Business Unusual: Corporate Responsibility in a 2.0 World*

The imperatives of a growing consensus on human‐induced causes of climate change, an increasing gap between rich and poor, and the misguided incentives in the economic, business, and financial models that dominated the last quarter of the twentieth century and first decade of the twenty‐first century along with the emergence of Web 2.0's transparency have highlighted the need for a new approach to capitalism. Looking around the world, we can witness the emergence of numerous new forms of enterprise that are part of a broader movement that we are calling change to a sustainable enterprise economy (SEE Change). This article details the broad outlines of the emerging shift, highlighting the new types of enterprise that constitute the SEE. First, we set the context in which business unusual is evolving, a context of “wicked problems”uncertainty, and sustainability problems. Then we provide an overview of new types of enterprises that are already emerging to cope with these changes, enterprises of the cloud (interlinked, web‐based enterprises that rely on the “cloud” of computers that store data such as social media, eBay, and Google). Next, we outline how such enterprises are permitting processes of dematerialization and “servicization” (the shift from product to services) to create new forms of enterprise that are less dependent on physical resources. From here, we explore what we term enterprise unusual, corporations that incorporate pro‐social goals into their very essence, for example, for‐benefit corporations, the B Corporation, and conscious capitalism companies, along with a few entities that are shaping their product development along the lines of biomimicry. All of this change, we argue, has created a blurring of sector boundaries evidenced in the rapid emergence of social enterprise, of which explore a variety of types, and what is being called the fourth sector, where business purpose and pro‐social activity are combined.     

Servitization of business: Adding value by adding services

More and more corporations throughout the world are adding value to their core corporate offerings through services. The trend is pervading almost all industries, is customer demand-driven, and perceived by corporations as sharpening their competitive edges.Modern corporations are increasingly offering fuller market packages or “bundles” of customer-focussed combinations of goods, services, support, self-service, and knowledge. But services are beginning to dominate.This movement is termed the “servitization of business” by authors Sandra Vandermerwe and Juan Rada, and is clearly a powerful new feature of total market strategy being adopted by the best companies. It is leading to new relationships between them and their customers.Giving many real-life examples, the authors assess the main motives driving corporations to servitization, and point out that its cumulative effects are changing the competitive dynamics in which managers will have to operate. The special challenge for top managers is how to blend services into the overall strategies of the company.     

From primacy to purpose commitment: How emerging profit-with-purpose corporations open new corporate governance avenues

This paper aims at contributing to corporate governance theory by developing a model of governance that takes into account a recent legal innovation: the introduction of purpose-driven legal business forms in the corporate law of several countries. Current debates in such theory oppose models that grant “primacy” (i.e., ultimate control rights) to different constituencies. The resulting uncertainty proves problematic in the face of new, urgent social and environmental stakes that are difficult to represent in traditional governance bodies. Newly adopted profit-with-purpose corporate forms' introduction of a “purpose” in corporate contracts renews these debates. We show that through the “purpose commitment” model it enables, the distribution of control rights in the governance system is decoupled from the objectives assigned to the corporation. This new approach renews the formal role of management, and corporations’ accountability to society. We explore the theoretical, practical, and political consequences of this new model.     

International Business,Human Rights,and Moral Complicity: A Call for a Declaration on the Universal Rights and Duties of Business

The purpose of this article is to call for the formulation and adoption of a declaration on the universal rights and duties of business. We do not attempt to define the specific contents of such a declaration, but rather attempt to explain why such a declaration is needed and what would be some of its general characteristics. The catalyst for this call was the recognition that even under optimal conditions, good companies sometimes are susceptible to moral lapses, and when companies undertake ventures in authoritarian countries with poor human rights records, even those with the best intentions may find themselves drawn into complicity in human rights abuses. There, market exigencies may persuade them to leave their codes of ethics and commitments to human rights at home. Pragmatism, it would seem, requires thatthey accept the ethical inconsistencies that follow from a “When in Rome, do as they Romans do” outlook. When facing the moral dilemma about whether or not to invest in human rights abusing countries, companies are offered two alternatives: they can operate in those countries and accept potential complicity or they can stay away. We suggest, however, that a preferable option is to address the underlying problem, and to this end we advocate the promulgation of a declaration for business that is comparable to the Universal Declaration of Human Rights. Our proposed name for this is the “Declaration on the Universal Rights and Duties of Business.” To be effective, such a declaration would require enforcement mechanisms. To illustrate this issue, we focus on China, not because China is unique in its human rights abuses, but because China occupies such a central place in the globalization efforts of the major companies from around the world. A robust international declaration is needed to provide a common framework for the practice of consistent and fair business competition everywhere.     

Transnational Corporations and Human Rights: Silencing the Ontological Controversy

“Engines of development” or “tools of exploitation”? Both expressions have been used to describe the transnational corporation’s (TNC) activity in the developing world. In this paper, it will be argued that these extreme characterizations—each armed with their preferred method and unit of analysis—are merely assessing different aspects of the relationship in question. Moreover, theoretical issues can help shed some light on the Janus-faced nature of TNCs’ human rights’ effects. These issues suggest that FDI (Foreign Direct Investments) benefits are conditional and can help determine whether or not the presence of TNCs will be benign.

     

The Meaning and Meaningfulness of Corporate Social Initiatives

In response to pressures to be more “socially responsible,” corporations are becoming more active in global communities through direct involvement in social initiatives. Critics, however, question the sincerity of these activities and argue that firms are simply attempting to stave off stakeholder pressures without providing a corresponding benefit to society. By drawing on institutional theory and resource dependence theory, we consider what factors influence the adoption of a “meaningful” social initiative—an initiative that is sustainable and has the potential for a significant positive impact on society—as opposed to a symbolic initiative. In addition, we raise the question of how social initiatives—both meaningful and symbolic—participate in the “institutional war” over the meaning of corporate social responsibility.     

As Public Goes Private, Social Emerges: The Rise of Social Enterprise

This article explores the relationship between social enterprise and a much-longer known set of arrangements generally comprehended as “public enterprise” (or “state-owned enterprise”). It considers the decline in some contexts in the use of, and interest in, public enterprise that reflects the impact of the privatization movement, and the rise of social enterprise as an alternative form—with speculation about cause-and-effect connections between these movements. An exploration of this sort may contribute in the longer term to a better understanding of the place of “public”, “social” and “community” values and structures within the general framework of governance.     

The new age of ethical marketing for the 21st century

The premise of this paper is that the strong trends toward ever increasing centralization in the agricultural producing sector of the United States in the 1980s will exacerbate in the middle-to-late 1990s. This, in turn, will lead to both radical changes in the consumer movement by the year 2000, and also to a completely redefined mission for the corporate marketing function as well. Specifically, the deliberate federal policies of the 1980s which led to a “shake-out” of the small family farm units in favor of large agri-business concerns in order to reduce federal subsidies will lead, in the 1990s, to the most noted of deleterious consequences of monopolization, namely ever increasing prices and lowered quality. The authors believe that by the late 1990s the American public will perceive this state of affairs as being intolerable and it will lead them to organize “Big Consumerism”, a cohesive, much strengthened version of the consumer movement of the 1980s. This movement will, among other major activities, establish consumer cooperatives as a way to control costs through the elimination of unnecessary middlemen. In addition, this new consumerism will demand a change in the ethical standards of business behavior which, in turn, will result in a reformation in the role of the “New Marketer”. This “New Marketer” function will be envisioned and practiced by incumbents as informational and educational, adhering to the highest standards of truthfulness concerning the products they are attempting to market. In this regard, the role of governmental agencies will be greatly strengthened and expanded to insure that the marketing profession lives up to these highest ethical standards and practices.     

Shareholders' Wealth‐Maximizing Operating Decisions and Risk Management Practices in a Mixed Contracts Economy

This paper establishes a critically important positive role for operations management practices and financial hedging. We show that operations management decisions and financial hedging are intertwined, and we advance a framework that can identify their combined effects on investors' wealth. We show that: (a) firms (publicly traded corporations) will optimally hold adequate riskless working capital (e.g., cash) to minimize the cost of obtaining non‐financial inputs, and the magnitude of this cash holding depends on operating details, and (b) operations management and financial hedging can lower firms' cash requirements, and boost productivity, defined as the wealth created in the firm per dollar of invested capital. Productivity‐enhancing practices—by “freeing up” some of the firm's cash—can maximize the investors' wealth. We show that these results obtain because firms' contracts with many of the providers of non‐financial inputs are not traded, and because investors can invest not just in public corporations but also in businesses “outside the markets” (e.g., proprietorships, partnerships, and private equity).     

Planning corporate growth with inverted product life cycles

The boomtime periods of growth enjoyed by U.S. corporations during the 1950s and 1960s are not likely to return. Firms desiring to realize consistent and continuous sales volume growth in the years ahead will need new perspectives and tools to actively and systematically plan that growth.Traditional approaches to planning growth are too unsophisticated for today's complex and competitive marketplace. Computerized simulations and other advanced techniques available today are, on the other hand, a step too far into the future for most business planners.This article presents a new framework and new perspectives for viewing and considering alternative growth opportunities. The framework—the “Inverted Product Life Cycle”—takes something with which most managers are very familiar (the product life cycle concept) and expands it into an analytical yet intuitive and useful tool for planning future growth.     

The Benefit Corporation: Corporate Governance and the For‐profit Social Entrepreneur

The adoption by 19 states and the District of Columbia of a new variant of the business corporation form—known as the benefit corporation—presents several issues for legislatures, for entrepreneurs electing to organize as benefit corporations, for existing corporations that are converting to the new form, and for the stakeholders (other than shareholders) who are intended to be considered in benefit corporation governance. The article presents the history and structure of the new business form and a discussion of what has become its predecessor—the constituency statute. The model benefit corporation statute provisions are reviewed, which many states have adopted in toto. The authors address the obstacles that should be overcome by legislatures, businesses, and stakeholders before further legislative adoptions occur, as well as considerations for effective implementation by government, corporations, and stakeholders under existing and proposed variations of the statute.     

Calling in a Debt: Government's Role in Creating the Capacity for Explicit Corporate Social Responsibility

Before the field of business and society can adequately analyze the relationship between governmental policies and corporate social responsibility (CSR), either as a reality or an ideal, it is first necessary to understand exactly how governments nurtured the development of the autonomous corporation. The roles assigned to government by the economics and management literatures—regulator, standard setter, protector, and adjudicator—ignore the crucial part played by state violence and government expenditures in the rise and sustained success of the corporate economy. An examination of the history of the American case, crucial for the development of the modern corporation as well as the “explicit” form of CSR that eventually followed it, highlights these roles: the willingness of the state to intervene with force in labor conflicts bolstered the managerial autonomy that defined the large corporation, and the way government expenditures promoted innovation and firm success. Acknowledging how corporations depended on government assistance in their development is a necessary step for both assessing the responsibilities owed stakeholders and for advancing the theoretical development of the field.     

Executive remuneration standards and the “conformity gap” at controlled corporations

In this paper we analyze the relationship between conformity to executive remuneration standards, corporate ownership, and the level and structure of CEO compensation for large European listed companies in the years 2007 and 2010. We show that controlled corporations conform to executive remuneration standards less than widely held firms. We also show that weaker compliance is associated with lower CEO pay and more cash-based incentive structures. We interpret this “conformity gap” from the perspective of individual firms and from a societal perspective, with the aim to contribute to frame the policy questions concerning executive pay at controlled corporations. Different policy implications depend on whether the conformity gap reflects a lower need for managerial incentives, given the monitoring by controlling shareholders, or the latter’s willingness to extract private benefits of control. We argue in this paper that the former hypothesis prevails, so that regulators should abstain from increasing the level of enforcement of executive remuneration standards.     

Dignity in Western Versus in Chinese Cultures: Theoretical Overview and Practical Illustrations

Dignity is an important concept in ethics. Human rights organizations justify rights by appealing to human dignity. Prominent politicians have cited the need to protect human dignity and urged the founding of international institutions. The concept of human dignity is often used to evaluate and critique the ethics of select practices. In addition, the idea of dignity is used as a universal principle to ground universalist business ethics. This paper argues that there are substantial differences between the ways in which the West and China construe human dignity. Having documented these major differences, we consider two cases to show how the differences might “cash out” in actual business practice. Instead of relying upon a nonexistent universal concept of human dignity, we suggest that it is respectful and sound to seek to identify the many goods (teamwork, initiative, autonomy, respect for elders) that differing parties see at play in the case at hand and then to try to come up with ways to realize as many of these goods as possible.     

Aus Fehlern Iernen

Learning from blunders. Experiences of an executive coach with problems and solutionsNot too often, even rarely, we are in a situation to talk about blunders or shortcomings within our coaching community. That really is a pity, because a discussion like this combined with reflection and feed back is the best and only way for a coach to avoid professional mistakes in his future. So this article is “somehow another kind” of contribution. The author reports his own 18 years of “blunder-experience” as well as professional mistakes of other coaches which he observed in mentor coachings and supervisions, he suggests outcomes, consequences and solutions. Topics are: Anger, aggression and “struggles of power” within the coaching process; dependence versus (internal) independence of a coach; transference and counter-transference within the coaching process; peanut politics within a coaching process. Result: the coach himself, his core values, his boldness directed to social risks and to natural consequences — combined with appreciative conversation and respecting clients — makes out the core dissolving capacity. Without mentor coaching and professional supervision every coach would be trapped into his personal “trap of mistakes” — and even worse: without recognizing this dilemma.     

Stakeholder Theory: The State of the Art

Abstract

For the last 30 years a growing number of scholars and practitioners have been experimenting with concepts and models that facilitate our understanding of the complexities of today’s business challenges. Among these, “stakeholder theory” or “stakeholder thinking” has emerged as a new narrative to understand and remedy three interconnected business problems—the problem of understanding how value is created and traded, the problem of connecting ethics and capitalism, and the problem of helping managers think about management such that the first two problems are addressed. In this article, we review the major uses and adaptations of stakeholder theory across a broad array of disciplines such as business ethics, corporate strategy, finance, accounting, management, and marketing. We also evaluate and suggest future directions in which research on stakeholder theory can continue to provide useful insights into the practice of sustainable and ethical value creation.     

They Reap but Do Not Sow: How Multinational Corporations Are Putting an End to Virtuous Capitalism

The actions of “world‐based” multinational corporations (MNCs) have effectively decoupled the revenue generation and the production sides of the business equation. This decoupling has led to an end of “virtuous capitalism,” which has widespread ramifications for the societies within highly developed countries as well as those in developing and underdeveloped nations. This article presents an overview of the defining aspects of virtuous corporations and the linkages to virtuous capitalism. It then describes the actions of Apple Computer as emblematic of an MNC that is nonvirtuous in its practices. The article then discusses how the encouragement of globalized trade has prompted the shift away from virtuous capitalism and closes with a summary of possible actions that could reverse the decline in corporate virtue.     

The Intrinsic Value of Decision Rights

Philosophers, psychologists, and economists have long argued that certain decision rights carry not only instrumental value but may also be valuable for their own sake. The ideas of autonomy, freedom, and liberty derive their intuitive appeal—at least partly—from an assumed positive intrinsic value of decision rights. Providing clean evidence for the existence of this intrinsic value and measuring its size, however, is intricate. Here, we develop a method capable of achieving these goals. The data reveal that the large majority of our subjects intrinsically value decision rights beyond their instrumental benefit. The intrinsic valuation of decision rights has potentially important consequences for corporate governance, human resource management, and optimal job design: it may explain why managers value power, why employees appreciate jobs with task discretion, why individuals sort into self‐employment, and why the reallocation of decision rights is often very difficult and cumbersome. Our method and results may also prove useful in developing an empirical revealed preference foundation for concepts such as “freedom of choice” and “individual autonomy.”     

‘Physicians to a dying planet’: Helen Caldicott,Randall Forsberg,and the anti-nuclear weapons movement of the early 1980s

This article profiles two important leaders of the anti-nuclear weapons movement in the United States during the early 1980s. Helen Caldicott and Randall Forsberg were visionary, transformational leaders who crossed a variety of boundaries for the common good, and as such are prime exemplars of integrative leadership in action. Caldicott was a charismatic figure who used her status as physician and mother to rally a worldwide movement opposed to the ongoing proliferation of nuclear weapons and talk of “winnable” nuclear war. Forsberg was the main architect of the nuclear “Freeze” campaign whose humanitarian vision and common-sense approach to political action helped unite diverse segments of the American public around the Freeze proposal and push the Reagan administration towards disarmament talks with the Soviet Union. The article analyzes the leadership of both women in historical and social–scientific context, shedding light on two relatively unknown — yet important — social movement leaders whose stories have much to tell us about integrative public leadership, the challenges faced by women leaders, and the strengths and pitfalls of charismatic leadership.