Archive for the ‘CSR’ Category
Starbucks’ ”Race Together” stunt is working—just not for Starbucks
So apparently Starbucks wants to turn tens of thousands of baristas into facilitators for discussions about race. Starbucks CEO Howard Schutlz recently announced that he wants the company’s front-line employees to write “Race Together” on the sides of customers’ cups. The idea is to inspire a conversation about race.
Not surprisingly, the plan has been thoroughly mocked online. Jokes abound, as do cynicism and outright disbelief.
More seriously, there’s a worry about the position the plan puts baristas in. It’s reminiscent of recent criticism of a plan by McDonald’s to require employees occasionally to engage in cuteness — dancing, singing, etc. — as part of the chain’s “pay with lovin'” campaign. The indignity that could imply is pretty clear. As for Starbucks employees, these are people in low-wage jobs who don’t need the extra hassle, or worse, that might come from being required to engage strangers on touchy topics.
But from a social point of view, it’s hard to fault Starbucks for trying. After all, of all the social ills facing modern society, racial prejudice, racial discrimination, and the resulting racial tension together constitute one of the big ones. And in fact, trying to do something — anything — that would help combat racism is a good example of what I would call true corporate social responsibility. That is, it’s a matter of a company taking on what it sees as a responsibility not to customers, or to employees, or to other specific stakeholders, but to society as a whole. Whether Starbucks or any other company actually has such a responsibility is another question. But if it does, then such a responsibility is emphatically a social one.
Naturally, some will be cynical. As is almost always the case when a big company makes big headlines, there will be conspiracy theorists who speculate that the campaign was never really intended to get baristas to engage customers, but to raise a ruckus and thereby garner Starbucks free exposure. There’s no such thing as bad publicity, blah blah blah.
That could certainly be the case. But that doesn’t mean the campaign couldn’t have social impact. Even if thousands of baristas are not going to be joining hands with customers to kick down racial barriers, the company has none the less started a dialogue about race. After all, the question everyone is talking about now is about just why it is that having employees engage customers on race would be such a problematic thing. The fact that the prospect is an awkward one is, after all, precisely a result of racial tension. So, we’re not talking about race, but (you’re reading this, aren’t you?) we’re talking about how hard it is to talk about race. And that, I think, amounts to the same thing.
See also: Why Starbucks CEO Howard Schultz is right to talk about race
Meatless Monday and Social Responsibility
Meat has recently taken on the role of the culinary bad boy, the gustatory rebel without a cause. Meat is the leather-wearing trouble-maker that scoffs at moral authority, making some people tsk-tsk and making others swoon.
Witness the fact that, couple of weeks ago, the New York Times announced a contest, asking entrants to provide their best argument as to why eating meat is ethical. In other words, the idea is to provide a rebuttal to what is by now nearly the default position, which is that meat is ethically problematic. And it’s not hard to see why. Even if you aren’t convinced that contributing to vast animal suffering is unethical, there are the very significant environmental impacts to consider. And when meat is thought of as a product that you either sell to consumers or feed to your children, health impact certainly becomes part of the ethical equation: how much beef you consume is between you and your colon, but how much you foist on others is open to scrutiny. So if meat If meat isn’t outright unethical, it’s certainly not the most socially-responsible product I can think of.
So, given the current ethical presumption against meat, do food companies that see themselves as socially responsible have a responsibility to minimize, or at least reduce, the amount of meat they sell?
In that regard, see this interesting report about how one company — Sodexo — worked to reduce the amount of meat eaten by its customers. The company runs cafeterias at hospitals and government buildings and so on, and serves over 9 million meals each day. And about a year ago, Sodexo announced that it would participate in the “Meatless Monday” program, urging customers to eliminate or reduce the amount of meat consumed just one relatively painless day each week.
The result is an absolutely perfect case study in the debate over corporate social responsibility.
The Sodexo experiment starts off as nothing less than a best-case scenario of CSR. Sodexo, in introducing Meatless Monday in its cafeterias, was arguably pursuing a win-win strategy. Serving less meat is good for the environment, good for consumers’ health, and (since meat is an expensive ingredient) maybe good for the bottom line. As an experiment, at least, it’s not crazy from a business point of view. So Meatless Monday presented the possibility of social benefit without pain: the holy grail of CSR.
Notice also the lack of sanctimony here. There’s nothing preachy about Meatless Monday: it’s just a way of saying hey, there are some really simple, painless steps that all of us can take to make the world a slightly better place.
But wait: it’s too soon to celebrate. It turns out that among Sodexo’s participating cafeterias, almost a third saw a drop in sales, and some saw a drop in customer satisfaction ratings. So much for the win-win! In the face of a significant drop in sales, a corporation’s managers face a true ethical dilemma, torn between social responsibility and responsibility to vulnerable shareholders. Should the company’s managers stick with Meatless Monday — ostensibly the socially responsible choice — or give it up and bring sales back to their previous level? Which matters more, social benefit or profits? Or, more precisely, how much would sales have to drop in order plausibly to say that the company was taking social responsibility too far?
A case like this strikes me as a pretty good litmus test with regard to divergent views on corporate social responsibility. It’s easy to be in favour of the win-win stuff. If a company can boost profits while doing some good in the world, who could complain? And if you can help others (or society) at no cost to yourself, maybe you’re even obligated to. But fewer people, I suspect, are willing to argue for a corporate obligation to engage in socially beneficial behaviours that not only hurt profits but also reduce customer satisfaction.
The next step in the litmus test, of course, is to adjust the ethical inputs, namely the strength of the ethical ethical arguments against meat. If you’re generally supportive of Sodexo’s move, how much weaker would the arguments against meat have to be in order to change your mind? And if instead you think Sodexo’s experiment is unjustified, how much stronger would the case against meat have to be to convince you that a company is justified in at least attempting to pursue socially-good objectives through its business practices? Answering such questions is a crucial step towards understanding your own point of view, and hence to being better prepared to engage in thoughtful discussion of corporate social responsibility.
The Social Responsibilities of Truckers
If you want to learn about the social responsibilities of business, don’t start by looking at Walmart and Apple and GM. Companies with hundreds of thousands of employees and millions of customers make an enormous number of decisions every day. Their impacts are many and varied. Their relationships are complex. They’re worth considering, but they are a lousy place to start.
Much better to start small, with a more tractable set of problems. We should look, for example, at the world of small, independent businesses. For example, a recent story from the Detroit Free Press raises interesting questions about safety and ethics in trucking. But the fundamental questions of social responsibility that story raised go far beyond the trucking industry itself.
Last week I wrote about the social responsibilities of lawyers. Today I’ll move the discussion of social responsibility in a decidedly blue-collar direction. Let’s look at the social responsibilities of truckers, the men and women who drive the Big Rigs on which a majority of North American goods get transported.
Like lawyers, truckers, too, are all either independent business-people or employed by businesses. So the relevance of trucker ethics to business ethics is clear. But unlike lawyers, truckers are not commonly spoken of as having specifically social obligations. But of course, that doesn’t mean they don’t have any.
Before asking about specifically social obligations, let’s look at a trucker’s obligations more generally.
A trucker’s most obvious obligations as a trucker are to her employer (if she has one) or to her customers. She’s got a job to do, and she ought to do it diligently, doing her best to deliver the shipment on time and in intact. She also has obligations to suppliers, including an obligation to pay invoices on time, and so on. If she happens to have employees (e.g., an assistant who helps load & unload) then there are clear obligations there, too.
The other obvious obligation is to drive carefully — an obligation owed to others with whom the trucker shares the road. 18-wheelers are pretty much the biggest thing on the road. That implies a significant responsibility not to drive recklessly and impose risks on others, including an obligation to be sober and alert while at the wheel. Are those social obligations? I don’t know. I tend to take words seriously. “Social,” to me, implies an obligation to society as a whole, to society at large, rather than just to people who happen to be directly in harm’s way.
So let’s put it this way: does a trucker — by dint of being a trucker — have obligations to make society, as a whole, better-off? But wait, we can’t really mean society “as a whole.” No one can do that. It’s too big a project. Social responsibilities must be responsibilities to do what one can to help some relevant bit of society, to contribute in some meaningful way to the overall project of making society better-off.
But if we’re thinking specifically about truckers, we should of course also exclude obligations that you might think all of us have: obligations to donate to good causes if we are financially able, and to help lost children find their way home. And so on.
So, then: does the trucker have trucker-specific social obligations, obligations that she should carry out in the course of driving her truck?
I have to admit, I’m having trouble thinking of very many. But the story cited above suggests one good example, since it is in part about efforts by the trucking industry to lobby government regarding the legal weight limits imposed on trucks. So one key social responsibility of truckers, we might say, is to lobby government in ways that is in the public interest, rather than just in their own interest. Of course, just what is in the public interest, here, is open to debate. But the notion of social responsibility at least sets the terms for that debate. So there’s one clearly social responsibility.
Now, with regard to lawyers, I argued that social responsibility has to do with the force of, and limits on, the individual’s role in a larger, socially-important system. If that is true beyond the special case of the legal profession, then role-related social obligations have something to do with the obligations involved in being part of a team effort. All that remains, then, is to figure out what socially-valuable team effort the trucker is part of, and what obligations are necessary to the achievement of that team’s goals.
At this point, I’ll open up for discussion.
Environmental Profit-and-Loss
Filed under: accountability, CSR, environment, pollution, pricing, sustainability, values |
Comments (1) It’s attractive, but very dangerous, to try to calculate a ‘bottom line’ for a firm’s social or environmental performance. Attractive, because key stakeholders are increasingly interested in knowing those kinds of details. But the main danger should be obvious: there’s just no way to add up the disparate factors that make up a firm’s social or environmental performance. How do you add together litres-of-water-used plus hectares-of-habitat-destroyed? On the social performance side, how do you sum up number-of-women-in-senior-management plus fair-trade-contracts signed?
The answer of course is that you cannot. You can’t add up things that are represented in different units of measure. That’s not to say that you can’t or shouldn’t track and report these various numbers; but it casts a dim light on the prospects of arriving at a global assessment of a firm’s social or economic performance.
Unless, of course, you simply put a dollar figure on everything, in which case the math becomes quite easy.
That’s what shoemaker Puma has done, with its new Environmental Profit & Loss Account (E P&L). They’ve attached a dollar value to their greenhouse gas Emissions and their water consumption, and compared that to the dollar value of the shoes they produce. And, interestingly, they’re publicizing the fact that, environmentally, they’re in the red. They extract more from the environment than they provide to consumers. Environmentally, they’re operating at a loss.
Now, in standard terms, any firm that uses more (in dollars) than it puts out (in dollars) is going to go out of business pretty quickly. But as Puma’s Jochen Zeitz points out, that’s not the case for many environmental inputs because so many environmental inputs are unpriced — that is, they cost a company nothing. Pollution, for example, when unregulated, costs a company nothing, and when under-regulated costs the company less than the cost such pollution imposes on others. So what Puma has done is put a dollar value on these things so that they can figure out what their environmental bottom line would be, if they actually had to pay for all they consume and all they emit.
There are two key problems with such attempts to calculate an environmental bottom line this way. One is practical: there just aren’t uncontroversial ways to put a dollar figure on every unpriced environmental input. Certainly there are people who can provide methods for doing so; but that doesn’t mean there’s a clear right way to do it.
The other problem is, well, philosophical. It’s not at all clear that everything we want to say about environmental ethics can be summed up in terms of economic impact. What’s the dollar value of the loss of a species? Is the value of beautiful scenery really captured by summing up how much each of us would be willing to pay to preserve it?
Still, Puma deserves credit for this rather striking bit of transparency. Even though the “E P&L” is a pretty incomplete picture, it nonetheless does tell us something about the company’s overall environmental impact, and its commitment to doing better.
(Thanks to Andrew Crane for pointing me to the Puma story.)
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.
Walmart, CSR Reporting, and Moral Grey Zones
Filed under: accountability, CSR, reporting, transparency, values |
Comments (2) It’s very hard to report on the good things you’ve done, when not everyone is sure that those things are actually good. Cutting CO2 emissions is pretty unambiguously good, as is working to reduce fire hazards in your suppliers’ factories. But in the realm of corporate responsibility reporting, there’s still lots of room for controversy.
Case in point: I recently had the chance to indulge in a careful reading of Walmart Canada’s 2011 Corporate Social Responsibility Report. Here’s a bit from the document’s intro, by CEO David Cheesewright:
We see this report as a powerful tool for corporate good. Our size gives us considerable influence and with it comes considerable responsibility – a role we embrace in order to help Canadians save money and live better.
Our goal is to present an open look into the impact of our operations in Canada over the past year. This latest report frames our diverse activities into four broad categories of CSR: Environment, People, Ethical Sourcing and Community.
In each area, we highlight our efforts and actions, both large and small – and summarize our current programs and challenges while outlining plans to keep improving in the future….
It’s a very readable 35-page document (more reader-friendly than some others I’ve read, which I think is really crucial if you want people actually to read the thing.)
One of the things that struck me about the Report is that there’s a genuine difficulty in reporting on this sort of stuff in a world replete with grey areas. There’s lots of lovely win-win stuff in the Report. But some of the stuff reported proudly is actually ethically controversial. A trio of examples will illustrate my point.
- Under the heading of “Community,” Walmart Canada proudly reports that “Walmart Canada thinks locally,” and that the retail giant does a lot to boost the prospects of Canadian businesses, to whom it funnelled just over $15 billion in 2010. This goes some distance toward countering a common criticism. But as I’ve pointed out here before, a focus on “supporting Canadian business” is often a mistake, both economically and ethically.
- Likewise, the Report indicates that their ‘Standards for Suppliers’ absolutely forbid the use of child labour. But there’s a good argument to be made that in at least some desperate parts of the world, child labour is a sad necessity. An absolute prohibition can make some kids’ lives worse.
- The Report also brags about its new line of organic baby food, despite the fact that there’s little clear evidence that organic foods are ethically better than other foods. The question is controversial, to say the least.
In all three cases, the company is portraying as ‘socially responsible’ something that, well, might or might not be, depending who you ask. But of course, child labour, healthy foods, and impact on local communities are precisely the sorts of things that critics (and maybe consumers more generally) want to hear about from Walmart. So it’s hard to fault them on doing, and reporting on, those things.
The point here really is not about Walmart Canada, but about the challenges of CSR reporting more generally. If CSR reports stuck to the unambiguously-great stuff, the reports would be vanishingly short and only minimally useful. And that would be a shame. The point of such reporting, I think is not to show that you’re doing everything right. It’s to show us what you’re doing.
Pet Sales, Municipal Rules, and Social Responsibility
Filed under: consumers, CSR, government, regulations, retail |
Comments (5) Toronto’s city council has just told an entire category of retail stores that they must only sell second-hand goods. No, the move isn’t some ‘green’ initiative aimed at encouraging recycling. It’s an animal-welfare edict, a move to force pet stores to sell dogs and cats sourced exclusively from “shelters, rescue groups or people giving up animals for free.” In other words, no more puppy-mill puppies or kitten-mill kittens are to be sold in Toronto.
See the story here, by Carys Mills for the Globe & Mail: Toronto Council bans pet shop sale of dogs, cats, unless they come from shelters.
The motion was passed unanimously, with all councillors bravely taking a pro-puppy stand. And it’s not surprising to see unanimity, even regarding a restriction on commerce, when that restriction can plausibly claim to protect not just helpless animals, but customers (including children) too.
One interesting point about this is the focus — both legal and ethical — on retail. Regulation (in this and many other cases) has, in principle, 3 possible targets: producers, consumers, and retailers. Council has chosen to focus on retailers — rather than, say, pass rules about how dog breeders should operate. Partly that’s a matter of jurisdiction: the municipal government has some authority over how business is conducted within its territory, but no jurisdiction over production processes at puppy mills in far-flung rural locales. But it’s not just a matter of jurisdiction: enforcement can be a lot more efficient when it can focus on just a handful of retail outlets. Retailers are the intermediaries between producers and consumers, and so they’re effectively gatekeepers. That makes them a good target for regulation, but it also means that as crucial links in the flow of ‘product’ (i.e., pets, in this case), they have power — and with power comes responsibility.
The other interesting point here has to do with the public good. The sale of a pet is notoriously likely to result in ‘externalities’ — that is, to have an effect on people not party to the transaction. Poorly-socialized puppies may grow into dangerous dogs. Unwanted dogs and cats may be abandoned, turning into social nuisances, and straining municipal resources such as dog-catchers, bylaw enforcement officers, etc. Unhealthy pets may transmit communicable diseases to other people’s pets. So the policies and practices that a pet store follows affect the interests not just of customers and suppliers, but of society at large. In other words, we see here good examples of that subset of ethical issues that truly are about the social responsibilities that businesses have.
The CSR Litmus Test
I wrote a short article for a forthcoming issue of Canadian Business, riffing on a recent Globe and Mail story about a South African winery that is working hard to face up to its slave-holding past. The Solms-Delta winery’s owners have done things like set up a museum in its wine cellar, and establish a trust for the benefit of workers. This is clearly admirable; other South African wineries generally prefer to sweep the past under a rug. But is highlighting the past this way an obligation owed to the winery’s current employees? If so, then Solms-Delta is simply meeting its ethical obligations. But if this is not something owed to current employees, it is better cast as a matter of social responsibility.
I’ve complained ad nauseum about the fact that there’s no clear, agreed-upon definition of CSR (Corporate Social Responsibility). Many definitions say something about “social contribution” or “giving back to the community.” But just what that amounts to is up for grabs. It might mean something trivial, or it might mean something unfairly burdensome.
Here’s a litmus test to help you figure out your own views in this regard, and what those views imply. Imagine a company that does all of the following, with reasonable consistency:
- Makes a decent product that people feel improves their lives in some small but meaningful way;
- Treats employees fairly;
- Deals honestly with suppliers;
- Tries to do a decent job of building long-term shareholder value;
- Cleans up their messes, environmental or otherwise;
- Does its best to follow all applicable laws, and trains and rewards employees suitably;
- Pay its taxes, making use of all relevant exemptions but not cynically seeking loopholes.
Next, if you consider yourself a fan of CSR, ask yourself this question: Would such a company count as a socially responsible company, in your books? Or is there something more they need to do in order to garner that designation? Are they ethically obligated to do something further?
If your answer is “Yes, that’s a socially responsible company!” then good for you. That’s a very reasonable answer. But then you should ask yourself two questions. One, why are you attached to the label “CSR”? Why not just call them a company that does right, or that acts ethically? Why try to shoehorn all the good stuff listed above into the little box of specifically social responsibility?
If your answer is “No, they’re still not giving back to the community!” then next you need to ask yourself what more and why. The company described above is engaging in voluntary, mutually-advantageous transactions with customers, making those customers better off (by their own lights). It is doing something good in the world, and being conscientious about how it does it. That seems pretty decent.
And whatever your answer is, taking this test should clarify both what your own views are, and perhaps why the term “CSR” is far less useful than it is popular. And whenever two people think they agree on the importance of CSR, each of them ought to doubt — or ask — whether they’re really agreeing on the same understanding of what social responsibility really means.
Post-Hurricane-Irene Business Ethics Roundup
Filed under: corporate citizenship, CSR, disaster, economics, pricing, profits |
Comments (2) 
Natural disasters put all kinds of pressures on the behaviour of otherwise-civilized people, and they almost always raise business ethics issues. Here are a few little issues that popped up over the weekend, while hurricane Irene was wreaking havoc on the east coast of North America.
First, a bit of price gouging: Brooklyn’s posh Hotel Le Bleu squeezed Irene shelter seekers for $999 per room
A trendy Brooklyn hotel generated a flood of cash from Irene, jacking up the price of a room to $999 a night on Saturday as the powerful storm zeroed in on New York, employees said….
As I’ve written before, raising prices during a disaster isn’t always unethical — sometimes higher prices provide an incentive for others to rush to send resources to disaster-stricken areas, and sometimes higher prices give citizens an incentive to avoid overusing scarce resources. I’m pretty sure neither of those rationales applies here. [Update: see the hotel’s reaction, in the Comments section below.]
The flip-side of the price-gouging story is this one: “Generators, batteries big sellers ahead of Irene”. You can learn a lot about the ethics of pricing by contemplating why hardwares stores generally didn’t jack up their prices. (Yeah, there are anti-price-gouging laws in many jurisdictions, but that’s likely not enough to explain why prices stay stable.) Note that this story mentions that “…an Ace Hardware in Nags Head, N.C., the store sold out of portable generators.” The fact that the store sold out pretty certainly means that some customers went away disappointed. And it’s entirely possible that some of the disappointed needed the generators a lot more than the people who actually got them. Should Ace have found some way of asking customers how badly they needed a generator, or should they have raised the price a bit to make sure that people who bought one really needed one?
Next, from Katy Burne, blogging for the WSJ (just before the storm), “Hurricane Irene Whips Up Trading In ‘Catastrophe Bonds’”. Here’s the technical bit:
Catastrophe bonds, known in the insurance industry as “cat” bonds, are structured securities that allow reinsurers to transfer their own risks to capital-market investors. Investors in cat bonds earn regular payments in exchange for providing coverage on a predetermined range of natural disasters for a set period of time.
Note the similarity here to the controversial practice of short-selling stocks. In shorting stocks in a particular company, a trader is betting that the value of that stock is going to go down — that is, betting that the company will do poorly. Many people find that distasteful. Some have even called it unpatriotic. In buying (or in shorting) ‘cat bonds,’ an investor is wagering on human misery. But note that that’s what insurance companies do, too, and none of us wants to be without those.
Next, there have been a few stories about companies helping out by either donating goods or by fundraising for disaster relief (see here and here, for small examples). Many more such stories have no doubt gone unreported. It’s also been noted that some companies are going to benefit from the storm, especially if (like Home Depot) they sell goods that will be needed for reconstruction. Is there anything wrong with that? (See here for a previous blog entry on profiting from disaster relief.)
Finally, the key business-ethics stories to watch, over the next few days, are about insurance claims. Insurance firms are happy that losses look to be lower than expected. But stories will inevitably pop up about consumers having difficulty getting insurers to pay up. This will, again inevitably, be portrayed as heartless. And in some cases it may well be heartless. In other cases, we’ll simply see that people generally fail to understand the economics — and the ethics — of insurance.
Pipeline Leaks and Stakeholder Theory
Filed under: accountability, corporate citizenship, corporations, CSR, management, pollution, shareholders, stakeholders |
Comments (2) 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.
The Business Ethics Blog 