stakeholders are not equal in our global economy, and even the best intentioned businesses run up against the implacable foes of profit and competition. Ultimately, the thorny problem of sustaining both decent livelihoods and a livable planet won't be solved by buying better things. It'll be solved through political struggle and demands that put people before profit."
Incorrect. Firms provide stakeholders with what they want and are willing to reward. Once we understand that good quality food is more expensive than poor quality food and are willing to pay for that product, then Whole Foods will have the success it deserves (and also be able to help improve the health of the general public and also the planet). We are not at that point at present.
Take care
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Whole Foods represents the failure of 'conscious capitalism'
By Nicole Aschoff
May 29, 2017
The Guardian

Monday, September 4, 2017

Strategic CSR - Paris

In light of the current U.S. administration's announcement that it intends to reject the Paris Accord, the article in the url below details the timeline over which such a decision could be implemented:
  • November, 2017: "Negotiators for 195 nations will meet in Bonn, Germany, to discuss how to carry out the Paris agreement."
  • November, 2018: "Everyone agrees that current pledges under the Paris agreement are nowhere near sufficient to keep total global warming well below 2 degrees Celsius, the threshold widely deemed unacceptably risky. So, starting in 2018, countries have agreed to meet every five years to take stock of their emissions-cutting efforts to date, compare them with what is needed to stay below 2 degrees of warming, and then figure out how to ratchet up their ambitions."
  • November 4, 2019: "This is the earliest date that the United States can submit a written notice to the United Nations that it is withdrawing from the Paris deal — exactly three years after it came into force."
  • November 4, 2020: "This is the earliest that the United States could officially withdraw from the climate accord. By coincidence, it would happen one day after the next presidential election."
  • January, 2021: "If a new president enters the White House on Jan. 20, 2021, he or she could easily submit a written notice to the United Nations that the United States would like to rejoin the Paris accord. Within 30 days, the United States could re-enter the agreement and submit a new pledge for how the country plans to tackle climate change."
  • November, 2023: "Negotiators will meet again in 2023 to see how their second round of pledges and actions stack up against the 2-degree goal."
  • 2025: "The Obama administration vowed to cut greenhouse gas emissions 26 to 28 percent below 2005 levels by 2025 as part of the Paris deal."
Clearly, whatever has been announced is not yet official; it is also far from irreversible. While the concern is largely over the symbolic effects of the announcement (in terms of both domestic policy and policy in other countries), the timeline indicates the vast gap between political speeches and the hard work of day-to-day diplomacy and international public policy
Take care
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U.S. Won't Actually Be Leaving the Paris Climate Deal Anytime Soon
By Brad Plumer
June 8, 2017
The New York Times
Late Edition – Final

Thursday, August 31, 2017

Strategic CSR - ESPN

There is an interesting moment happening in the U.S. – both in terms of the level and intensity of social discourse.
You will all have seen the articles in recent weeks focusing on the pressures CEOs are increasingly feeling to take a stand on political/social/activist issues. At least in the U.S., there is a similar debate happening in the world of sports.
The focus is on Colin Kaepernick – a quarterback, made famous for his time with the San Francisco 49ers, whose declining productivity caused him to be kicked-off the team last season. What made the separation controversial was that Kaepernick had also made a very public protest against the U.S. national anthem (in support of the Black Lives Matter movement) – a brave decision given the hyper-patriotic PR machine that is the NFL.
In spite of the focus on Kaepernick, there are other athletes taking more public political stances. Lebron James has been at the forefront of this movement, but other athletes have also been inspired to speak-up (e.g., Steph Curry has been very vocal with his key sponsor, Under Armor). A common story has been a championship team invited to the White House, causing some players to decide between their principles and celebrating their team's success.
Into this hyper-politicized environment wades ESPN – the TV sports network. While I am in favor of political sensitivity (bordering on correctness), you can only feel sorry for ESPN's attempts to navigate the current new and volatile political environment, as noted in the article in the url below:
"The latest episode of the culture wars to wash into sports, and the news media that cover it, was prompted (unintentionally) by a broadcaster named Robert Lee. His employer, ESPN, announced Tuesday night that the name he shares with the Confederate general made him a poor choice for calling a University of Virginia football game in Charlottesville, where a recent protest over the removal of a statue of Robert E. Lee left a woman dead and became part of the national dialogue. It was a story tailor-made for America's present hyper-polarized, kinetic and more than slightly absurd moment, and it has left one inescapable conclusion: However many times sports media outlets — and chiefly the biggest of them all, ESPN — are implored to 'stick to sports,' the centripetal force of politics is bound to make a battlefield of almost anything."
It is unclear if the correct response is to laugh or to cry:
"ESPN made the decision with Lee, the company said in a statement Tuesday night, 'as the tragic events in Charlottesville were unfolding, simply because of the coincidence of his name.' 'In that moment it felt right to all parties,' the statement said. 'It's a shame that this is even a topic of conversation and we regret that who calls play-by-play for a football game has become such an issue.'"
The story was first reported by a FOX Sports commentator, who has been a longstanding critic of the network, which he accuses of introducing a "liberal bias" to its coverage of sports. Things went downhill from there:
"Compounding matters, Lee is Asian-American. The Asian American Journalists Association said in a statement that 'it is unfortunate that someone's name, particularly a last name that is common among Asian-Americans, can be a potential liability.'"
Social media, of course, had to get in on the act. While you can imagine some of the responses, it is always reassuring to see those with a sense of humor not miss an opportunity to air their specific grievances. The best response I saw:
Apologies to those of you outside the U.S. (or who are less interested in sports) who might miss the Joe Buck reference, but it is quite funny.
As I mentioned, it is an interesting moment. In The New York Times a couple of days ago, Tim Cook was quoted saying the times had changed and CEOs need to respond accordingly:
"The reality is that government, for a long period of time, has for whatever set of reasons become less functional and isn't working at the speed that it once was. And so it does fall, I think, not just on business but on all other areas of society to step up. … I think we have a moral responsibility to help grow the economy, to help grow jobs, to contribute to this country and to contribute to the other countries that we do business in."
It will be interesting to see where this takes us.
Take care
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ESPN Pulls Announcer and Starts a Storm
By Marc Tracy
August 24, 2017
The New York Times
Late Edition – Final

Monday, August 28, 2017

Strategic CSR - Uber

From a CSR perspective, there are not many firms that have had a worse year than Uber. Just to mention a few 'highlights' – there was the #deleteUber campaign; the CEO caught on a dashcam screaming obscenities at one of Uber's drivers; the CEO bowing to public pressure to leave the President's advisory council; the exposure of the firm's sexist culture; the forced resignation of the CEO; and the very public boardroom battle to replace him (resolved, at last, earlier today). I might have missed some things. In short, it has been a bad year. In spite of that, as the article in the url below notes, the company is thriving:
"Uber has spent the past eight months reeling from a series of corporate scandals. Yet those have done little to deter people from hailing an Uber for rides. That became clear on Wednesday, when the ride-hailing company shared its latest financials with investors. According to the disclosures, Uber's gross bookings continued to increase in the second quarter, while its losses narrowed. Trip requests from riders also more than doubled over the past year."
If we are to believe the business case for CSR, it is hard to know where that leaves us. While Uber is still far from profitable and in spite of all its transgressions, it's performance has improved significantly throughout 2017. Specifically:
"In the second quarter, Uber's gross bookings rose to $8.7 billion, up 17 percent from the previous quarter. Uber's adjusted net revenue — or the amount of money earned after paying out its drivers — jumped to $1.75 billion from $1.5 billion over the same period. Ride requests increased 150 percent from a year ago, though Uber did not disclose the number of rides requested."
A key part of the framework underpinning Strategic CSR is the idea that firms survive and thrive by creating value for their collective set of stakeholders. If stakeholders do not care how a firm creates and delivers its product (and who it abuses along the way), but only care that the product satisfies their immediate needs, then we will get companies like Uber. In contrast, if stakeholders care about the way a firm conducts itself and seek to reward that behavior, then we will get others kinds of firms with different priorities. Either way, Uber is not the problem here – the firm's set of stakeholders (including its customers) have built a company that reflects their collective interests. If you continue to reward Uber with your loyalty in light of the problems that have been exposed this year (especially as there is a very effective, more socially-responsible competitor in Lyft), then how can we expect the company ever to change its business model? Especially when that model has worked for it so far (and continues to do so).
Take care
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Uber, Mired in Scandals, Sees Uptick in Bookings
By Mike Isaac and Tiffany Hsu
August 24, 2017
The New York Times
Late Edition – Final

Thursday, August 24, 2017

Strategic CSR - Welcome back!

Welcome back to the Strategic CSR Newsletter!
The first CSR Newsletter of the Fall semester is below.
As always, your comments and ideas are welcome.
The article in the url below contains a map that shows the extent to which robots have transformed manufacturing in the U.S. In particular, the map shows the density of robots per worker in each county of the U.S.:
"The upper Midwest, particularly Michigan, was ground zero for the robot explosion from 1990 to 2007. That makes sense, since the automobile industry uses more robots than any other. The other hot spots also make sense on closer inspection. In Beaumont, Texas, lots of workers are employed in the plastic, chemicals and pharmaceuticals industry, another big user of robots. Wilmington, Delaware, has a big chunk of workers in that industry and others in car manufacturing, according to Restrepo, one of the researchers."
A second chart demonstrates the effect a higher density of robots has had on employment:
"Those increases tended to mean fewer jobs. Of course, lots of factors weigh on employment. Foreign competition, overvaluation of the dollar and rising productivity all play a big part, too. But even after taking all those other factors into account, [research] found that additional robots in an area reduces workers and cuts local wages."
The article also does a good job of identifying industry-specific trends. As you might expect, certain industries are more negatively affected by an influx of robots than others and, contrary to general perceptions, the effects are still pretty localized:
"The first industrial robots were developed for the auto industry, which still accounts for over half of U.S. robot orders."
There is no indication that robots have started teaching CSR classes, … yet!
Hope you all have a great semester.
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More Robots, Fewer Jobs
By Mira Rojanasakul and Peter Coy
May 8, 2017
Bloomberg Businessweek

Wednesday, May 3, 2017

Strategic CSR - Ethical shopping

This is the last CSR Newsletter of the Spring semester.
Have a great summer and I will see you in the Fall!
The link in the url below takes you to Businessweek's "Ethical consumer game":
"Ethical shopping is even harder than you thought. You buy cage-free eggs, eat quinoa and drive an electric car to do your part to help the environment. That's all great, right? ... Pump the brakes on that Tesla. We built an ethical consumer game that leads you through the difficulties of living a cage-free, carbon-neutral lifestyle."

My favorite slide covers the topic of reusable shopping bags:
"Only 3 percent of shoppers with multi-use bags said they regularly washed them. … In 99 percent of bags tested, half carried coliform bacteria, while 8 percent carried E. coli."
A heads-up – you are not going to win this game. It seems as though every consumer choice we have has perceived negative consequences for some stakeholder somewhere.
Have a great summer!
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Ethical shopping is even harder than you thought
By Miranda Purves
December 22, 2016
Bloomberg Businessweek

Monday, May 1, 2017

Strategic CSR - Cadbury

The article in the url below reports a decision by Cadbury (the UK chocolate company) to drop its commitment to the Fairtrade certification of its cocoa sourcing and, instead, replace it with its own scheme – “Cocoa Life”:
“The British confectionery maker, which is owned by US food giant Mondelez, was applauded in 2009 when it announced its Dairy Milk brand would be made from Fairtrade cocoa — guaranteeing farmers in its supply chain decent working conditions and a minimum cocoa price.”
The company is being criticized for the decision in some quarters because it weakens support for Fairtrade, in spite of its growth in recent years:
“Fairtrade now has more than 4,500 products to its name, including bananas, coffee and sugar.”
In contrast, Cadbury says farmers will not lose out from the change and, in fact, the company’s new program indicates a higher commitment to a more sustainable supply chain:

“Instead, the new scheme will involve the entire Cadbury range. Products including Flake, Twirl and Wispa bars will all sport a Cocoa Life logo on the front of their packets, the company said, and the farming supply chain will receive $400m in investment by 2022. ‘This is about making sure we make a greater impact to more farmers in more communities,’ said Glenn Caton, president of Northern Europe at Mondelez, adding that the decision was driven by a desire to take ‘ownership of the challenge of sustainability.’”
From the outside, it is good to see Cadbury taking ownership of its supply chain and imposing its own operational-specific standards, similar to Starbuck’s CAFÉ standards. From the consumer’s point of view, however, it is difficult to see how yet another ethical/environmental ‘standard’ is going to aid transparency and enable better consumption decisions (see Strategic CSR – Green Noise). As noted by the head of the Food Foundation, a UK think-tank:
“… there is a risk that if every company has their own mark it will be extremely difficult for consumers to determine which mark represents the best, independently verified standard.”
“NestlĂ© and Barry Callebaut each have their own company schemes, Cocoa Plan and Cocoa Horizons.”
Take care
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Cadbury move fuels concern for Fairtrade’s future
By Hannah Murphy
November 29, 2016
Financial Times
Late Edition – Final

Thursday, April 27, 2017

Strategic CSR - Jobs

To follow-up on Tuesday's Newsletter, the article in the url below investigates the accusation that excessive government regulation "kills jobs":
"It was in the early days of Ronald Reagan's campaign for president that America first started frequently hearing the term 'job-killing regulations' in response to an increasing number of environmental laws. Reagan criticized the Carter administration for doing a terrible job with the economy, and said these failures were related to Carter's 'continuing devotion to job-killing regulation.'"
Interestingly, research suggests that, while regulations can diminish economic growth and, therefore, employment in one sector or industry, the same regulation usually creates about the same number of jobs in a different/new industry:
"A factory that makes lead additives for gasoline might be shut down because regulations have banned lead additives. But new jobs will then be created at a factory that makes catalytic converters, which are emissions-control devices for cars. Some workers, then, benefit from regulation, while others lose. That doesn't mean that the losses aren't real and painful for the people who held those jobs, but the overall picture is not one that can be accurately characterized by the phrase 'job-killing.'"
Of course, with any evaluation of an economy-wife phenomenon, there is also a lot of noise to go along with the theory. While jobs are created and lost continuously, it is ideologically useful to have the crutch of "burdensome governmental regulation" to blame for run-of-the-mill business failure:
"Job loss and creation is also a normal part of any economy; some companies go out of business because their goods or services are no longer in demand, while other jobs are created as new companies emerge to fill new demands. … That doesn't mean companies don't try to blame regulations for their failures."
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Do Regulations Really Kill Jobs?
By Alana Semuels
January 19, 2017
The Atlantic

Wednesday, April 26, 2017

Strategic CSR - Minimum wage

The article in the url below presents a strong argument in favor of minimum wage jobs:
"Entry-level jobs matter—and you don't have to take my word for it. In a speech last week on workforce development in low-income communities, Federal Reserve Chair Janet Yellen said that 'it is crucial for younger workers to establish a solid connection to employment early in their work lives.'"
Although the author of this article has a dodgy record as an employer (to say the least), I think there is value in his position on this issue. Specifically, he argues that the downside to a significant jump in the minimum wage is heightened in an age of increasing automation:
"In a survey released last month, the publication Nation's Restaurant News asked 319 restaurant operators to name their biggest challenged for 2017. Nearly a quarter of them, 24%, said rising minimum wages. … McDonald's said last November that it would install self-order kiosks in all 14,000 of its U.S. restaurants. Wendy's announced in February it would add kiosks at about 1,000 locations to 'appeal to younger customers and reduce labor costs.'"
While prior research on the effects of a minimum wage suggest that a significant jump discourages entrepreneurs from creating more jobs, the article suggests that, given the increasing ability of machines to replace humans in the workplace, any legislation designed to raise the minimum wage should really be called "the Robot Employment Act":
"The trend toward automation is particularly pronounced in areas where the local minimum wage is high. Eatsa, a 21st-century version of the automat, now lists seven locations in four cities, each of which will be subject to a $15 minimum wage within the next 36 months."
And this problem is only going to become more apparent:
"Taking automation to the next step, Miso Robotics and the owner of CaliBurger announced in March they have developed a robotic arm, called Flippy, that can turn burgers and place them on buns. CaliBurger plans to install them over the next two years in 50 restaurants worldwide."
Take care
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The Minimum Wage Should Be Called the Robot Employment Act
By Andy Puzder
April 14, 2017
The Wall Street Journal
Late Edition – Final

Wednesday, April 19, 2017

Strategic CSR - Progress

In evaluating the purpose of the for-profit firm in society, it is useful to occasionally remind ourselves of how far we have come. The article in the url below touches on this subject:
"For most of the time that our species has been around, a man in his thirties had a fair chance of being dead already; a woman, too, often through childbirth. Evading violence, hunger and the elements was a human's daily lot. Even in modern history, people were bonded to the state through conscription or to the land through serfdom. Within memory, there was one role for women (mother), one for men (provider), one permissible sexual taste (straight), and even that was consecrated within marriage."
A large assumption of the framework presented in Strategic CSR is that, although all sectors of society played a part, the invention of the for-profit firm (in particular, the limited liability corporation) is a large reason for these advances – what the article attributes to "material progress." The speed and extent of change is quite remarkable (when you stop to think about it) given the short period of time involved:
"Most people for most of history lived in small communities, had few sexual partners and could not take food or other needs for granted. My friend is just two generations removed from a similar life, and that was on English soil. Now, in a city he shares with almost 9 million others, he goes on a hundred dates a year without having to do anything more strenuous than wait for his numerous apps to make matches. Without working very hard, he has surplus income."
None of this, of course, excuses behavior by firms that transgresses stakeholder expectations, but it does put things in perspective and, perhaps more importantly, should be accounted for among those who seek alternatives to market capitalism. The bar that needs to be cleared is inventing a system that creates more value than the system we currently have. If that bar cannot be cleared, then a more sensible solution is to improve the system we currently have. This is the approach of Strategic CSR, based within a set of assumptions about economic exchange and human psychology that helps us understand how the current system works and how we might end up with behavior from firms we say/think we do not want.
A historical perspective is useful in assessing how best the for-profit firm can benefit us. To be clear, the corporation is a social construction. We can shape it in any way that we please. What is important, however, is that we remember that it is a tool, not an agent with an independent consciousness; as such, it reflects the values of those connected to it (its stakeholders).
Take care
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History's luckiest generation: We're getting away with it – For now
By Janan Ganesh
January 14/15, 2017
Financial Times – Life & Arts
Late Edition – Final

Tuesday, April 18, 2017

Strategic CSR - Morality

The article in the url below discusses the extent to which our personal values/morals/ethics are central to who we are as individuals:
"What defines who we are? Our habits? Our aesthetic tastes? Our memories? If pressed, I would answer that if there is any part of me that sits at my core, that is an essential part of who I am, then surely it must be my moral center, my deep-seated sense of right and wrong."
What is interesting, therefore, is to consider how that morality evolves according to context, such as when speaking a foreign language:
"And yet, like many other people who speak more than one language, I often have the sense that I'm a slightly different person in each of my languages—more assertive in English, more relaxed in French, more sentimental in Czech. Is it possible that, along with these differences, my moral compass also points in somewhat different directions depending on the language I'm using at the time?"
While we have known that morality is, to some extent, culturally specific (i.e., different behaviors are deemed to be moral/immoral in different cultures) and time-specific (i.e., different behaviors are deemed to be moral/immoral at different points in time), the article discusses how this variance exists within people as well as among them. In other words, different behaviors by the same person are considered moral/immoral depending on the culture in which the person happens to be at the time. The research summarized in the article operationalizes different cultures in terms of when the person is speaking a different language and found some interesting results:
"[Researchers] found that using a foreign language shifted their participants' moral verdicts. In their study, volunteers read descriptions of acts that appeared to harm no one, but that many people find morally reprehensible—for example, stories in which siblings enjoyed entirely consensual and safe sex, or someone cooked and ate his dog after it had been killed by a car. Those who read the stories in a foreign language (either English or Italian) judged these actions to be less wrong than those who read them in their native tongue."
The explanation offered for this relative morality speaks directly to the level of effort required to speak a foreign language as opposed to a native language:
"According to one explanation, such judgments involve two separate and competing modes of thinking—one of these, a quick, gut-level 'feeling,' and the other, careful deliberation about the greatest good for the greatest number. When we use a foreign language, we unconsciously sink into the more deliberate mode simply because the effort of operating in our non-native language cues our cognitive system to prepare for strenuous activity."
Another explanation offered relies more on the relationship between language, emotions, and memory:
"An alternative explanation is that differences arise between native and foreign tongues because our childhood languages vibrate with greater emotional intensity than do those learned in more academic settings. As a result, moral judgments made in a foreign language are less laden with the emotional reactions that surface when we use a language learned in childhood."
The author's conclusion?
"What then, is a multilingual person's 'true' moral self? Is it my moral memories, the reverberations of emotionally charged interactions that taught me what it means to be 'good'? Or is it the reasoning I'm able to apply when free of such unconscious constraints? Or perhaps, this line of research simply illuminates what is true for all of us, regardless of how many languages we speak: that our moral compass is a combination of the earliest forces that have shaped us and the ways in which we escape them."
This work reminds me of research that looked at the relativity of ethical values by studying the decisions of prison parole boards before and after lunch. It seems that, if you ever find yourself before a prison parole board, they will be less likely to be lenient if they are hungry (see Strategic CSR – Ethics).
Take care
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How Morality Changes in a Foreign Language
By Julie Sedivy
September 14, 2016
Scientific American

Wednesday, April 12, 2017

Strategic CSR - United

A key to understanding the full implications of Strategic CSR is the idea that corporations reflect our values; they do not shape those values. In other words, corporations reflect the aggregated values of their collective set of stakeholders (internal and external). To put this succinctly – it is not Walmart that puts Mom & Pop stores out of business; customers do that by choosing to shop at Walmart, employees do it by choosing to work for Walmart, governments do it by providing tax breaks for Walmart, and so on. If you have a problem with Walmart, then you have a problem with American society because it is clear that American society wants Walmart. 90% of U.S. households shop at Walmart at least once a year – I don't know of any other company that consistently receives that level of societal endorsement.
An extension of this idea is that corporations are not the problem; they are the solution. The for-profit firm is simply a tool that we have devised to solve a specific problem – how to allocate scarce and valuable resources. There is a finite set of resources available to us. How to allocate these resources in a way that produces 'optimal' value for the majority is a problem that has challenged humanity throughout our existence. The best solution we have found to date is for-profit firms operating within a market-based, democratic form of capitalism. Once you understand firms are merely a tool, you understand that they will do what we ask of them. If we ask them to pollute the planet (as we are, at present), they will efficiently do that. Equally, if we ask them to preserve the planet, they will find the most efficient means of achieving that goal. They will do what we want them to do – they reflect our collective set of values.
I was thinking about this again in light of United's recent challenges. To what extent is United shaping the airline industry and to what extent is it merely giving us what we, collectively, want – cheap tickets and bare-bones service? The most recent crisis to hit United is made all the more apparent in contrast to last week's news about the airline industry's most recent performance ratings. The one headline that caught my attention there – the low budget carrier, Spirit Airlines, is currently the most profitable U.S. airline; it also has the highest rate of customer complaints. I fail to understand how that can be. If people want the absolute cheapest tickets, why would they then complain if they receive poor service, or their bags get lost, or whatever caused them to complain? If we want good service, we have to understand that there is a cost associated with that. And, if we are willing to pay for good service, we should believe that there are many entrepreneurs out there who would be more than willing to provide it to us. Clearly, when it comes to airlines, however, most of us do not want to pay for that service.
This brings me back to United. I don't necessarily agree with the overall tone of the article in the url below, but it is the most unique perspective I have seen in the acres of coverage on this issue. More importantly, I think it captures effectively the idea that United is merely a reflection of a broader system that we have shaped through our day-to-day decisions. In other words, while it feels satisfying to shoot the messenger, we should always remember that it is we (the firm's collective set of stakeholders) who are sending the message. In the same way that we get the politicians we deserve, we also get the companies we deserve:
"It is commendable and necessary to direct your outrage at this particular corporation, on this particular day, but keep the larger truth in mind: You are not mad at United Airlines; you are mad at America."
Of course, on the flip side, the fact that so many passengers felt outraged at the events and spread the word so quickly suggests a willingness to induce change, …. perhaps. We'll have to see if there are any lasting consequences for United. Past performance suggests we will quickly forget and move on. But, it is worth keeping in mind the next time you purchase an airline ticket. Will you demand better service and pay for it, or are we all heading towards a future filled with versions of Spirit Airlines or Ryan Air (or your lowest-cost carrier of choice)?
Take care
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You're Not Mad at United Airlines; You're Mad at America
By Shane Ryan
April 10, 2017
Paste Magazine