| 10.3 Misery Loves Companies | |
|---|---|
| Tweet Topic Started: Aug 1 2012, 06:04 PM (64 Views) | |
| johnpatrickcoffman | Aug 1 2012, 06:04 PM Post #1 |
|
Margolis, J.D. & Walsh, J.P. 2003. Misery loves companies: Rethinking social initiatives by business. Administrative Science Quarterly, 48: 265-305. Reviewed By: John Coffman Vast amounts of research have been performed on linking corporate social performance (CSP) initiatives to corporate financial performance (CFP). Though none of the research results are without controversy (Sampling problems, Reliability and validity of CSP and CFP measures, Omission of controls, Opportunities to test mediating mechanisms and moderating conditions, No causal link between CSP and CFP), many studies have shown a positive relationship, and very few have shown a negative relationship between CSP and CFP. One key dilemma exists, and neither explaining why it is not a dilemma, nor describing how CFP and CSP can exist harmoniously is adequate. That is, economic theory clearly indicates that CSP initiatives impose disadvantages to the firms, thus their shareholders. Despite the wide acceptance of the disadvantages of CSP to the firm, CSP is pervasive in most firms today—and is only growing. Thus, the authors recommend a pragmatic approach to analyzing CSP. They do not offer a hypothesis of whether or not CSP is right for a firm. They accept that CSP is part of the current (and future) business environment. Therefore, they propose a framework by which managers not only accept the apparent discrepancy between the two agendas, but that they use those discrepancies to better define their purpose and to make the appropriate trade-offs. The article proposes that managers take 3 steps prior to making a decision about launching a CSP initiative: 1. Identify the objectives, duties, and concerns implicit when considering a CSP. • How does the firm reconcile shareholders claim on the resources used for the CSP? • What about efficiency of resources? Wouldn’t the resources be better used (thus better for society) if used to leverage their core capabilities? • Shouldn’t stakeholders have the right to make those decisions about allocation, as opposed to management? 2. Analyze the specific situation which posed the question of how to act. • Has the company contributed (or caused) the human misery? • Does the company benefit from the situation which is causing human misery? • What about beneficence—the duty to promote well being for others, “an individual need only aid others to the extent that would be required were everyone to comply with the duty to aid others.” 3. Identifying how competing considerations result in a course of action. This requires the manager to consider 4 viewpoints. • Features of the problem—proper response depends upon the significance of the issue • Features of the firm—Firm’s relationship to the problem (did they cause it, are they benefitting from the problem, etc.) • Features of the impact—Can the firm really make a difference? Are they causing more harm than good? • Boundaries—Will the firm exacerbate the problem? Are they better suited to let others fix the problem and they focus on their core capabilities (which are assumed to benefit society already) The article was an excellent review of the CSP topic and the implications for a profit maximizing firm. However, I found it a bit disconcerting that the article spent 20+ pages discussing this topic, and then presented their proposition that we essentially ignore the question of whether or not CSP initiatives are consistent with economic theory. The framework the authors provide is an excellent analysis of how a manager should approach the decision to initiate any project, not just CSP. But I still think it completely ignores the manager’s fiduciary responsibility. Though I am most certainly empathetic to the world’s problems, and I would love to contribute to ending human suffering, I do not believe that this should be the business of for-profit institutions owned by non-managing shareholders. Shareholders give management their money so that management can leverage the company’s core competencies to increase the value of their investment. Any other use of the funds is by my definition, mismanagement. I liken it to a conglomerate. If an investor wanted to diversify his/her investments, he/she would simply invest in multiple companies. The investor does not need the company to make that decision for him/her. Likewise, if an investor wants to use his/her money to end human suffering, there are other avenues in which he/she can make that conscious decision. There are a few exceptions to this, of-course. As the article pointed out, the contractarian model indicates that if a company has, as part of its business model, CSP initiatives; and the investor is well aware of this prior to his/her investment, then CSP initiatives may be acceptable as this is an agreement between the shareholder and the company (similar to the Ben and Jerry’s model). Furthermore, if there can be shown a direct causation between a CSP initiative and positive bottom line performance, then of-course the company should initiate the project—as in the connected capitalism initiatives lauded by Neville Isdell. Finally, many CSP initiatives may fit under the umbrella of good marketing. If the company can show that the project fits into this mold, provide metrics to determine success of the marketing campaign, and clearly charge the campaign to the marketing budget, then these initiatives are acceptable as well. In short, I thought the author’s review of the concept was very thorough. I thought that they provided an excellent framework for any management decision making process. However, I think that the authors stopped too short of making real impact by starting their pragmatic approach off by assuming that corporations can have lasting positive impact on social issues. After all, if CSP does not make good sense, the market will eventually punish the corporation forcing them to stop. Thus, the initiative is unsustainable. |
![]() |
|
| 1 user reading this topic (1 Guest and 0 Anonymous) | |
| « Previous Topic · Session 10 | Leadership and Global Ethics: Universal Values in a Pluralistic Society · Next Topic » |
| Track Topic · E-mail Topic |
12:39 AM Jul 11
|
Theme by Rae of the ZetaBoardsThemeZone.



10.3_misery_loves_companies_j_coffman.docx (15.6 KB)



12:39 AM Jul 11