Sunday, April 6, 2014

Corporate Social Responsibility

I'm taking a class this semester called Governance of Global Production with professor Dara O'Rourke.  He is a cofounder of Good Guide.

It just occurred to me that he kinda looks like nerdier version of the lead singer of Tool, James Maynard Keenan.

They could be brothers!  or maybe just cousins?

Anyway, I was going to riff on the readings I did this week about corporate social responsibility.

In the past decade or so, the idea that a business should be more concerned with creating "shared value" has been gaining momentum.  This means that businesses have a responsibility to stakeholders beyond their shareholders such as their employees, their local community, and the global environment.  

So far, the prevailing attitude among most business leaders and investors is still that the most important thing to do is to maximize shareholder value.  I think it's safe to say that for the most part, corporations are only interested in sustainability as a way to increase the stock price through improving reputation and thus increasing the value of the brand.  

Even so, within a corporation there are likely to be champions of corporate social responsibility for its own sake.  And there are notable leaders in the corporate world who seem to be truly committed to CSR and sustainability in particular.  O'Rourke specifically singles out Unilever as one of them.

Those committed to CSR wouldn't say (admit) that CSR may sometimes reduce profits.  Instead, they would point out two concepts that change the perspective.  The first is that every corporation exists as part of an economy, where it depends on the well-being of the citizens.  So it may be true that their CSR initiatives actually benefit all companies in their industry not just themselves.  The second concept is that the corporation is planning on sticking around for many years to come.  In terms of game theory, it's a repeated game which can make it beneficial in the very long run to internalize more costs and take others' interests into account.  This is only slightly different from increasing brand value in that it is a more future-oriented perspective.  The brand value motivation would only justify CSR initiatives that would help the corporation get recognition in the near term.

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