Is it already the first day of Spring Quarter? For the second year students this their final and most likely their least stressful one. For the first year students, Yay! you made it, you have an elective class...you have graduated.
As Jonathan mentioned in class, the purpose of this blog is to facilitate discussion among students about current events that are related to, or in addition to, the class discussions. Given the popularity of this issue, you should have no problem finding something interesting to "blog" about. Post your thoughts, respond to your colleagues and read the entries. The reason most of you are here is to learn and you would be surprised how much each of you can learn from one another. Let the blogging begin!
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Hi everyone. Great class tonight. I look forward to talking at greater length about social enterprise and Ethos Water throughout the course.
I forgot to announce an event scheduled to take place at Anderson later this week that might interest students in this class. Net Impact is sponsoring a talk on Corporate Social Responsibility that will take place Wed, April 2nd, 2008. 5:30-7:00pm at A201, Collins Center. I am moderating this panel that also will include Michael Besancon, President of the Southern Pacific Region of Whole Foods, and Joshua Stempel, a Senior Consultant at Brand Neutral.
Michael is a leading thinker in the field of social enterprise so I can assure you that this will be a fascinating session that will build on the discussion held in class this evenint. I hope that all of you can make it.
Where: UCLA Anderson Campus – A201, Collins Center
Speaking of American Apparel from last night, more trouble for those guys today:
http://www.foxnews.com/story/0,2933,344236,00.html
I am not sure what Woody Allen dressed as a rabbi has to do with the American Apparel brand or social responsibility.
Eli Broad is one of the founders of KB Homes or Kauffman and Broad Homes. He made is fortune in real estate and established private foundations to administer his philanthropic endeavors.
I'm posting a NY Times piece that was published last year about the decline of corporate giving in the arts. I think the most important take away from this piece is that corporations are looking for more "bang for their buck" or really, more marketing opportunities and tangible benefits for their contributions.
NY Times
February 21, 2007
Arts Organizations Adjust to Decline in Funding
By ROBIN POGREBIN
When the Altria Group announced in the fall that it was planning to spin off its Kraft Foods division, Wall Street cheered. But among cultural institutions, the response was considerably less upbeat: as part of the restructuring, Altria, formerly Philip Morris, is phasing out its significant support for the arts, which has funneled $210 million to cultural groups over the last four decades.
“It’s the end of an era,” said Sharon Gersten Luckman, the executive director of Alvin Ailey American Dance Theater. “Altria and Philip Morris supported dance and Ailey for over 25 years. They were at the forefront. There wouldn’t be an Ailey if it weren’t for them.”
Altria’s decision is just part of the changing landscape of corporate financing of the arts. Over the last decade, the portion of corporate philanthropy dedicated to the arts has dropped by more than half, according to the Giving USA Foundation, an educational and research program of the American Association of Fundraising Counsel. In 2004, the most recent year for which figures are available, support for the arts was 4 percent of total corporate philanthropy, compared with 9.5 percent in 1994 — part of a general shift in giving toward health and social services.
When companies do support culture, they are increasingly paying for it out of their marketing budgets, which means strings are attached to the funds: from how a corporation’s name will appear in promotional materials, to what parties it can give during an exhibition, to the number of free or discounted tickets available to its employees.
“Corporations are not Medicis; they never have been, they’re not supposed to be,” said Nancy Perkins, a senior vice president at Payne, Forrester & Associates, fund-raising consultants. “They’re not in business to be philanthropic.”
As a lead sponsor of City Center’s Fall for Dance program over the three years of its existence, Time Warner had its logo splashed on everything from 160,000 festival brochures to 150,000 regular-season brochures to 400 subway posters and 5,500 bus ads. Its gift was in the six figures, City Center said, declining to be more specific.
Arlene Shuler, president and chief executive of City Center, said providing this kind of exposure for a major sponsor was not a problem. In fact, she said, it was City Center’s idea to put the Time Warner logo on every ticket envelope. “We are very aware of the kind of recognition they deserve,” she said.
Time Warner was also happy with the deal, said Lisa Quiroz, the company’s senior vice president for corporate responsibility. Time Warner gives to arts groups whose activities have “a direct connection to our business,” she said, and Fall for Dance brought in audiences of different ages and ethnicities, one of the company’s goals.
“It’s becoming increasingly metrics-driven: you’ve got to show how your money has been leveraged and how that’s been to the benefit of your company,” Ms. Quiroz said. “Ten years ago, you didn’t hear people talking about measuring the impact of your dollars.”
Some arts groups say they welcome the shift as an opportunity to partner with corporations. Reynold Levy, the president of Lincoln Center — who has also served as president of the AT&T Foundation and is the author of the 1999 book “Give and Take: A Candid Account of Corporate Philanthropy” (Harvard Business School Press) — calls this “the sweet spot: the intersection between a company’s business interests and charitable need.”
The Metropolitan Life Insurance Company, for example, has for more than eight years been the exclusive corporate sponsor of the television series “Live From Lincoln Center,” underwriting it with $1.2 million annually and receiving, in return, a continuing association with a high-art program before a national audience.
Hovering in the background, cultural executives acknowledge, is the potential risk to an institution’s artistic autonomy: if companies have a say in some decisions, might they eventually demand it in others?
Ms. Perkins, the fund-raising consultant, said corporations were less interested in dictating programming than in exploiting it — as entertainment for their V.I.P. clients, for example, or for an image-enhancing connection with a high-end art form. “They’re not saying, ‘I want to see more of the “Bolero” and less of the Stravinsky,’ ” she said. “They’re looking to see the menu of opportunity for them.”
More worrisome, Ms. Perkins said, is the lengths to which an arts group may go to secure marketing support: “You’ve got to be careful that the art institution doesn’t turn itself inside out to get the money and lose their identity.”
Will Maitland Weiss, executive director of the Arts and Business Council of New York, a division of Americans for the Arts, which fosters partnerships between arts and business, agreed. “The challenge isn’t that evil Mr. Businessman is trying to trick you into doing something you don’t want to do,” he said. “The challenge for an arts group is to go into a meeting thinking strategically: ‘We want to reach this audience, you want to reach this market, and we’ll both win.’ ”
When the Metropolitan Opera approached Panasonic about simulcasting its opening-night performance of “Madama Butterfly” last fall, Panasonic was happy to donate its jumbo screen in Times Square. This season the Met has added Panasonic plasma screens in its lobby areas — clearly marked with the company logo — for latecomers to watch performances. The screens also show highlights from past performances, like opera music videos, throughout the day.
“I think it’s good that companies can justify their gifts to the Met through marketing,” said Peter Gelb, the Met’s general manager. “It’s up to institutions like ours to create opportunities for sponsors.”
The Brooklyn Academy of Music recently closed a $200,000 deal with Visa’s Signature card to sponsor its coming production of the dance-theater piece “Edward Scissorhands” with both cash and in-kind donations. In exchange, the academy will advertise the card free in its programs, post Visa Signature signs in its patron lounge and provide the company with a block of free tickets to the production.
That kind of support “requires much more hands-on servicing of a donor, but that’s fine; if that’s the pool of money they’re tapping, we’re thrilled,” said Lynn M. Stirrup, the academy’s vice president for planning and development.
Ms. Stirrup keeps track of just how the academy’s corporate partners are taking advantage of the benefits offered. “I want to be able to call those memories up and say, ‘We entertained X amount of people, here is you making a speech, here is the number of employees who took advantage of employee opportunities,’ ” she said. “They want to make sure the dollars they’re spending are worthwhile.”
But proving a return on investment can be tough for an arts group. “How do you quantify that in the arts?” asked Vishaka Desai, president of the Asia Society. “It’s not an impact you can measure in dollars and cents and number of hits.”
Since arts groups are vying for marketing dollars against major players, like sports events, they have to position themselves as partners. “We can’t compete with the numbers that a Nascar or the N.F.L. can provide,” said Karen Brooks Hopkins, the academy’s president. “What we can provide is a tremendous impact that’s targeted to a specific demographic.”
Making that case is difficult for smaller groups, like Elevator Repair Service, an avant-garde theater ensemble, which last year received $5,000 from Altria. “This was the only corporate funding we got,” said John Collins, the company’s artistic director. “As much as 5 percent of our gross income was coming from them at a certain point.”
Mr. Weiss of the Arts and Business Council noted: “It’s hard for small arts organizations to compete for sponsorships when businesses are looking for a breadth of reach. Sometimes I say to them: ‘If you can’t be part of a consortium, don’t waste your time. You’ve got an audience of 10,000; they want to reach people in the hundreds of thousands.’ ”
Those kinds of donations often involve specific high-profile programs or building projects that come with so-called naming opportunities. What has become more difficult to land — from both corporations and wealthy individuals — is general operating support. Altria was among the few corporations that provided such contributions.
Of the 272 arts organizations that received grants from Altria in 2006, for a total of $7.5 million, only about half will receive a grant in 2007, which may well be their last. “This year, the majority of grants we make will be final,” said Jennifer P. Goodale, Altria’s vice president for contributions. (The individual companies spun out of Altria may still support the arts, but they are not expected to do so at the same level.)
To try to make sure that other companies fill the gap, Altria has been holding events to introduce grantees to various corporations and writing recommendations on behalf of arts organizations. “I feel very optimistic that other corporations will step in,” Ms. Goodale said.
It is unclear whether that will happen. Given that, experts say, arts groups have no choice but to play ball in the marketing arena.
“Can we put a car onstage in the middle of ‘The Nutcracker’?” Mr. Weiss asked. “No, we’re not going to do that. But there is a lot of flexibility out there.”
Check out the latest 100 Best Corporate Citizens of 2008 announced by CRO (this list used to be published by the Business Ethics magazine for 7 years until it got acquired in 2006 by CRO).
Interesting to see that 19 utility companies are represented in this year's release. Not an industry that would leap to the mind when you think of CSR.
The good news is that 3 companies Intel, Cisco and Starbucks are doing something right. They have consistently appeared in all the 9 surveys. Its definitely possible to look after the bottom line, without sacrificing one's corporate as well social responsibility.
Fittingly, there is also a penalty box which identifies companies involved in scandals, with a chance for a reprieve only 3 years after the settlement/fine etc.
Anyway, hope this is a good starting point for some of you for our white paper.
100 Best Corporate Citizens 2008
Mastercard:
Someone said that Mastercard was a non-profit organization until it went public. I have been trying to research this fact and I see that they became a "private-share corporation" in 2002 and they went public in 2006 (IPO). Is anyone aware of any sources that cite Mastercard being a non-profit?
(http://www.mastercard.com/us/company/en/ourcompany/the_mastercard_story.html)
Hi guys! I enjoyed our first class together and hearing everyone's perspectives.
I left our last class a bit puzzled - I am not sure I understand why a company's intentions matter if its operations benefit society or the environment. It seems like we expect "socially responsible" companies to act that way out of the goodness of their leaders' hearts.
Is it really so terrible that they might do so to boost their brand image and make profits? If in the end society or the environment is better off, is it bad if a company focuses on boosting its bottom line?
I'd love to hear your thoughts.
A public company must make decisions that enhance shareholder value. I think the biggest obstacle to companies making changes for the social good are concerns that these actions will hurt profits and therefore shareholder value.
Absent government policies and enforcement that penalize free riders, corporations must seek out opportunities to provide environmentally friendly/fair trade products to target consumers that value them. To a certain extent corporations can even serve to pull more consumers into the group that cares about these products.
I just read Collapse by Jared Diamond. I thoroughly recommend the book.
Synopsis (from Wikipedia)
In the prologue, Diamond summarizes Collapse in one paragraph, as follows.
“ This book employs the comparative method to understand societal collapses to which environmental problems contribute. My previous book (Guns, Germs, and Steel: The Fates of Human Societies), had applied the comparative method to the opposite problem: the differing rates of buildup of human societies on different continents over the last 13,000 years. In the present book focusing on collapses rather than buildups, I compare many past and present societies that differed with respect to environmental fragility, relations with neighbors, political institutions, and other "input" variables postulated to influence a society's stability. The "output" variables that I examine are collapse or survival, and form of the collapse if collapse does occur. By relating output variables to input variables, I aim to tease out the influence of possible input variables on collapses. ”
—page 18
Diamond lists eight factors which have historically contributed to the collapse of past societies:
1. Deforestation and habitat destruction
2. Soil problems (erosion, salinization, and soil fertility losses)
3. Water management problems
4. Overhunting
5. Overfishing
6. Effects of introduced species on native species
7. Human population growth
8. Increased per-capita impact of people
Further he says four new factors may contribute to the weakening and collapse of present and future societies:
1. Human-caused climate change
2. Buildup of toxic chemicals in the environment
3. Energy shortages
4. Full human utilization of the Earth’s photosynthetic capacity
The root problem in all but one of Diamond's factors leading to collapse is overpopulation relative to the practicable (as opposed to the ideal theoretical) carrying capacity of the environment. The one factor not related to overpopulation is the harmful effect of accidentally or intentionally introducing nonnative species to a region.
Diamond also states that "it would be absurd to claim that environmental damage must be a major factor in all collapses: the collapse of the Soviet Union is a modern counter-example, and the destruction of Carthage by Rome in 146 B.C. is an ancient one. It's obviously true that military or economic factors alone may suffice" (p. 15).
Tiffany,
Your comments are interesting because the Friedman article for next week speaks to some of what you addressed. Friedman and other similar thinkers like Henry Manne (http://www.opinionjournal.com/editorial/feature.html?id=110009295) argue that the manner in which businesses impact society should exclusively be from creating jobs and making profits for their shareholders. Friedman also states that businesses must avoid taking on the roles of societal structures (ex. government, non-profits) so that the market can avoid socialist tendencies and continue to operate in a free and efficient manner.
Some of Friedman's logic rests on the idea that the corporation is a business entity, not an individual, and that corporations that engage in socially responsible practices do so because of the self-interests of a few individuals. However, as pointed out in the movie 'The Corporation' (http://www.imdb.com/title/tt0379225/), a decision by the American courts in the late 18th century ruled that a corporation is legally a person. I believe that by being deemed a person, corporations lost their ability to operate exclusively in a context of 'the business world.’ This ruling ultimately shifted societal perception of business from isolated instruments of the free market and to members of the society at-large. Essentially, Friedman's concern about the blending of the free market in general society occurred long ago and the trends we have seen are manifestations of this change.
As you pointed out, socially responsible policies could ultimately lead to increased profits, market share, and stable customer loyalty (ex. the continued purchase of Tylenol following a widespread contamination of the product). These policies could also be used as a competitive advantage for companies who have strong social responsibility policies or good public relations departments (depending on your view of the intent of corporations). Beyond that, if formulated with measurable goals and outputs in mind, these policies can have a very powerful and positive impact on society as a whole.
What is most important is that a free market can only remain free if there is a society around to support it. If we wish the free market to continue to operate in the long-term future, we will need to create and use products, services, and methods that create a sustainable existence for all life on this planet. Slowly, governments, non-profits, and entrepreneurs are taking these steps now, and progress will come. In terms of sustainable products and services, it may be a while before companies can profitably supply the market with consumer products and services that address sustainability issues and are affordable to members of all income classes. For now, the goodwill policies used by companies are benefiting society in one way or another, so I'll take what we are being offered by the business community. I’m just looking forward to figuring out ways to accelerate the proliferation of successful sustainable products in the marketplace.
Wow! It's great when someone else sums up your own thoughts so succinctly. Thanks Chris!
I would also add that what is interesting to me is not just the motivation to become socially responsible but the motivation to remain socially responsible. While I would love to believe that socially responsible = profitable; this is probably a tad naive. So...what happens when a company makes socially responsible changes or even starts off as a responsible company (this is social entrepreneurship) as a way to increase profits and then finds those changes not profitable. If the motivation is purely profit, won't the company revert back to its old ways? This seems to put the owness for maintaining socially responsible practices on the consumer rather than the company.
Most of us are familiar with Kermit the Frog's famous words, "It's not easy being green."
Well, as evidenced by The Economist book review of The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World
By John Elkington and Pamela Hartigan, Corporations are experiencing Kermit's angst. As detailed in the following article:
http://www.economist.com/books/displaystory.cfm?story_id=10601356
Social entrepreneurs are experiencing challenges with:
- Raising capital
- Inability to replicate social enterprise on a large and impactful scale
The most interesting question raised by the article brings up the chicken or the egg dilemma, does a social enterprise rise as a by-product of a larger for-profit enterprise looking to expand a market (i.e. Tata Motors) or can a social enterprise rise to prominence and impact independently?
Additionally, The Economist has explored the demand side of the equation. In the following article:
http://www.economist.com/specialreports/displaystory.cfm?story_id=10491144
The Economist ventures to understand the psychology of the consumer, especially as it relates to "ethical buying." What is most interesting in this, is the counter-intuitive findings of the experiment noted in the first paragraph, where as prices are increased for "ethically labeled" goods, the demand for such goods increases as well.
Robert -
The conversion happened when they switched from a "membership organization" comprised of member banks to a private corporation. Many nonprofits are membership organizations (like MasterCard was) and have certain rules they need to follow to maintain their nonprofit status. A good comparison is a bank versus a credit union (another membership organization).
From MC's website:
2002 – Converted from a membership association to a private share corporation
2006 – Transitioned to a new corporate governance and ownership structure. MasterCard Inc. begins trading on the New York Stock Exchange under ticker symbol MA. Introduced new corporate name, MasterCard Worldwide, and adopted a new corporate signature and tagline, The Heart of Commerce™
Finally, here is a decent explanation of Visa and MasterCard's tricky status (and a summary of the antitrust case against them):
"Visa and MasterCard are non-profit, joint venture associations comprised of thousands of financial institutions; each has a board of directors that includes executives from their member
institutions. The associations authorize their members to issue credit and debit cards bearing the
trademarks the associations own. Membership is open to any qualifying financial institution; by joining either association, a financial institution may issue that association’s credit cards.
Financial institutions may belong to both associations simultaneously."
http://www.wilmerhale.com/files/Publication/c63ce905-c4da-4f6a-8bf5-1f42ac052625/Presentation/PublicationAttachment/834d3b45-369b-487b-961d-787efea6e739/ACFBB8.pdf
I wanted to add a small item to last week's discussion about the social responsibility movement. Somewhere in between the reasons mentioned by Adam and Stacey (increased awareness/consciousness and improved technology) is an improved understanding of the environmental repercussions of our behavior. Books like Silent Spring and Gore's movie have increased the average citizen's understanding and concern about pollution and the environmental impact of corporate (as well as governmental and individual) actions. Without the research published in the last 40 years, people wouldn't know the exact risks associated with exposure to certain chemicals and would continue to trust what the government or corporations tell them. Out of an improved understanding of environmental risks, people have started to demand change...
Aimee--i think you brought up a great point on how the companies make decisions to invest in socially responsible projects and what principles should guide those decisions. While profitability has to be a top concern, I think Porter's article mentions the challenges of precisly measuring the impact of socially responsible actions, which would also translate into challenges of linking these actions with profitability. Thus, it would make it fairly difficult for a corporation to assess whether their CSR programs are "profitable" or not at least from a short or medium term perspective. Yet, the article further points out that perhaps the way to solve this dilemma is to engage in strategic CSR which utilizes the company's resources most efficiently to accomplish a social mission while contributing to its long-term competitive position.
I agree with the chain initiated by Tiffany by questioning the importance of "intention" by a company in conducting socially responsible activities. I've always agreed with the Friedman school of thought that companies should answer primarily to their shareholders, and any focus on the social good should be aligned with shareholder interest. I believe the latter is beginning to occur with greater frequency given the recent publicity of "green" and sustainable practices in the press. Whether simply through reputation, or through strategic business decisions, being socially responsible is increasingly in the best interest of shareholders.
In response to Aimee, I agree that the lack of an altruistic intention, requires that sustainability lead to higher financial returns, otherwise company managers will decide that such practices are no longer necessary. This leads to Oxana's comment about the need for concrete metrics and transparent information about the actual social impact. The problem is that unlike quarterly earnings, the impact of sustainability can be very long-term and not easily recongnized within the tenure of specific managers. Further, while reputation is firm-specific, the benefit of operating in a healthy economy can lead to the incentive for firms to "free-ride" on the activities of others (as mentioned by Prof. Greenblatt in class).
In order to continue to build on the current socially responsible movement, there must be improvement in identifying, measuring, and communicating the potential benefits of social impact. How can firms quantify each of these decisions in terms of metrics they can reasonably explain to shareholders for both short-term and long-term success? For every company that builds ratings, such as FTSE4Good Index, there are critics in the audits of these ratings. In addition, as Porter states, each company should focus on different CSR objectives that align with their business operations, thus making apples-to-apples comparisons even more difficult.
Hi all,
I was able to attend the discussion panel on CRS last Wednesday and wanted to share some thoughts I had based on that discussion / chime in on a continuing thread from above.
One of the things that struck me relates to our conversation in class and here about “how far” a company has to go to be acting in a socially responsible manner, and what their intentions are/should be (see: Tiffany / Ryan / others above). Michael Besancon of Whole Foods discussed how Whole Foods takes actions that contradict the traditional single bottom line, such as dropping products that don’t conform with Whole Foods’ criteria for being on their shelves, even if those products are among the highest revenue generators. They do calculate the loss of revenue that will result from dropping a product, yet it doesn’t stop them (at least not always), and they still have the highest bottom line for food markets in the U.S. in terms of percentage sales. So do companies, which don’t necessarily use a triple bottom line like Whole Foods does (“People, Planet, Profit”, Michael said), have to contravene their bottom line in order to be socially responsible? Or is going just as far as actions help your bottom line (i.e., stay "true" to shareholders) sufficient?
It made me wonder as well if in order to take revenue-decreasing actions such as Whole Foods does, a company has to be rooted to its core social/environmental values from its inception, and/or have a well-established culture of the company that makes it clear taking actions that hurt profit is acceptance and expected. Could companies without such well-established values take such actions and replicate the success Whole Foods has enjoyed? There’s also the question of how extensive your CSR-type actions must be to avoid getting the “greenwash” label (which Whole Foods earned from some critics for offsetting their entire nation-wide energy consumption by purchasing wind energy credits).
To take a crack at addressing my own questions…I agree with what Ryan said at the beginning of his post above, that “being socially responsible is increasingly in the best interests of shareholders.” I think there is relevant insight from the Porter and Kramer article as well, specifically the need to transition CSR thinking into “corporate social integration” and to undertake strategic efforts that realize and create shared value, where both the company and society are going to benefit. As Porter and Kramer stated, “Organizations that make the right choices and build focused, proactive, and integrated social initiatives in concert with their core strategies will increasingly distance themselves from the pack.” Whole Foods seems to operate within this model, and I would think that any company that embraces Porter and Kramer’s approach will find success without necessarily having a similar and well-established culture or triple bottom line metric.
To conclude...here's a statement Michael made during the panel, discussing the decision to eliminate plastic bags at Whole Foods as of Earth Day 2008: “We think doing the right thing will get us to the place we need to be, and ultimately the bottom line as well.”
Here's a link to an article published in GuideStar that might be of interest as we full-timers and career switchers prepare to make some important career decisions...
http://www.guidestar.org/DisplayArticle.do?articleId=1197
The article cites several sources that make a compelling case for hiring MBA's to work in the nonprofit sector. It also outlines challenges inherent in recruiting top MBA talent to work in this sector.
Empirically it seems that many nonprofits, large and small, are recognizing that, while important, passion alone cannot create a sustainable enterprise. Good, sound business fundamentals still apply -- no matter what your mission statement reads.
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