BE-01-02 What is the Role of the Corporation in Society?

Wall Street Subway Mosaic, photo by epicharmus / Michael, http://www.flickr.com/photos/epicharmus/2519028591/ (Creative Commons Attribution 2.0 Generic). Wall Street Subway Mosaic
By epicharmus / Michael (CC)

This is lesson two of six on business ethics.

Here are links to the other five:

Lesson 01-01, Lesson 01-02

Lesson 02-01, Lesson 02-02

Lesson 03-01, Lesson 03-02

INTRODUCTION

At the 2008 World Economic Forum, Microsoft Chairman Bill Gates popularized the term "creative capitalism," meaning that profit generation and social welfare can go hand-in-hand.

Creative capitalism is representative of a growing school of thought that business should not only decrease its negative impact on society, but actively work to develop solutions to social and environmental problems—or at least help distribute the benefits of the private sector more widely. 

Approaches to this can take a variety of forms, including multistakeholder initiatives, industry-wide coalitions, social enterprises, public-private partnerships, and megacommunities.

Each approach has its advantages in sharing knowledge, financing, and expertise in an attempt to make services such as water supply or disease intervention more efficient, effective, and sustainable.

But collaboration among the private sector, government, and civil society also comes with risks. Private sector interests may encroach on policymaking, while the involvement of activists could politicize business decisions. Corporations may also end up taking on projects with low returns on investment, which could do more harm than good to society if they result in rate increases or termination of essential services.

What is the best way to promote sustainable business practices and solve global problems? How broadly should companies think when identifying partners and stakeholders?

INSTRUCTOR PREPARATION NEEDED

Familiarity with various forms of private sector involvement in social causes, as well as the different theories of business ethics covered in lesson BE-01-01: shareholder v. stakeholder theory, corporate social responsibility, philanthropy, and sustainable business practices.

LESSON PLAN

A. In-Class Assignment
Do: Present
If you were launching a business with a social goal in mind, what would that goal be? On what sector would you focus, and in which country (or countries) would you operate?

Create a brief description of your company and its mission. Present to the class your business plan based on the following considerations:

I. What are the potential negative and positive impacts of your core business operations on society?

II. Would minimizing any of the negative impacts affect your bottom line?
III. Are there market incentives for maximizing your company's positive impact?

IV. How will your business assess its social impact? Do you know enough about the needs of the community in which you operate to be aware of all of the ways in which it is affected by your operations?
V. Would your corporation require a Corporate Social Responsibility charter, or would you consider your core business operations to be socially responsible?
VI. Would you operate in partnership with other businesses, government, or civil society organizations? If so, which ones? 

B. Assignments to Be Completed in Advance
Read:
Bill Gates, "Making Capitalism More Creative," Time Magazine (July 31, 2008)

To make the most of private sector skills and abilities to innovate, according to Gates, we need a more creative capitalism: an attempt to stretch the reach of market forces so that more companies can benefit from doing work that makes more people better off.

Michael Kinsley, Creative Capitalism: A Conversation with Bill Gates, Warren Buffett, and Other Economic Leaders, (New York: Simon & Schuster, 2008)

Following Gates' speech at Davos, Kinsley gathered a series of responses and rejoinders from more than forty contributors, including economists, government officials, foundation heads, and more. The central questions debated are: Can charity and profit maximization go hand-in-hand? Is social good the responsibility of individual companies, or are there market imperfections and governance issues that should rather be addressed? How will the global economic crisis impact companies' good intentions?

Listen:
Christopher Kelly, "A Megacommunity at Work on Great Barrier Reef," Workshop for Ethics in Business (November 14, 2007)

Christopher Kelly of Booz Allen Hamilton explains how business leaders launched the Great Barrier Reef Foundation to coordinate scientific research and protect the ecosystem. Gradually a megacommunity formed around the foundation, uniting government, industry, and civil society through mutual leadership and distributed capabilities to solve their shared problem.

Watch:
Maggie Kohn, "Health as a Human Right: Rights, Roles, and Responsibilities," Workshop for Ethics in Business (December 2, 2008) [26:20-38:20]

As part of a six-person panel, Maggie Kohn of Merck & Company discusses the role and responsbilitiy of for-profit pharmaceutical companies in ensuring the "right to health," particularly in developing countries.

RELATED ETHICS QUESTIONS

A. How can the social impact of business activities be measured and assessed? Whose responsibility should it be to fund and/or carry this out?

B. Businesses generally have more capital at their disposal than government or non-governmental organizations. That said, what do businesses get out of partnering with the public sector? Do multistakeholder initiatives affect the bottom line?

C. By allowing all stakeholders to have a say in a company's operations, does "the megacommunity way" increase or decrease the complexity of corporate social responsibility? How can megacommunities (and other partnerships) be governed so that they lead to workable solutions?

D. Give concrete examples of what you would consider successful and failed examples of "creative capitalism." What are you basing your judgment on? Does the approach work more effectively with certain issues or sectors than others? Are there areas in which the public sector should retain complete control?

E. How does collaboration affect competitiveness? If CSR gives businesses an edge over competitors, should firms partner on social responsibility initiatives or create their own?

F. How much of a company's information should stakeholders have a right to in the name of transparency and collaboration? When is it legitimate for a corporation to keep secrets?

ADDITIONAL RESOURCES

Mark Gerencser, Fernando Napolitano, and Reginald Van Lee, "The Megacommunity Manifesto," strategy+business (August 16, 2006)

Public, private, and civil leaders should confront together the problems that none can solve alone.

Innovations

Innovations is an academic journal about entrepreneurial solutions to global challenges. It is jointly hosted at George Mason University's School of Public Policy, Harvard's Kennedy School of Government, and MIT's Legatum Center for Development and Entrepreneurship.

Vinod Kapur, "Pioneering Micro-Entrepreneurship Through Poultry Breeding And Distribution in Rural India," Innovations 3, no.1 (Winter 2008) [PDF]

Kapur tells the story of how Keggfarms was reinvented as a sustainable enterprise, based on a micro-entrepreneurship model in which poor rural villagers in India significantly increase their cash income by raising specially bred chickens.

Christina Madden, "Managing Water Well," Policy Innovations (February 19, 2009)

As water scarcity is fast becoming everyone's problem, it will take all parties to the debate working creatively to come up with solutions. Is privatization the answer, or should water remain in public hands?

"Partnering for Success: Business Perspectives on Multistakeholder Partnerships," 4th annual report, Global Corporate Citizenship Initiative, World Economic Forum (January 2005)

This 2005 report focuses on some of the innovative approaches that GCCI companies are taking to build partnerships with other private enterprises, government bodies, and civil society organizations to address key international development challenges. 

Resources: Social Entrepreneurship, Harvard Business School Social Enterprise Initiative

A selection of books, articles, case studies, and more resources produced by Harvard Business School on the topic of social entrepreneurship.

Jeffrey Sachs, "The Digital War on Poverty," Project Syndicate (August, 2008)

Extreme poverty is almost synonymous with isolation, especially rural isolation. Mobile phones and wireless Internet will prove to be the most transformative economic development technologies of our time.

Keith Slack, "Corporate Social License and Community Consent," Policy Innovations (November 21, 2008)

Moving beyond "social license" to respecting the principle of consent can be an effective way for companies and communities to control risks and create mutual benefits.

 

 

Read More: corporate social responsibility, stakeholder, profit

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