The corporate responsibility facade is finally starting to crumble

Alison Taylor

Yahoo Finance

Originally posted 4 March 20

Here is an excerpt:

Any claim to be a responsible corporation is predicated on addressing these abuses of power. But most companies are instead clinging with remarkable persistence to the façades they’ve built to deflect attention. Compliance officers focus on pleasing regulators, even though there is limited evidence that their recommendations reduce wrongdoing. Corporate sustainability practitioners drown their messages in an alphabet soup of acronyms, initiatives, and alienating jargon about “empowered communities” and “engaged stakeholders,” when both functions are still considered peripheral to corporate strategy.

When reading a corporation’s sustainability report and then comparing it to its risk disclosures—or worse, its media coverage—we might as well be reading about entirely distinct companies. Investors focused on sustainability speak of “materiality” principles, meant to sharpen our focus on the most relevant environmental, social, and governance (ESG) issues for each industry. But when an issue is “material” enough to threaten core operating models, companies routinely ignore, evade, and equivocate.

Coca-Cola’s most recent annual sustainability report acknowledges its most pressing issue is “obesity concerns and category perceptions.” Accordingly, it highlights its lower-sugar product lines and references responsible marketing. But it continues its vigorous lobbying against soda taxes, and of course continues to make products with known links to obesity and other health problems. Facebook’s sustainability disclosures focus on efforts to fight climate change and improve labor rights in its supply chain, but make no reference to the mental-health impacts of social media or to its role in peddling disinformation and undermining democracy. Johnson and Johnson flags “product quality and safety” as its highest priority issue without mentioning that it is a defendant in criminal litigation over distribution of opioids. UBS touts its sustainability targets but not its ongoing financing of fossil-fuel projects.

The info is here.

Why Boards Should Worry about Executives’ Off-the-Job Behavior

Harvard Business Review

January-February Issues 2020

Here is an excerpt:

In their most recent paper, the researchers looked at whether executives’ personal legal records—everything from traffic tickets to driving under the influence and assault—had any relation to their tendency to execute trades on the basis of confidential inside information. Using U.S. federal and state crime databases, criminal background checks, and private investigators, they identified firms that had simultaneously employed at least one executive with a record and at least one without a record during the period from 1986 to 2017. This yielded a sample of nearly 1,500 executives, including 503 CEOs. Examining executive trades of company stock, they found that those were more profitable for executives with a record than for others, suggesting that the former had made use of privileged information. The effect was greatest among executives with multiple offenses and those with serious violations (anything worse than a traffic ticket).

Could governance measures curb such activity? Many firms have “blackout” policies to deter improper trading. Because the existence of those policies is hard to determine (few companies publish data on them), the researchers used a common proxy: whether the bulk of trades by a firm’s officers occurred within 21 days after an earnings announcement (generally considered an allowable window). They compared the trades of executives with a record at companies with and without blackout policies, with sobering results: Although the policies mitigated abnormally profitable trades among traffic violators, they had no effect on the trades of serious offenders. The latter were likelier than others to trade during blackouts and to miss SEC reporting deadlines. They were also likelier to buy or sell before major announcements, such as of earnings or M&A, and in the three years before their companies went bankrupt—evidence similarly suggesting they had profited from inside information. “While strong governance can discipline minor offenders, it appears to be largely ineffective for executives with more-serious criminal infractions,” the researchers write.

The info is here.

Do Ethics Really Matter To Today's Consumers?

Anna-Mieke Anderson

Forbes.com
Originally posted August 20, 2019

Unlike any other time in history, consumers are truly demanding more from the companies with which they do business. Today’s shoppers are looking for ethical, eco-friendly brands that put people and the planet ahead of profits.  Led by the estimated 83 million millennials in the world, this change shows the need for companies to lead with compassion and authenticity. The spending power of millennials can’t be overlooked. They are projected to spend $1.4 trillion annually by 2020.

Undoubtedly, technology is a major contributing factor to this shift in purchasing. Consumers have endless information about a company’s practices, mission and values at their fingertips. They are also attuned to what’s happening in the world around them and want to help address the pressing issues they are facing while not contributing further to the problems they inherited. Consider this: 81% of millennials want a company to make public commitments to charitable causes and global citizenship, something many corporations are not used to doing.

According to the 2018 Conscious Consumer Spending Index, in 2018, 59% of people bought goods or services from a company they considered socially responsible, and 32% of Americans plan to spend even more this year with companies that align with their social values. What’s equally important to note is that in the same timeframe, 32% of Americans refused to support a company that they felt was not socially responsible.

The info is here.

Ethics and automation: What to do when workers are displaced

Tracy Mayor
MIT School of Management
Originally published July 8, 2019

As companies embrace automation and artificial intelligence, some jobs will be created or enhanced, but many more are likely to go away. What obligation do organizations have to displaced workers in such situations? Is there an ethical way for business leaders to usher their workforces through digital disruption?

Researchers wrestled with those questions recently at MIT Technology Review’s EmTech Next conference. Their conclusion: Company leaders need to better understand the negative repercussions of the technologies they adopt and commit to building systems that drive economic growth and social cohesion.

Pramod Khargonekar, vice chancellor for research at University of California, Irvine, and Meera Sampath, associate vice chancellor for research at the State University of New York, presented findings from their paper, “Socially Responsible Automation: A Framework for Shaping the Future.”

The research makes the case that “humans will and should remain critical and central to the workplace of the future, controlling, complementing and augmenting the strengths of technological solutions.” In this scenario, automation, artificial intelligence, and related technologies are tools that should be used to enrich human lives and livelihoods.

Aspirational, yes, but how do we get there?

The info is here.

The Wayfair Walkout Is a Different Kind of Tech Worker Protest

April Glaser
slate.com
Originally posted June 26, 2019

Here is an excerpt:

This time, the Wayfair employees went very public—and they did so during a week of renewed public outrage over the Trump administration’s border policies, thanks to reports of appalling conditions at a facility in Clint, Texas, holding migrant children who had been separated from their families. When Wayfair employees disrupt business on Wednesday by walking out, they’ll highlight that even a company best known for cheap sofas is entangled with a system that has split up families, locked asylum-seekers in cages, and detained children who have been found sick and without access to sufficient food or places to bathe.

This isn’t a typical use of organized labor, but it’s of a piece with the methods used by white-collar workers in the technology industry over the past two years. So far, the movement to force companies to oppose various activities of the Trump administration has had mixed success. Wayfair’s case suggests it will now grow beyond the very largest tech companies—and that employees are realizing signing a petition isn’t their only move.

The Wayfair protesters aren’t fighting to improve their own working conditions: They’re organizing to change their employer’s business practices. Google employees did this in 2018 with a petition that lead to the nonrenewal of a Department of Defense contract to build software systems for drones. Microsoft and Salesforce employees were less successful last year when they sent letters to their respective CEOs demanding they stop contracting with federal immigration agencies. More than 4,200 Amazon employees recently called on the company, unsuccessfully, to reduce its carbon footprint and stop offering cloud services to the oil and gas industry.

The info is here.

When a Colleague Dies, CEOs Change How They Lead

Guoli Chen
www.barrons.com
Originally posted April 8, 2019

Here is an excerpt:

A version of my research, “That Could Have Been Me: Director Deaths, CEO Mortality Salience and Corporate Prosocial Behavior” (co-authored with Craig Crossland and Sterling Huang and forthcoming in Management Science) notes the significant impact a director’s death can have on resource allocation within a firm and on CEO’s activities, both outside and inside the organization.

For example, we saw that CEOs who’d experienced the death of a director on their boards reduced the number of outside directorships they held in the publicly listed firms. At the same time, they increased their number of directorships in non-profit organizations. It seems that thoughts of mortality had inspired a desire to make a lasting, positive contribution to society, or to jettison some priorities in favor of more pro-social ones.

We also saw differences in how CEOs led their firms. In our study, which looked at statistics taken from public firms where a director had died in the years between 1990 and 2013 and compared them with similar firms where no director had died, we saw that CEOs who’d experienced the death of a close colleague spend less efforts on the firms’ immediate growth or financial return activities. We found that there is an increase of costs-of-goods-sold, and companies they lead become less aggressive in expanding their assets and firm size, after the director death events. It could be due to the “quiet life” or “withdrawal behavior” hypotheses which suggest that CEOs become less engaged with the corporate activities after they realize the finite of life span. They may shift their time and focus from corporate to family or community activities.

Meanwhile we also observed that firms lead by these CEOs after the director death experienced an increase their corporate social responsibility (CSR) activities. CEOs with a heightened awareness of deaths will influence their firms resource allocation towards activities that provide benefits to broader stakeholders, such as employee health plans, more environmentally-friendly manufacturing processes, and charitable contributions.

The info is here.

Why It’s So Hard to Be an ‘Ethical’ Investor

Jon Sindreu and Sarah Kent
The Wall Street Journal
Originally posted September 1, 2018

In life, ethics are in the eye of the beholder. In investing, ethics are up to the whims of your fund manager.

With little regulation governing what a fund manager can call a “socially responsible” or “ethical” investment, a myriad of bespoke standards have popped up. Increasingly, these fund strategies are designed to beat the market rather than uphold morality.

This has created a dizzying of array possibilities when it comes to what these funds might hold. Fund companies can craft their definitions in such a way that they can simply rename existing products with an ethical allusion, without having to change their fund holdings.

Fund managers have rebranded at least two dozen existing mutual funds over the past few years, adding terms such as “sustainable,” and “ESG”—which stands for environmental, social and corporate governance, an industry buzzword.

The info is here.

The Corporate Joust with Morality

by Caroline Kaeb And David Scheffer
Opino Juris
Originally posted June 6, 2016

Here is the end:

This duel between corporate responsibility and corporate deceit and culpability is no small matter.  The fate of human society and of the earth increasingly falls on the shoulders of corporate executives who either embrace society’s challenges and, if necessary, counterattack for worthy aims or they succumb to dangerous gambits for inflated profits, whatever the impact on society.

The fulcrum of risk management must be forged with sophisticated strategies that propel corporations into the great policy debates of our times in order to promote social responsibility and thus strengthen the long-term viability of corporate operations.  We believe that task must begin in business schools and in corporate boardrooms where decisions that shape the world are made every day.

The article is here.

Lawsuit: Your Candy Bar Was Made By Child Slaves

By Abby Haglage
The Daily Beast
Originally published September 30, 2015

Here is an excerpt:

In the 15 years since the documentary sparked outrage, there are more child laborers in the cocoa industry than ever before. The companies have not only failed to stop the “worst forms of child labor”; they’ve seemingly made it worse. A report released on July 30, 2015, from the Payson Center for International Development of Tulane University and sponsored by the U.S. Department of Labor found a 51 percent increase in the number of children working in the cocoa industry in 2013-14, compared to the last report in 2008-09. The number, they found, now totals 1.4 million. Those living in slave-like conditions increased 10 percent from the 2008-09 results, now totaling 1.1 million. The study concludes that while “some progress has been made,” the goal of reducing the number of children in the industry had “not come within reach.”

The California plaintiffs’ false-advertising claims against Nestle, Hershey, and Mars are the latest effort to pressure the chocolate industry to fix a problem it has known about for more than a decade. “Children that are sometimes not even 10 years old carry huge sacks that are so big that they cause them serious physical harm,” the complaint alleges.

The entire article is here.

The Banality of Ethics in the Anthropocene, Pt 1

By Clive Hamilton
The Conversation
Originally posted July 12, 2015

Among the great crimes of the 20th century the most enduring will surely prove to be human disruption of the Earth’s climate. The effects of human-induced climate change are apparent now and will become severe this century, but the warming is expected to last thousands of years. That is so because extra carbon dioxide persists in the atmosphere for a very long time, but also because changes in the climate are triggering changes in the Earth System as a whole, changes that cannot be undone.

If it is a crime to transform the Earth into a hot and less habitable place what are the offences committed by those responsible? A panel of eminent jurists this year published some principles to guide us. The Oslo Principles note that “all States and enterprises have an immediate moral and legal duty to prevent the deleterious effects of climate change”.

Corporations causing harm to people through their emission of greenhouse gases may be subject to tort law and may be sued for damages. The Principles observe that States are obliged to protect human life and the integrity of the biosphere through an existing network of national and international obligations.

The entire article is here.

Please, Corporations, Experiment on Us

By Michelle N. Meyer and Christopher Chabris
The New York Times - Sunday Review
Originally posted June 19, 2015

Can it ever be ethical for companies or governments to experiment on their employees, customers or citizens without their consent?

The conventional answer — of course not! — animated public outrage last year after Facebook published a study in which it manipulated how much emotional content more than half a million of its users saw. Similar indignation followed the revelation by the dating site OkCupid that, as an experiment, it briefly told some pairs of users that they were good matches when its algorithm had predicted otherwise.

But this outrage is misguided. Indeed, we believe that it is based on a kind of moral illusion.

The entire article is here.

License to Ill: The Effects of Corporate Social Responsibility and CEO Moral Identity on Corporate Social Irresponsibility

By Margaret E. Ormiston and Elaine M. Wong
Personnel Psychology
Volume 66, Issue 4, pages 861–893, Winter 2013

Abstract

Although managers and researchers have invested considerable effort into understanding corporate social responsibility (CSR), less is known about corporate social irresponsibility (CSiR). Drawing on strategic leadership and moral licensing research, we address this gap by considering the relationship between CSR and CSiR. We predict that prior CSR is positively associated with subsequent CSiR because the moral credits achieved through CSR enable leaders to engage in less ethical stakeholder treatment. Further, we hypothesize that leaders’ moral identity symbolization, or the degree to which being moral is expressed outwardly to the public through actions and behavior, will moderate the CSR–CSiR relationship, such that the relationship will be stronger when CEOs are high on moral identity symbolization rather than low on moral identity symbolization. Through an archival study of 49 Fortune 500 firms, we find support for our hypotheses.

(cut)

Although moral licensing research has found that individuals are generally inclined to engage in morally questionable behavior after having engaged in socially desirable behavior, this process runs counter to the fundamental psychological finding that people desire consistency in their beliefs and behaviors (Audia, Locke, & Smith, 2000; Bem, 1972; Festinger, 1957). Thus, recent calls to examine when licensing occurs and whether some people remain consistent in their moral behavior across time have been issued (Merritt, Effron, & Monin, 2010). In other words, it is important to understand when inconsistency trumps people's basic desire for consistency. Some boundary conditions to moral licensing have been suggested, with Mulder and Aquino (in press), for instance, proposing that an individual difference, moral identity, influences the consistency of moral behavior across time.

The entire article is here.

The Real Privacy Problem

As Web companies and government agencies analyze ever more information about our lives, it’s tempting to respond by passing new privacy laws or creating mechanisms that pay us for our data. Instead, we need a civic solution, because democracy is at risk.

By Evgeny Morozov on October 22, 2013
MIT Technology Review

Here is an excerpt:

First, let’s address the symptoms of our current malaise. Yes, the commercial interests of technology companies and the policy interests of government agencies have converged: both are interested in the collection and rapid analysis of user data. Google and Facebook are compelled to collect ever more data to boost the effectiveness of the ads they sell. Government agencies need the same data—they can collect it either on their own or in coöperation with technology companies—to pursue their own programs.

Many of those programs deal with national security. But such data can be used in many other ways that also undermine privacy. The Italian government, for example, is using a tool called the redditometro, or income meter, which analyzes receipts and spending patterns to flag people who spend more than they claim in income as potential tax cheaters. Once mobile payments replace a large percentage of cash transactions—with Google and Facebook as intermediaries—the data collected by these companies will be indispensable to tax collectors. Likewise, legal academics are busy exploring how data mining can be used to craft contracts or wills tailored to the personalities, characteristics, and past behavior of individual citizens, boosting efficiency and reducing malpractice.

The updated story is here.

What is the Value of Ethics Education?

Are Universities Successfully Teaching Ethics to Business Students?

By Steven Mintz
Ethics Sage Blog
Originally published on February 12, 2013

Last week I read an article on the failure of ethics education of business students to change the dynamic in the business world where the pursuit of self-interests trumps all else. We certainly have been through a decade or so of glaring unethical business practices at companies such as Enron and WorldCom, Bernie Madoff’s insider-trading scandal, and the financial meltdown of 2008-2010 from which we still have not recovered.

As a professor who teaches ethics I was struck by the reasoning given for the failure of ethics education. Some claim ethics is taught only in a separate course rather than integrated throughout the curriculum creating a perception in the minds of students that ethics is only important tangentially rather than as an integral part of business practice. I agree with this perspective but realize, having been an academic administrator for many years, the problem lies in not being able to get faculty from various business disciplines on board to incorporate ethics into their individual courses. Some feel unequipped to do so; others do not believe we should be “preaching” to college students.

I did some research on how ethics is taught to business students and their perspectives on business responsibilities and found some interesting results. Surveys conducted by the Aspen Institute, a think tank, show that about 60% of new M.B.A. students’ view maximizing shareholder value as the primary responsibility of a company; that number rises to 69% by the time they reach the program's midpoint.

There is nothing wrong with maximizing shareholder value – it is a basic tenet of capitalism. The problem lies when that is the only driver of corporate behavior to the exclusion of broader stakeholder approaches that would include customers, suppliers, and employees in the mix. Though maximizing shareholder returns isn't a bad goal in itself, focusing on that at the expense of societal interests can lead corporate decision-makers down the road of greed. By maximizing shareholder value, bonuses increase and stock options are worth more.

The entire blog is here.

The Ethics of Admissions, Part I: Graduate and Professional School

By Jane Robbings
Inside HigherEd - Sounding Board Blog
Originally posted February 13, 2013

I’ve been wanting to write a series of posts on the ethics of admissions and its connection to operating models since I began this blog a few months ago.  While there is lots of talk about one or the other, they are rarely brought together in the sense of recognizing how embedded the ethical choices of institutions—and their consequences—are in the construction of their program and college business models. Acknowledging the ethics of a business model—yes, business models are ethics-laden—implies a stakeholder, or corporate social responsibility (CSR) view.

For a long time, though, institutions of higher education have made their operational decisions largely on the basis of internal interests. We could argue about whether what is going on now in terms of business model collapse is essentially chickens coming home to roost—the inevitable outcome of blindedness and self-interest.  And maybe warn about what is yet to come in other areas such as medical research. But for now I’m most interested in looking at recent movements—some coerced, some bravely self-initiated, to consider the ethical connection between admissions and business models. So far, the most explicit has been going on in graduate and professional education.

In the “coerced” category, the poster child is law schools. One could say this is a case of the market, and in response the government, saying “enough” and forcing change. While it can seem sudden, like most sources of change the problems did not arise overnight, but are the cumulative effect of a gradual process. Law schools, like business schools, underwent a “Flexnorization”—a specific effort to become more scientific and empirical as a strategy to drive out lower, practitioner-driven forms—in the late 60s on; the reports from the middle decades of the 20th century, such as the 1968 Rutgers “Law School of Tomorrow,” reflect contentious debate and an awareness of what might be the negative outcomes; by the time of the 2007 Carnegie report with its meaningful title (Educating Lawyers: Preparation for the Practice), many concerns had become a reality. And a funny thing happened along the way: the lower-tier schools were not driven out—indeed, like their business school counterparts they thrived by the promise of credentials and high earnings—and the upper tier schools have lost much of their market in the recession—a market that may never return, in part because the narrow tasks performed by even highly paid associates can be performed more cheaply overseas or through an agency (and, increasingly, by a computer), and because firms themselves are restructuring the way they practice.

The entire blog post is here.