Archive for the ‘stakeholders’ Category
How Can Business ‘Give Back’ to Society?
Filed under: consumers, contract, corporate citizenship, corporations, government, markets, philanthropy, public relations, stakeholders, taxpayers |
Comments (1) A recent story quotes Fred Green, the CEO of the Canadian Pacific Railway, as saying that he won’t sacrifice safety in pursuit of profits. In his words, he won’t violate the terms of his company’s unwritten ‘social licence’ to operate.
The notion of a ‘social licence to operate’ reflects the notion that in order for a business to be successful, in the long run, the support and goodwill of society is essential. This includes everything from the willingness of a local community to walk into your store to buy things, to the willingness of neighbours to put up with the noise of your trucks driving past, to the willingness of duly elected representatives of the people to pass the kinds of legislation that makes modern commerce possible.
This raises the question: just how does a company earn, and maintain, its social licence to operate? How, in other words, can — or should — a business show its gratitude, or pay its debt to society?
There are a number of ways, and they are not mutually exclusive.
One option is through charitable donations. Corporate philanthropy is as old as the hills, but is generally pooh-poohed by proponents of modern CSR, who favour instead things like collaborative efforts to build local skills and capacity.
Another way is by paying special attention to social impacts, beyond what is required by law. For example: selling junk food is perfectly legal, and arguably fully ethical, at least on a case-by-case basis. But a food seller that looks to the aggregate social consequences of its junk-food sales, and tries to mitigate negative impacts, might be said to be doing so as part of its social licence to operate.
Another way is by paying its taxes. That might seem trivial, a mere matter of following the law. But given the complexity of the tax code, the number of loopholes, and the size of some companies’ accounting departments, a commitment to paying your fair share is probably non-trivial.
Another way a company can earn and keep its social license to operate is by a commitment to looking for ‘win-wins.’ In this category, we could place various efforts at seeking energy efficiency and waste reduction. Of the many ways a company can look to save money, some are socially valuable, and opting to pursue those over others might be seen as supportive of a company’s social licence.
And finally, there’s the old (and true) point made by Milton Friedman years ago, which is that companies contribute socially by making goods and services that people want. What does Merck ‘give back?’ It gives us pharmaceuticals that relieve pain and suffering. What does BP contribute? It finds and refines the oil without which our economy would literally grind to a halt. What does my local coffee shop do for the community? It provides a place to get in out of the rain, have a cup of coffee, and chat with a friend.
Now it’s quite likely that no one of these is sufficient. Each of them is a plus, and counts towards a company’s social licence, but likely some combination is necessary. From this range of options, each company chooses how it thinks it can best earn and keep its social licence to operate. Different mixes will make sense for different companies in different industries. There’s no one right combination that will let a company merit its social licence. Innovation and variety are a good thing, here. Let a hundred flowers blossom!
Should Penn State’s Board Resign?
Filed under: accountability, boards, education, ethics, excuses, governance, public relations, sports, stakeholders, transparency, trust |
Comments (4) In the wake of the Sandusky sex-abuse scandal the question has arisen whether Penn State University’s Board of Trustees should tender its collective resignation. And now, following the death of Coach Joe Paterno on Sunday, the question has taken on additional emotional resonance. The university’s Faculty Senate is scheduled to discuss a motion to strike an independent committee to investigate the Board’s role in the whole affair, and indeed has seen at least one motion calling for the entire Board’s resignation.
So, should the members of the Board be asked to resign? And if not, should they do so of their own volition?
To answer these questions, here are some questions that need to be considered:
Fist, did indeed the Board fail in its fiduciary (‘trust-based’) duties? It’s worth noting that the Board has been under fire from two different directions, here. Some think the Board failed in not staying sufficiently ‘on top of’ the Sandusky situation, and in resting satisfied with whatever dribbles of information the university administration saw fit to feed them. (The only detailed account I’ve read so far paints the Board in a rather sympathetic light, in this regard.)
Others think the Board failed in firing — in their eyes, scapegoating — the beloved Paterno. Both sides think the Board screwed up, but for very different reasons. Of course, both can be right at the same time. Perhaps the Board has just generally done a bad job, first by letting the situation get out of hand and then second by botching the task of responding to it. Rather than cancelling each other out, maybe these two sets of complaints just compound each other.
Next, we need to ask, if the Board failed, was it a failure of people or a failure of structure? A board, after all, is both an institutional structure and a set of people occupying that structure.
If it was a failure of structure (and, as governance expert Richard Leblanc wrote back in November, there are serious problems with how Penn State’s board is configured) then there’s little reason to think that a change of personnel on the Board is either necessary or sufficient to fix the problem. And if instead it was a failure of people, then getting rid of them all is a blunt, but perhaps effective, way to solve the problem — providing, of course, that the new people brought in to replace them are better.
Of course, the problem is that it’s difficult to distinguish between a failure of people and a failure of structure, in a case like this. Perhaps people better-suited to the job would have risen above the confines of a poorly-structured board, or lobbied to have its structure revised. Human behaviour and institutional structure shape each other.
And finally, regardless of the above questions about the sources of failure, it might be the case that the removal or resignation of the Board is necessary in order to restore public confidence. That is, even if the individuals currently on the Board are not in any way to blame, the fact that key stakeholders have lost faith in the Board might be sufficient grounds for calling for the entire Board to go. Without the confidence of key stakeholders, any Board is going to find it hard to do its job.
But then, while the current Board certainly faces challenges, so would an entirely new Board. The loss of continuity that would result from a 100% change in membership could seriously impair the Board’s functioning, and make it even more reliant on — and susceptible to control by — university administrators. There’s a good reason why well-governed boards have careful plans in place to make sure that new blood is brought in regularly, rather than en masse. In the end, it seems to me that the best prescription is this. The Board of Trustess at Penn State needs to see substantial structural change. It also needs enough new blood to restore confidence, while retaining enough of the old guard to ensure continuity. Beyond that, the Board is just going to have to do its best to muddle through whatever challenges lie ahead, with whatever strengths and limits it possesses, just like any other board.
The Virtues of Local Ownership
Filed under: accountability, corporations, CSR, decision-making, entrepreneur, governance, retail, shareholders, SME, stakeholders, values |
Leave a Comment There’s plenty in the news these days about the supposed virtues of “buying local.” Buying local usually means buying from small businesses. As I’ve argued before, in at least some cases buying local also means opting for small-scale, inefficient production processes. And in other cases, it means an unhealthy kind of insulation from the outside world.
But what about the virtues of specifically local ownership, when the ownership in question is ownership of what is otherwise a standard-issue department store, replete with goods ‘Made in China,’ as the stereotype goes?
The New York Times recently reported on an effort by a small town in upstate New York to ensure its residents have access to some sort of local department store. When the local Ames department store went out of business a few years back, residents of Saranac Lake — pop. 5,041 — took matters into their own hands. They raised the capital, at $100/share, to open their own department store.
It’s a charming story, and an interesting experiment, but we ought to exercise some caution before attaching too much significance to it.
First, it will be tempting to see this as radical re-visioning of modern capitalism. To see examples of such a temptation, see the 2004 Avi Lewis and Naomi Klein documentary, The Take, about the takeover of a defunct Argentinian factory by its former employees. Lewis and Klein portray that takeover as an example of the pursuit of a real alternative to capitalism — despite the fact that the cooperatively-run factory is still buying inputs on the open market, selling goods on the open market, and so on.
Were it not for movies like The Take, it might go without saying that innovations in ownership structure don’t eliminate the fundamental challenges of capitalism, and certainly don’t eliminate the standard ethical issues that face all businesses. The department store in Saranac Lake is — setting aside a few nods to local sourcing — just a regular department store. It’s got employees, so it will face questions about how those employees are treated. It’s smaller than your typical Walmart, but it will still face questions (or at least it should) about where its products come from, the conditions under which they’re manufactured, and so on. And its managers will still face questions about how to balance the good of the community as a whole with their obligation to be fiscally responsible. And so on.
Not that we need to be entirely cynical about the Saranac Lake experiment, and others like it. There’s at least a prima facie case to make for the significance of local ownership. Managers of a locally-owned store have at least some sense of what kinds of things shareholders would want them to do, and hence seem less likely to violate the trust placed in them. When you know your shareholders by name, you can ask them what they want, and they can tell you what obligations they feel to the community, and they can then ask you, their representative, to make good on those obligations.
In the end, I think experiments in capitalism are good. Indeed, the way it fosters experimentation is one of the great virtues of capitalism. We ought to keep a careful eye on such experiments, both for what we can learn about their particular virtues, and for what we can learn about the nature and structure of capitalism more generally.
Corporations as “People” vs Corporations as “Persons”
Filed under: corporations, critical thinking, definitions, personhood, stakeholders |
Comments (10) There are two ways to think about corporations. One is as a mechanism for letting a bunch of individual people interact. Seen this way, General Motors is just a mechanism for letting employees, customers, shareholders, suppliers, and managers interact in mutually-beneficial ways. The other way is to think of the corporation as an entity in its own right. Seen this way, GM is an entity that owns property, hires employees, is a party to contracts, and has obligations (e.g., via warrantees) to millions of customers. The people involved come and go, but the 103-year-old institution remains. These two views aren’t incompatible. Each illuminates one important characteristic while obscuring another. We need to be able to see corporations both ways, depending on the circumstance.
But it is important not to confuse the two. One is about people. The other is about legal personhood.
Here’s an important case of that confusion. As was widely reported at the time, US presidential hopeful Mitt Romney said, in a speaking engagement, that “corporations are people.” (You can see it for yourself on YouTube: Mitt Romney- Corporations Are People!) This happened over six weeks ago, but it is still causing confusion, and muddying the waters of the debate over the role of corporations in modern society.
What did Romney mean by what he said? I think the point Romney was clearly making is very different from the one he is often thought to have been making. In fact, he was making the exact opposite point. In clarifying what he meant, Romney said, in reference to corporate profits:
“Everything corporations earn ultimately goes to people. Where do you think it goes?”
In other words, he’s pointing to the first of the two viewpoints mentioned above, the one according to which what really matters is the people, the individual stakeholders, behind the corporation. And yet I keep seeing Romney’s “Corporations are people” claim bandied about sarcastically as if it’s yet another example of the much-hated (and much-understood) notion that corporations are legal persons.
(Greg Sargent at the Washington Post did try to explain this, but the point has generally been missed.)
If you don’t like Romney, fine. And if you don’t agree with the point he was making — that corporate profits end up in the pockets of human beings — that’s fine too. But please don’t confuse his point with the exact opposite point, namely the fact that corporations are (and need to be) legally regarded as persons.
Reverse Discrimination in High-Profile Hiring
Filed under: activism, decision-making, discrimination, governance, leadership, stakeholders, values |
Comments (5) Discrimination has a bad name, in part because what we typically mean by the word “discrimination” is more like “unjustified discrimination” or “discrimination on morally-irrelevant grounds.” But discrimination per se — even discrimination based on normally-irrelevant characteristics like race or disability — is not always bad. In a very few cases, discrimination is rooted in bona fide job requirements. The classic example is that it’s OK to discriminate against the visually impaired if you’re hiring pilots; having good eye-sight is a bona fide requirement for being a pilot. Being white, on the other hand, is not.
For a recent controversy over reverse discrimination (or rather over a failure to engage in such discrimination) see this recent case from Halifax, Nova Scotia. By Clare Mellor, for the Chronicle Herald: Africville trust hiring prompts some anger: Choosing white minister ‘insulting’
Some members of Nova Scotia’s black community say they are outraged that a white person has been hired as executive director of the Africville Heritage Trust and are calling for her resignation.
“I find it insulting to all black people,” said Burnley (Rocky) Jones, a local lawyer and well-known human rights activist.
“Surely we, within our community, have many people fully qualified to do such a job.”
The trust was set up to establish a memorial to Africville, a major African-Nova Scotian community destroyed on the orders of Halifax officials in the 1960s.
The trust’s board of directors, which includes six representatives of the Africville community, recently hired Carole Nixon, a white Anglican minister, for the position….
So-called “reverse discrimination” is challenging, ethically. Preferential hiring of individuals from historically-disadvantaged groups can be a ham-fisted way to right past wrongs. But in at least some cases — particularly cases involving high-profile positions — the symbolic significance of the job in question has to at least be considered. (A very similar controversy arose a couple of years ago, when the Canadian National Institute for the Blind hired its first non-blind CEO.)
The first thing to note about the Halifax / Africville case is that it’s not primarily a black-vs-white dispute. It’s clear that those who oppose the hire don’t speak for Halifax’s entire black community. The Board of Directors of the Africville Trust is the body that did the hiring, and although detailed information about the composition of the Board is hard to find, the article cited above does say that the Board “includes six representatives of the Africville [i.e., black] community.” That doesn’t change the fundamental ethical questions at stake, but it does sweep away any thought that this is just an us-vs-them debate.
It’s also worth pointing out a legal worry, here. Hiring based on race is generally wrong, and typically illegal. It’s not clear to me (a non-lawyer) that excluding non-blacks from consideration for a job like this would even be legal. Do the critics of this hire simply think that the job posting should have said “Whites Need Not Apply?” Likely not. But a subtler position is logically open to them, anyway, namely a position that says something like “if in doubt, give the job to the black candidate” (based perhaps on a presumption of greater personal understanding of the issues at stake). But again, I don’t know whether that would be legal. (Does anyone reading this know?) And surely no on really wants to settle, as one activist quoted in the story suggests, for a candidate who is merely “fully qualified”. After all, there might well be a number of “fully qualified” candidates, and so you’re still going to need to make a decision. And if the job is important, then we likely want it filled not just by someone qualified, but by the most qualified person.
But on the other hand, critics of this decision do have a point, and that has to do with the symbolic value that would attach to putting a black person in charge of the Africville Trust. It’s not hard to see that selecting a black man or woman for this kind of leadership role would send a certain kind of message, and maybe give black kids in Halifax another positive role-model, one more non-white individual occupying a position of prestige and influence.
All in all, I’m not sure what to think about this one. But one thing I’m pretty sure of is this: if you think a case like this has a clear and simple answer, you’re probably not thinking about it hard enough.
Pipeline Leaks and Stakeholder Theory
Filed under: accountability, corporate citizenship, corporations, CSR, management, pollution, shareholders, stakeholders |
Comments (1) When oil spills in a forest, does everybody matter? That’s the question posed by the events recounted in this recent CBC story: Wrigley residents voice pipeline spill concerns.
The story is about an Enbridge pipeline that sprung a leak in a tiny, remote town in Canada’s Northwest Territories. Not surprisingly, residents of tiny Wrigley are unhappy about the spill, and so Enbridge has to figure out not just what to do about the spill (i.e., how to clean it up) but what to do about the people of Wrigley. More generally, managers at Enbridge have got to figure out, on an ongoing basis, what their obligations are, and to whom those obligations are owed.
There’s an older school of thought (or more likely a caricature of an older school of thought) according to which shareholders are the only ones whose interests really need to be taken seriously. According to this view, an oil company’s managers’ only real obligations are owed to shareholders. After all, says this view, shareholders own the company, and they’re the ones who (indirectly) hired these managers to make money on their behalf. If anyone else matters, they matter in a strictly instrumental way. Don’t treat your customers badly, for example, because they’re the key to making a profit. Or, in the present case, don’t irritate the people of Wrigley, because if you do they might do something inconvenient, like protesting.
A leading modern alternative to the only-shareholders-matter view is sometimes called the “stakeholder” view (or sometimes, in academic circles, “stakeholder theory.”) The core of the stakeholder view is the idea that the real ethical task of corporate managers is to balance the interests of various stakeholders — various individuals and groups whose interests intersect with those of the corporation. After all, many people contribute to the success of a firm, from customers to suppliers to members of local communities. And if they all contribute, they all have the right to ask for something in return. (You can read a summary of my review of a recent book on the topic, here: Managing for Stakeholders.)
The pipeline story is an excellent example of both the strengths and the limits of the stakeholder perspective. It’s surely useful for executives at Enbridge (or any other company, in the midst of an environmental crisis) to survey the situation and ask, “Who do we need to talk to? Who has a stake in this?” So, are the people of Wrigley stakeholders in Enbridge? Pretty clearly, yes. But after that, things get complicated. Does the environment itself automatically count as a stakeholder of some sort, or does it only count if the well-being of the people of Wrigley is jeopardized? What about the residents of Zama, Alberta? That’s the little town, 850 km away from Wrigley, to which Enbridge is planning to ship the contaminated soil. What about me? Like most people, I’m a consumer of oil. I clearly have a stake, here, don’t I? Pretty clearly, there are stakeholders and then there are stakeholders.
But anyway, once you’ve figured out who the stakeholders are, then what? Let’s take the easy one, a group that’s directly affected, namely the people of Wrigley. What are they owed? Are they owed the cleanup? Are they owed a speedy one? At what cost? Do they have a right to participate in the decision-making, or just to be kept informed? Or are they owed, as one resident of Enbridge suggested, a “swimming pool or a hockey arena or something for the kids”?
As you can see, one problem with the stakeholder view is that the word “stakeholder”, itself, doesn’t actually clarify much. Yet some people tend to sprinkle it on like fairy dust, as if simply anointing someone a Stakeholder™ clarifies what is owed to them, ethically. Life in the little town of Wrigley should be so simple.
Managing for Stakeholders (Book Review)
A couple of years ago, the editors of Business Ethics Quarterly asked me to write a feature-length review of Managing for Stakeholders: Survival, Reputation, Success (2007), by R. Edward Freeman, Jeffrey S. Harrison, and Andrew C. Wicks. It was a daunting task. The book was a highly anticipated one — the lead author of the book, Ed Freeman, is the man who imported the term “stakeholder” into the world of business ethics back in 1984, in his much-cited (and recently re-issued) book Strategic Management: A Stakeholder Approach. Further, Managing for Stakeholders is a book aimed specifically at a non-academic audience, and yet I was being hasked to review it for a scholarly journal. The 4500-word result appeared in the October, 2009 issue of BEQ (Vol. 19, No. 4).
For anyone unfamiliar with the term, a stakeholder in a company is roughly any person or group that can affect, or be affected by, that company’s operations. It’s a useful concept, though its real contribution to business ethics is up for debate. Freeman’s key insight, nearly 30 years ago, was that business managers have obligations to a range of stakeholders (rather than just to shareholders), and that hence the manager’s job is to balance the interests of various stakeholders. But identifying someone as a stakeholder just means, ethically, that they matter — somehow. That still leaves unanswered a whole range of harder questions about how to balance the interests of various stakeholder groups when those interests conflict.
So, here’s a brief summary of my review of Managing for Stakeholders:
On the plus side:
1) The book’s authors express their intention to tell “a new narrative” about business, one according to which a manager’s legitimate social role goes beyond short-term profit-making. They’re right. We desperately need such a narrative.
2) The authors of Managing for Stakeholders aim their message directly at managers, rather than at other scholars, and they try hard to make it a narrative that managers, themselves, can take up and consider their own. In other words, their book isn’t just about managers, it is for managers.
3) The book wisely encourages managers to seek out what might colloquially be referred to as “win-win” solutions. Creating value for all, when possible, is both wise and ethically good.
On the minus side:
1) The authors of Managing for Stakeholders portray, as the “standard” view to which their view is intended to be an alternative, a view of managerial capitalism that I doubt anyone actually holds. According to them, the “standard” view (held by managers and scholars) is that the goal of capitalism is only to generate value for shareholders, and that other stakeholders need not even be considered. This is of course false.
2) The authors of Managing for Stakeholders try very hard to deny that there is any real conflict between the interests of different stakeholders. They’re right to point out that commerce is a cooperative game from which all voluntary participants ought to benefit; what’s in the interest of one stakeholder needn’t automatically be against the interests of another. But that’s not to say that there’s never any conflict at all.
3) Managing for Stakeholders also seems to assume that the mindset of managers is all that matters — it contains no discussion of corporate culture, and no discussion of the requirements of good corporate governance or the dictates of corporate law.
4) The authors slide from the very reasonable claim that managers ought to manage stakeholder relationships to the the much-less-plausible claim that managers ought to manage the corporation for stakeholders. The latter claim is one that many others believe, but it needs support, and it certainly shouldn’t be confused with the former claim.
5) The book also make a faulty leap of logic in jumping from the very sane claim that business is in some sense about creating value for all to the much-less reasonable claim that it is the role of individual managers to ensure value for all concerned. The latter claim puts a lot of pressure on the very managers these authors seek to help, as well as implying what is likely a violation of employment contracts and committing the fallacy of division.
But the biggest problem with Managing for Stakeholders, I argue in my review, was that it was unlikely to serve well its intended audience, namely managers. For example, the authors of the book steadfastly refuse to cite any social science (including economic) literature to back up their many empirical claims. This is surely a result of their well-intentioned populist approach, but the result is that many claims go unsupported, and managers who want to learn more are left with nowhere to turn. And by telling managers that a “simple” change of mind-set is all that is needed, the book fails to make good on the now decades-old promise to turn the term “stakeholder” from a mere category word into a useful tool for ethical decision-making.
Corporate Rights as Stand-in for Human Rights
Filed under: corporations, law, personhood, rights, shareholders, stakeholders |
Comments (5) The rights of corporations are back in the news this week, as the US Supreme Court decided that a California law restricting sale of violent video games to minors constituted an infringement of the constitutional right to free speech.
Far from being shocking, the notion that corporations should be protected by certain rights ought to be utterly commonplace. Here’s why.
Do you believe that human individuals should have a right against unreasonable search and seizure?
Do you believe that human individuals should have strong rights to free speech?
If so, then you must, logically, be in favour of according such rights to corporations. Why? Not because corporations are legally persons, and not because corporations are “like” human individuals in any particular way. We don’t necessarily need to appeal to any checklist of characteristics that a thing must have in order to be accorded rights.
The reason you must logically be in favour of granting such rights to corporations is that granting them to corporations is — in at least some cases — an essential part of protecting such rights for individual humans.
Consider the right against unreasonable search and seizure. Such a right (for individuals) is a central tenet of all civilized societies. It is crucial for our wellbeing that the government not be allowed simply to show up, search our homes, and take our stuff. What about a corporation’s “stuff”? It must be protected as well. Why? Not because corporations feel fear or have interests of their own to protect. No, corporations’ property must be protected because the interests of real, flesh-and-blood people depend on the protection of such property.
Roughly the same argument goes with regard to free speech. It is literally impossible to shut up a corporation without thereby shutting up human persons. If a human being has the right to speak freely, then she also has the right to speak freely about her commercial interests, including about the products and services and viewpoints of the entities (corporations, partnerships, unions, etc.) that advance those interests.
None of this suggests that the rights accorded to corporations must be exactly the same in kind and in character as those accorded to humans. Rights for corporations are largely instrumental, and need only be accorded where doing so protects important human interests. Nor must such rights be unlimited: there are limits on free speech for humans, and those limits generally should also apply to non-human persons such as corporations and unions and clubs and churches. What is essential, here, is to see that corporate rights are not the bogeyman. Just like human rights, they are a tool for helping us get along, and thrive, as a community.
Ethics of Golden Handshakes
Filed under: boards, decision-making, employees, governance, leadership, pay, stakeholders |
Comments (2) When an executive leaves in disgrace, what does the organization owe him or her? How should a Board handle such situations? In some cases, contractual obligations may seem to settle the matter, but contracts can be contested. Should they be? Does the IMF’s Dominique Strauss-Kahn deserve a quarter million dollars?
For further food for thought, see this story, by Tom Hals and Dena Aubin, for Reuters: Strauss-Kahn severance revisits CEO pay dilemma
The IMF now faces a challenge that keeps members of corporate compensation committees up at night: explaining why they may have to pay a handsome severance package to an indicted executive.
…
Former International Monetary Fund managing director Dominique Strauss-Kahn, facing charges of attempted rape in New York, resigned his post from the global lender on Wednesday.Strauss-Kahn’s contract entitles him to a one-time severance payment of $250,000, the IMF said on Friday….
Whether a Board of Directors should attempt to fight in order not to pay severance to an executive who has brought disgrace upon the organization is clearly going to depend on the circumstances. But it serves as a good example of the conflict between two different styles of moral reasoning. On one hand, a Board thinking primarily in terms of consequences might well reason this way: “Look, we need to get past this unfortunate incident. Let’s pay this guy the money his contract says he is owed, and be done with it. It’s better for the firm, overall, if we pay and get this finished.” On the other hand, a Board might think primarily in terms of justice: “This guy has brought shame (or at least notoriety) upon the organization. He doesn’t deserve a dime. We should fight for what’s fair.”
The tension between these two styles of moral reasoning is an ancient one, and it’s perfectly reasonable to find something attractive in both styles of reasoning. But the fact that both kinds of reasons might occur to a single group of people — a Board of Directors — in a single situation implies an interesting question. Even if we were to agree (even for sake of argument) that a Board of Directors’ main obligation is to serve the interests of the organization and its shareholders, that still leaves open this important question: should a Board of Directors seek the best outcomes for the organization and its shareholders, or should it seek justice for it and for them?
Should We Teach Students About the “Social Impact” of Business?
Filed under: corporate citizenship, CSR, definitions, education, ethics, management, MBA, stakeholders |
Comments (3) As regular readers know, I’ve blogged a lot about the vocabulary we use to talk about ‘doing the right thing’ in business. Here’s another example of a term that some people seem to want to use to capture that entire topic: “Social Impact.”
See for example this piece, by NYU’s Paul Light, in the Washington Post: It’s time to require students to do good.
I’ll start by pointing out that the headline is inaccurate, though that’s likely not Light’s fault. (It’s more likely the fault of the newspaper’s headline writer. Hard to say.) At any rate, Light’s article isn’t about making students “do good;” it’s about teaching them courses about doing good. And that’s a very different thing.
Light points out that many business schools now offer courses on what he refers to broadly as the “social impact” of business. “Social impact,” he says, can variously be defined in terms of “social responsibility, innovation, engaged citizenship or plain old public service.” (Note that Light is in trouble here, already, implicitly assuming all of those terms are good things. For counter-examples, see my recent blog entry on unethical innovation.)
Anyway, Light says business schools are increasingly realizing that they need to teach students something about the social impact of business (and presumably, more specifically, about how to maximize positive social impact and minimize negative social impact.)
For what it’s worth, I should point out that many business ethics classes — presumably among the courses that Light sees as part of the trend — absolutely would not focus primarily on social impact. And that’s a good thing, because social impact is just one of the many ethical issues that arise in business. Courses on business ethics can cover a large range of issues, many of them not directly related to social impact:
- product safety (which is mostly a concern to customers, who very often make up only a tiny segment of “society”)
- employee health and safety
- truth in advertising
- the environment (which, depending on your philosophical views, may have ethical importance independent of society’s reliance on it).
Each of those topics has relatively little to do with social impact, and indeed there can be important tensions between, for example, what is good for employees and what is good for society.
But maybe Light doesn’t want courses in business ethics more generally; maybe he really does think it most important to focus on social impact, thereby ignoring the issues (like those noted above) that got the field of business ethics off the ground in the first place. Such a focus by business schools would be incredibly unfortunate, because it would leave business students radically unprepared to face the ethical challenges that they really will have to face on a daily basis in their professional lives. And even if courses on “social impact” do tackle a broader range of issues (including the ones listed above) the title of the course is going to mislead students into thinking that social impact really is the key issue after all.
Finally, I’m confused by the fact that Light views “social impact” as a skill:
Making social impact part of every student’s curriculum would send the signal that social impact is an essential skill….
What are we to make of this? Is social impact really a “skill”? Personally, I’m not sure how to make sense of that turn of phrase. I suppose we can read Light somewhat more charitably as meaning that an appreciation of the social impact of business, and an understanding of the key issues and how to respond to them, are essential parts of a sound business education. And surely he’s right. But we ought at least be clear on the fact that what we’re struggling with — and what we need students to struggle with — is the complexity of the role and impact of business in society. Calling it a skill misleadingly implies that we know what to do about it all, and now we just need to do it. If only life were so simple.
