Tuesday, February 15, 2011

Shared Value:new corporate strategy...wrong note, bad source

Michael Porter, Professor at the Harvard Business School, spent an hour this morning defining and defending his theory of shared value for corporations, in a conversation hosted by Tom Ashbrook (NPR's On Point) and joined by Robert Reich, former Secretary of Labour in the Clinton administration, now a professor of Public Policy at UC Berkeley.
Porter's contention is that, contrary to the approach of something called CSR (Corporate Social Responsibility) which he says was an 'add-on' to corporations' agenda, to satisfy a growing complaint that big companies don't give a "rat's ass" about their social responibility, corporations should (and he says some are) changing their vision to one of shared value, that is of meeting the needs of their communities and the people in those communities, as an integral part of their "doing business" and therefore as an integral part of their profit strategy. The notion of investors' demand for higher returns on their share purchases, along with the pressure from the consumer for more value at lower prices, according to Reich, has made it difficult for corporations to serve these different masters.
However, while Reich supports the vision of Porter and his co-author, he says he has spent too many years working against a very strong initiative from those same corporations trying to wiggle out of regulations that were imposed because the companies did not wish to operate within guidelines established by government, for example, to protect the environment, or the safety of workers.
Consequently, Reich, and several callers to the On Point program, doubt whether it will be possible, feasible or just moondust, to think about Porter's vision taking shape among corporate leaders.
Turning the capitalist system loose on the society's needs, like improved health care for the workers in those companies, and like improved housing for the poor in the towns and cities where the factories and companies are located...is the kind of outcome Porter is painting of the future.
However, as we listened, we were struck by Porter's concept of placing the corporate leadership out front on what is obviously a curve to bring social needs back into the equation for all citizens, and by taking the lead, they might enhance the opportunity to guide, shape and take profit advantage of the thrust. Capitalism has not recently been endowed with leadership that exemplified a social conscience, even if that conscience were linked to the potential for profit for those corporations, and their shareholders. And to think that governments might be willing to grant regulation-negotiation opportunities to those same corporate leaders, among them the gang from Wall Street,  when the public has been so serverely burned by the excessive profits, evasion of tax through lobbied loop-holes, generated by buying those same politicians....that is a picture that creates its own dose of excess scepticism.
In the vernacular, "It ain't going to happen!"
There is, according to one caller, a current constitutional amendment that would require corporations to acquire a charter for their operations, to last for ten years, and to be re-applied for and re-acquired before a "court" of local citizens much in the manner of a Grand Jury, in the U.S. The charter would state agreed-upon goals and objectives, that had been negotiated between the local citizens and the corporate leaders before the corporation was permitted to conduct business in that municipality.
Whether such an amendment has any chance of passing is anyone's guess. It is, however, on the floor of the Congress.
Nevertheless, there are other steps that might help to turn the tide away from this religion of corporatism (see John Ralston Saul, The Unconscious Civilization, 1995).
First, we need to de-couple the corporate lobbyists from the politicians through election finance reform that removes private dollars from buying both campaigns and the elected candidates. And then we need to re-educate the business school lecturers who have pumped the "for profit" and for personal gain and the largest gain through the shortest route is the best for their innocent students....they need to teach a different business model and ethic, including the pursuit of a reasonable pay schedule and the balance of a healthy lifestyle, not only for female executives (enlightened) but also for male executives. Let's get the gender equality thing addressed within the corporations before we start taking profit to meeting society's needs.
And they need to teach the advantages and even the need for organized labour in all workplaces. Let's get past the bogeyman that unions break corporations, when reality is precisely the opposite. A good place to start that learning would be at the Harvard Business School.
In Singapore, because of Harvard Business school graduates, the political leadership has their stipend tied to the GDP of the country. The higher the GDP, the higher the politicians' salaries
I, for one, would not even offer my name for election in such a system. Imagine, the Harvard Business School being responsible for such a perversion of democracy in favour of the corporation.
Trying to take the the lead, by putting the corporations in front of this curve, as a significant and overdue attempt to restore some dignity and honour to the reputations of those corporations who have yet to atone for their decades of abuse of the system (including their people, the environment and the public) will not fly...and the Harvard Business School does not have the credibility even to put the item on the agenda, in spite of the good intentions of Professor Porter and his colleague.

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