Menemani

The Survival of Capitalist Democracies

Capitalism and democracy, can the two co-exist? The question I answered on another forum is indeed provocative.

I believe capitalism and democracy can successfully coexist in the long run only if economic actors become mature enough to police themselves in the way they conduct business, in “exchange” for freedom of market and reduced regulation.

In a democracy the people entrust a government to defend their individual freedom & rights and their interests as a society or nation, and to preserve a social order in a long term perspective.
Capitalism is based on the inalienable right to ownership and profit, and on the principle of a free market.
Conflict between capitalism and democracy occur when the exercise of freedom jeopardizes the rights and interests of the people and the interests of society at large.

In the past 30 years, many economists and management theorists have pushed the concept of freedom of enterprise and free market to a point where any intervention of the state or attempt to regulate the economic, social or environmental field is qualified as “socialism”. At the same time the world has seen more and larger frauds, scandals, crisis, and yoyo bubbles than ever, all in the name of free markets – including wars for democracy-, far from bringing the “equilibrium” expected.

Capitalism and free markets are not to blame here, but rather the behavior of economic actors. A free market does not confer the right to do anything at any cost, regardless of the impacts on people, societies or the generations to come. It can’t be a free ride to grab everything you can as fast as you can. In a democracy, freedom comes with duties and responsibilities. What is true at the individual level is also true for corporate economic actors. For democracy and its social contract to survive in a free market, the economic actors, whether individuals or corporations, must assume their social role (i.e role in society, not “socialistic” role) and take their part of duties and responsibilities. The counterpart of a free market and absence of regulation is the adoption of self imposed rules and principles for the conduct of business as an actor of society, and the accountability thereof. This proactive approach is what I believe Corporate Social Responsibility is ultimately about. When economic actors are not able to police themselves, they misuse the freedom they have been granted, and “the people” will legitimately want to impose more rules, or topple the system.

Proactive Corporate Social Responsibility is the safeguard that will prevent capitalist democracy to fall into socialism, anarchy or the reign of plutocracy…

Sweden -that I had the opportunity to observe for a few years- is probably ahead in its approach of capitalist democracy and practice of proactive CSR. The Swedish democracy is monitored and nurtured. It is the object, together with the cohesion of society, of continuous attentions though a long term engagement in democracy policies, because  nothing is ever to take for granted.

To conclude, I would like to share a quote of Jean Jacques Rousseau that I particularly like:

“What man loses by the social contract is his natural liberty and an unlimited right to everything he tries to get and succeeds in getting; what he gains is civil liberty and the proprietorship of all he possesses. If we are to avoid mistake in weighing one against the other, we must clearly distinguish natural liberty, which is bounded only by the strength of the individual, from civil liberty, which is limited by the general will; and possession, which is merely the effect of force or the right of the first occupier, from property, which can be founded only on a positive title.
We might, over and above all this, add, to what man acquires in the civil state, moral liberty, which alone makes him truly master of himself; for the mere impulse of appetite is slavery, while obedience to a law which we prescribe to ourselves is liberty.”
Jean Jacques Rousseau -The Social Contract - Book I, Chapter VIII                                              

Defining Responsibility in CSR

People tend to make business cases for Corporate Social Responsibility or debate the validity of CSR without realizing that each individual probably puts a different meaning behind the words, especially when it comes to defining what this responsibility actually is, and which values it proceeds from… 

One of my respondents on another forum suggested that there was no actual shared and universal definition. He quoted a 2006 white paper by Norwegian academic Dahlsrud who analyzed a total of 37 definitions and found out that none of those actually defined the social responsibility of businesses, but rather described its operational dimensions. While trying to find this paper, I came across the following fundamental principle:

“that a company is responsible for providing more benefits than just profits for shareholders. It has a role to play in treating its employees well, preserving the environment, developing sound corporate governance, supporting philanthropy, fostering human rights, respecting cultural differences and helping to promote fair trade, among others. All are meant to have a positive impact on the communities, cultures, societies and environments in which companies operate.”

Such a loose definition does not serve CSR in my opinion, as it enables its detractors to benefit from the confusion and concentrate their attacks on the elements that are the easiest to dispute. I think in particular of Milton Friedman and his followers who associate CSR initiatives to philanthropy, and restrict responsibility to compliance. By doing so, they obliterate from the discussion what I believe is at the core of CSR: accountability for the impacts corporations may have on societies and environments. 

In my personal view, CSR has a lot more to do with the consequences of doing business freely, and the duties that come with this freedom than with charity and philanthropy…

Wikipedia defines CSR as:

"A concept whereby organizations consider the interests of society by taking responsibility for the impact of their activities on customers, suppliers, employees, shareholders, communities and other stakeholders, as well as the environment. This obligation is seen to extend beyond the statutory obligation to comply with legislation and sees organizations voluntarily taking further steps to improve the quality of life for employees and their families as well as for the local community and society at large."

The real challenge is how to get from a compliance approach (compliance to law or pressures) to a voluntary approach (self imposed code of conduct).
Some cultures -I think of Scandinavia that I know quite well- rely as much on the "collective" sense of responsibility and "conscience" as they do on the strict application of the law, and they are already close. Others, where a belief that anything that is not forbidden by law -or subject to risk of litigation and rising insurance premiums- can be done is ingrained, have a longer way to go. The response to external stakeholders' pressure is a step in the voluntary direction. I believe education -from kindergarten to university- has a tremendous role to play, but this is another topic...

What other definitions and views do we have out there?

Kantian reminder

1. We are all citizens of the world, driven by -a few common- universal values
2. It is our responsibility that the world in which we live be in concordance with these values
3. We should determine our actions and behaviors under the light of the potential undesirable consequences of a universal adoption of these actions and behaviors.

Corporate Social Responsibility: how far are we from the tipping point?

Harvard Business Review Jonathan Lash and Fred Wellington devise this month on the effect of climate change on corporations and on their ability to handle the various related risks: regulatory, supply chain, product & technology, litigation, reputational, physical… and turn them into competitive advantages.

Are we seeing a change in economic and management theory embracing corporate social responsibility? Will csr become mainstream as a corporate value any time soon?

Technically, it seems that directors are mandated by law to put their shareholders' interests above the interests of any other stakeholder. Henry Ford himself received a supreme court ruling in 1919 when he vowed to reinvest his surplus profits in cutting the prices of his cars and hiring more workers to "spread the benefits of this industrial system to the greatest possible number, to help them build up their lives and their homes."

In his book The Corporation*, Joel Bakan claims that corporations relentlessly pursue their own self interests regardless of the harmful consequences they may cause to others. A concept promoted by Nobel Prize Milton Friedman who titled a New York Times article in 1970 The social responsibility of business is to increase its profits, a stand he confirmed in a 2005 Businessweek interview. For Friedman, Social Responsibility goals are to be pursued exclusively at the individual and personal level, and should be considered as a misappropriation of corporate assets and “fundamentally subversive” if pursued at the corporate level.

The controversy over Friedman's theories also sparked the US academic world. In a remarked white paper, the late management education guru Sumantra Ghosal explained a couple of years ago how the "oversimplifying" sets of ideas that have shaped management theories for the past 30 years have freed students –today's actors- from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses -see one of my previous posts on this subject. Ghosal entrusted the academy to promote pluralism and alternative theories and reverse the trend. With success it seems given all the articles white papers, podcasts and conferences on the subject of CSR and global warming.

Has a page been turned since Friedman passed away, and are we close to the tipping point? Large corporations -including Walmart- are starting to embrace the concept,  customer and public pressure have a visible effects, and policy makers are on the job. let's be optimistic.

*Many thanks to Lauchlan Mackinnon for  pointing me to this resource.

The feminization of values...

Whether you call it Yin/Yang –Chinese philosophy- or Animus/Anima –Jung’s archetypes-, the idea of the feminine/masculine nature of things is not new. Because women attach a great importance to social goals in their work: relationships and collaboration, helping others and the environment in which they live, sociologist Geert Hofstede called these goals feminine goals.

When women are empowered, they influence and “feminize” societies and economies in a positive way, and this becomes a virtuous circle. Small entrepreneurship and policy making seem to be the route to empowerment.
As beneficiary of microcredit loans in developing countries, women put particular emphases in developing their communities as a whole.
As part of policy making bodies in Nordic countries (>45% of parliament in Sweden, even more at local community levels), they have contributed to shape a unique collaborative approach.

Interestingly enough –and hopefully for you guys!-, Geert Hofstede points out that what he calls feminine goals and values in the work place are not a female exclusivity, and that differences exist between women and between men across nations. However, differences are narrower between women worldwide than they are between men. –Vikings, if I remember well, turn out to be the most feminine males, and American women, among the most masculine females-.

As the world becomes flatter and corporate social responsibility gains ground the values and goals that drive the corporate world are “feminizing”. Leaders are required to have more social and relationship skills. The increased role of women in management and leadership position will probably follow. It is yet a lengthy process, and will probably not be a landslide, as even countries like Sweden despite their huge percentage of women in policy making have a very low percentage of women in leadership positions. Why they don’t go there although they have the most “gender equal” society, is another story, probably linked to the motivation to exert an influence where they feel it will be the most “useful”…

Let's think ahead of tomorrow's Dow Jones

We live in a world driven by short term goals and rewards, at the expense of future generations. Do we really want to continue encouraging bad management practices and behaviors?

Day to day variations vs. yield or patrimonial perspective
The fact that capital gain has taken predominance over yield and long term revenue has affected mentalities and changed the relationship between the stockholder and the corporation in quite a cynical way. With a focus on next quarter's bottom line and the share value tomorrow, who sees the overall wealth creation over 5 years? Who is the guardian of a company's perspectives, reputation, liability and potential profits and wealth at say, 10, 20, 50, 100 years?

Short term money in emerging sectors
Ages ago, I learned that long term investments shouldn't be financed by short term money. Huge capital is available in western countries waiting to be invested: short term/volatile capital rushes to finance “hit hot” markets -i.e. most of the time growing markets that require long term investments to consolidate. Of course, everyone wants a share of the same cake, that’s how bubbles build up, making these markets riskier than they should be -see Businessweek Too Much Money-. At the first blip, the rush is to pull back and the whole thing collapses, throwing the baby out with the bath water. I saw this first hand in South-East Asia in 1997, with all its implications on local people's lives. When the IMF stepped in, conditioning its loans to a total and immediate deregulation of what was locally perceived as a social aid -i.e. subsidies on household energy, you got riots and unrest... Joseph Stieglitz explained this very well. Then came the internet... a perfect opportunity to place the cash divested from Asia...

No more investments in infrastructures
The maximization of short term profit is detrimental to long term investment and infrastructure: rare are those who invest in the US railroad or electrical distribution network, ROI is too far away, as a result, the power grid is in a terrible condition -and probably also a cause of energy waste- and the prospects of a Chicago New-York high speed train connection in 3hrs is not for tomorrow. What about the internet, could it have been created by the private sector today? Who will finance the infrastructures needed for its growth tomorrow.

Dilapidating assets and increasing liability
Last, and to put this issue in a financial perspective: our generation happily jeopardizes at no cost the assets of future generations. No "provisions" whatsoever are made today for the risk and cost our children will incur tomorrow -health, environment, natural resources...-. In addition our states live off “leveraged” deficits that future generations will have to finance…

Win/win has to be put into perspective, it's not just here and now...

Lumières du Nord - 1. Valeurs Comparées

Ceci est un chapitre de l'étude approfondie de la société suédoise menée pendant quatre années de vie sur place. Lire le chapitre précédent << et le chapitre suivant >>

Depuis une vingtaine d’années, le sociologue américain Ron Inglehart suit les évolutions politiques, sociales et culturelles qui s’opèrent dans le monde en corrélation avec le l’accroissement du niveau de vie, grâce aux données recueillies régulièrement dans le cadre des World Values Surveys auprès de 65 pays qui représentent 80% de la population mondiale.

Alors que l’humeur semble céder à la panique morale, que certains redoutent un repli sur soi individualiste ou un retour en force des valeurs autoritaires, Inglehart observe une dynamique généralisée des pays industrialisés vers des valeurs de plus en plus porteuses de rationalité, de tolérance, de confiance et de participation, vers une plus grande prise de parole de l’individu, une individualité qu’il distingue de l’individualisme égocentrique. Même si leurs trajectoires restent marquées par leur héritage culturel, le développement économique pousse ces sociétés dans une même direction. A mesure que le niveau de vie augmente, que la paix progresse, que la solidarité sociale et le sentiment de sécurité se renforcent, que la société d’information et de communication se développent, les priorités se réorientent, la qualité de la vie et des rapports humains prennent plus d’importance, le champ de l’expression individuelle s’accroît en même temps que l’aspiration à une démocratie de plus en plus proche du citoyen: les valeurs post-matérialistes prennent le pas sur les valeurs matérialistes.

Pour illustrer son propos, Inglehart dresse une carte du monde selon deux dimensions qui synthétisent les évolutions et les différences en matière de normes et croyances, de niveau de satisfaction et de confiance, d’autonomie et de liberté, de culture politique et d’exercice de la démocratie, d’expression et d’influence. -Cliquer pour agrandir le schéma-

Les Entreprises victimes de l’Amérique Moralisatrice

Bannir l’enseignement de la théorie de l’évolution à l’école ne leur suffit pas. Les groupes de pression évangélistes américains s’immiscent aussi dans la vie de l’entreprise, et ils y mettent les moyens. Après Microsoft, sous les feux de projecteurs il y a quelques semaines pour avoir retiré son soutien à une législation locale anti-discrimination envers les homosexuels, Businessweek enquête sur les entreprises ayant fait l’objet de pressions ces derniers mois. Procter, boycottée sur 3 produits phares entre septembre et fin avril non seulement pour son soutient une législation anti-discrimination, mais aussi pour ses campagnes TV pendant « Will & Grace », et une annonce dans un journal gay canadien mettant en scène deux homo au lit… aurait silencieusement fait machine arrière après réception d’une pétition de 365 000 signatures et une quantité d’appels téléphoniques à faire exploser leur standard… Kraft, Kellogg, Johnson, KFC ont été soumis au même type de chantage, d'autres sont stigmatisées pour leur contribution au Planning Familial, et GE de son côté pour l’annonce de ses recherches sur cellules souche. Certaines entreprises plient, d’autres en profitent pour réaffirmer leurs convictions « libérales » et en font même un argument de vente. Dans tous les cas, la guerre culturelle fait rage au sein même des entreprise. Jusqu’où cela va-t-il aller ?

Les évangélistes blancs (25% de la population) grignotent des ‘parts de marché’ aux protestants traditionnels à coups de hard marketing. La spiritualité passée au rouleau compresseur du marketing de masses: millions de dollars, méga TV shows, méga-églises, best-sellers médiatisés.  Les pasteurs ont des MBA et roulent en BMW : Jesus n’a jamais dit qu’il était mal de s’enrichir !

Conscients de leur rôle clé dans l'élection de Bush, les évangélistes attendent un retour d'ascenseur, et notamment l'autorisation pour les églises de soutenir officiellement des candidats politiques. Voir les articles complets ici et là. Une grande partie de l’Amérique en a la chair de poule… 

The Art of Management

What many in the academic world have been thinking in silence, or expressed behind closed doors in the aftermath of the Enron scandal, is now voiced openly and creates some turmoil in business education circles: Bad management theories are destroying good management practice!

In a 17 page article published posthumously by the Academy of Management Learning & Education, the late management education guru Sumantra Ghoshal explains how the sets of ideas that have shaped management theories for the past 30 years have freed students from any sense of responsibility, influenced social and moral behaviors, and have led, in a self-fulfilling process, to the worst excesses. Read full paper and related comments in The Economist, the Financial Times plus a second FT article.

The issue is highly political. For Ghosal, the desire to make business a science encouraged the adoption of Milton Friedman's oversimplifying individualistic and pessimistic vision of liberalism. In her response to Ghosal, Prof. Moss Kanter of Harvard agrees that these theories are "just too simple and leave out too much". She lays a great part of the responsibility for exesses on managers themselves and law schools and describes the predominance of maximizing shareholders' interests as a result of the victory of capitalism over communism. "Valuing all stakeholders, being socially responsible and caring about people, she adds, sounded a little 'pinko' to business managers when the world had so roundly rejected socialism in any form. Greed was legitimated as producing a better society, not just better companies".   

Ghosal claims that teaching ethics is not enough, and only a change of paradigm and the promotion of pluralism and alternative theories will reverse the trend. Unfortunately, he passed away and we will never know what alternatives he had in mind.

Harvard and many other Business Schools have introduced courses on Ethics in their MBA programs, and accreditation bodies are pushing to make them mandatory in the curriculum. Will this be enough? How will the Academy further take on the mission that Ghosal entrusted them with?

Evolution

D'un autre age, la guerre entre créationistes et évolutionistes fait rage de ce côté-ci de l'Atlantique! Et les fanatiques en tout genre marquent des points. Certains états ont voté des lois qui limitent la portée de la théorie de l'évolution dans l'enseignement de la biologie: suppression du sujet aux examens, introduction de la théorie créationiste -la Genèse telle que décrite dans la Bible, prise au pied de la lettre- dans les manuels scolaires, mention, dans ces manuels, que la théorie de l'évolution est une théorie parmi tant d'autres... les autres étant issues non pas du domaine scientifique mais du domaine mythologique... Même si certains de ces états ont fait depuis machine arrière, l'affaire est grave et inquiète la portion "sécularisée" de l'Amérique.

Pourtant, science et religion font bon ménage. La majorité des Chrétiens accomodent fort bien leur foi et la théorie de l'évolution que le pape Jean-Paul II a reconnue comme étant "plus qu'une hypothèse" en 1996. L'Eglise Catholique présente la Genèse comme l'interprétation mythique de l'origine de l'homme il y a quelques milliers d'années... Lire ce portrait de Jacques Arnould, frère dominicain et chercheur au CNRS où il travaille sur l'éthique scientifique et le lien entre la Science et la Foi sur lequel il a publié plusieurs ouvrages.

De leur côté, scientifiques, philosophes et théologiens américains se sont alliés pour tenter de réconcilier science et religion dans une série de programmes télévisés, publications et site internet destinés à réhabiliter cette théorie de l'évolution, régulièrement mise à mal...

L'Amérique est bel et bien divisée sur la place à donner aux valeurs et idéologies religieuses. Et si l'obscurantisme sévit dans les écoles, il n'est pas près de reculer...