Maxine Rich

Shared Value - changing the corporate mindset

Sat, 19 Nov 2011 02:29:53 -0500

Michael Porter and Mark Kramer’s work on “Shared Value” has sparked much debate since its publication earlier this year (see my post below). There has been much discussion as to whether their approach is viable, or even sustainable in the corporate context.

One of the more interesting blogs since then has come from Valerie Bockstette who discusses how companies are beginning to change from a “safety net” mindset when it comes to social objectives to a “trampoline” approach. She discusses the way Audi has shifted its objectives from simply making a car out of renewable energy, to assisting in the development of excess renewable energy capture.

Her blog is both interesting and practically based.

HBR Blog Network

VALERIE BOCKSTETTE

Valerie Bockstette, HBS MBA 2005, is a Director at FSG and has over ten years of experience in advising leading organizations in Europe and the U.S. on issues of strategy, evaluation, and organizational capacity.

Create Shared Value with a Trampoline Approach

8:16 AM Wednesday November 16, 2011
by Valerie Bockstette | Comments (0)

Too often companies approach their engagement with social and environmental issues with a safety net mentality: reacting to vocal stakeholders, minimizing risk, doing the bare minimum to comply with standards, and at best, striving for footprint reduction rather than ecological value creation.

This approach is nowhere near enough to tackle the pressing problems we all face — water scarcity, low quality education systems, an aging population in some parts of the world, a rapidly growing one in others, and so on. Indeed, I see some of our most vexing societal problems as opportunities for the private sector. But these are opportunities that can only be seized through a different approach: a trampoline approach.

A trampoline approach is one that is focused on value creation, not the mitigation of value destruction. An approach that turns societal challenges into new markets. Safety nets prevent things from falling; they are responsive and defensive. But trampolines propel things forward.

Creating shared value, a paradigm for how companies engage with society pioneered by Michael Porter and FSG, captures this trampoline mentality very well. Michael Porter and Mark Kramer argue that shared value encompasses corporate policies and practices that enhance the competitiveness of a company while simultaneously advancing social and economic conditions in the communities in which it operates. When corporations create shared value they increase their profits and create greater social impact, resulting in powerful transformations and innovations in both business and society.

Last month, I had the privilege of attending and speaking at a conference about innovation, and specifically, about how shared value can infuse new innovation into companies competing in the 21st century. One of my fellow speakers, Reinhard Otten from Audi, introduced a new initiative where Audi will become a trampoline for the whole renewable energy movement in Germany. Audi is seeking to build a car that is carbon-neutral — one that when driven does not create any new net emissions. This is laudable, but I would argue somewhat safety-net oriented, as Audi is merely joining its competitors in an inevitable trend for the automobile industry.

But Audi is not stopping there. Audi believes that in order for the car to be truly carbon neutral, it needs to be manufactured using only renewable energy. Easier said than done it, turns out! Germany benefits from wind farms and solar energy, and in any given year from net excesses of these renewable sources of energy. However, Germany currently lacks the capacity to store excesses from sunny or windy days at scale, meaning that on the many days of deficits in these renewable sources, conventional sources of energy are still needed. So Audi has decided to become a trampoline. Audi helped spearhead a technology solution to this problem, which will enable excess renewable energy to be captured, stored, and used in its production processes. While this is good for Audi, it is also good for the country and society as a whole, as this solution was badly needed to move toward more renewable energy.

This initiative is new, and it is too soon to tell if it will work at scale the way Audi hopes it will. But it is energizing to see that a car company — which in the old paradigm of safety nets could have easily said that helping to solve Germany’s energy storage problems was not part of its mandate — has decided to become a trampoline for renewable energy.

In the world of shared value, companies need to ask themselves a broader set of questions to compete:

What are the key societal issues in my company’s context? If you’re a car company like Audi, you are worried about access to renewable energy. If you’re a healthcare technology provider like GE, you’re worried about the healthcare sector at home and abroad. Or, if you’re an F&B company like Nestlé, you’re worried about the practices in your supply chain.

Which of these are impeding growth (or representing untapped markets)? In Audi’s case, it is the inability to capture daily excesses in renewable energy. In GE’s case, it is the quality, cost, and access issues plaguing healthcare, and for Nestlé, it is excess water use in agricultural production.

How can I — and capable partners from all sectors — actively solve the problem? For Audi, it is engineering an energy storage solution in cooperation with multi-sectoral partners. For GE, it is the multifaceted healthymagination campaign. And for Nestlé, it is working with agronomists to help hundreds of thousands of smallholder farmers improve their farming practices.

It is easy to be a safety net; you just react to trends, regulations, and loud voices that fall into your lap. It is much harder to be a trampoline and to spot opportunities for societal progress and competitive advantage proactively. However, in the 21st century companies with safety-net mentalities will soon find themselves in need of one. Only a trampoline mentality will allow companies to successfully compete in this world.

Sculpting the 'flexible' corporate form - providing for companies with both "for profit" and "not for profit" objectives

Sat, 19 Nov 2011 01:51:00 -0500

One of the more vexing issues confronting new social ventures, is how to structure the form of organisation to get the benefit of tax exempt charitable status while having a business which may produce profits. Additionally, where an organisation is set up as a company, how does the not for profit attract directors who, on the one hand will not be paid for their work, but on the other, face the full suite of liabilities in the event of a mis-step or failure by the company.

In California, the state has introduced laws for two different types of corporation - each of which tries to grapple with and make provision for these issues. Gibson Dunn, lawyers, in California have written an excellent summary of the provisions of the two types of corporation which I have set out below.

These legislative provisions are the first steps in recognising that social ventures no longer necessarily fall within the traditional “charity” structures. Moreover, they attempt to address some of the difficulties facing directors of social venture organisations which are organised as a company.

We need to stoke the dialogue in Australia to help foster a regime which provides protection to directors of such corporations, whilst also introducing some flexibility in the types of corporation which fall within the tax exemption for charitable institutions.

Here is how the State of California is attempting reform.

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October 25, 2011

CALIFORNIA ADOPTS TWO NEW CORPORATE FORMS TO ADVANCE SOCIAL BENEFITS

To Our Clients and Friends (of Gibson Dunn, Lawyers):

On October 9, 2011, California Governor Jerry Brown signed into law competing bills that create two new corporate forms in California — a “flexible purpose corporation” and a “benefit corporation” — intended to allow entrepreneurs and investors the choice of organizing companies that can pursue both economic and social objectives. The new corporate forms differ from traditional for-profit corporations that are organized to pursue profit (and not social purposes) and non-profit corporations that must be used solely to promote social benefits. These laws will take effect on January 1, 2012.

The flexible purpose corporation is created by California Senate Bill 201 (“SB 201”), which adds Division 1.5 to Title 1 of the California Corporations Code (the “Code”) and amends other related sections of the Code, and the benefit corporation is created by California Assembly Bill 361 (“AB 361”), which adds Part 13 to Division 3 of Title 1 of the Code. State Senator Mark DeSaulnier authored SB 201, and a full copy is available here. AB 361 was authored by Assemblyman Jared Huffman, and a full copy is available here. Both new laws take effect January 1, 2012.

Background

The new laws offer two versions of a solution to an identified gap in the Code and the corporate laws of many states. Existing law in California permits formation of for-profit corporations that operate within a construct that places interests of shareholders, and specifically return to shareholders, as the primary, if not sole, objective of the corporation and its various agents. A corporation might engage in philanthropy, act in an environmentally conscious manner and promote employee- or community- friendly policies, to name a few, but such pursuits ultimately are rationalized in the corporate governance context as being acts taken to promote long-term value growth for shareholders, and directors of a corporation could face exposure if they lean too far in favor of social objectives at the expense of shareholder returns. In contrast, a non-profit corporation in California is mandated to serve public interests and is specifically prohibited from pursuing private gain. A non-profit corporation that strays too far toward profit-producing activities risks action by the State Attorney General and loss of tax-exempt status (if applicable). This has left a gap for some entrepreneurs and investors that desire a business vehicle which can pursue both profits and social objectives.

SB 201 and AB 361 are the result of efforts by two groups working over the last two years to introduce a new “hybrid” corporate form in California. SB 201 originally was written by a group of corporate attorneys from major law firms in California, including this firm, who sought to create a new “flexible” form of corporation in California that would allow shareholders to devise their own mix of economic and social corporate objectives, ensure that future investors would have adequate notice of the purposes pursued, and provide protections to ensure that the new corporate form is not easily foisted upon shareholders of traditional corporations. AB 361 resulted from efforts of B Lab, a non-profit organization that offers certification of corporations as “B corporations” (which B Lab describes as “a new type of corporation which uses the power of business to solve social and environmentalpurposes”) and promotes adoption of benefit corporation legislation in states across the country. Enactment of AB 361 follows the adoption of similar benefit corporation legislation in Hawaii, Maryland, New Jersey, Vermont and Virginia. The fact that both SB 201 and AB 361 were enacted is likely to create confusion going forward among entrepreneurs, investors and lawyers as they try to understand differences among the new entities and traditional for-profit and non-profit corporations (as well as limited liability companies and limited partnerships). Both of the new entities will be taxed the same as for-profit corporations under current tax law.

Flexible Purpose Corporations

A flexible purpose corporation will be set up much like a traditional for-profit corporation, with shareholders and a board of directors, but its articles of incorporation and share certificates must state that it is organized as a flexible purpose corporation, and its articles must identify a “special purpose” from the following list:

(1) One or more charitable or public purpose activities that a nonprofit public benefit corporation is authorized to carry out; or

(2) The purpose of promoting positive short-term or long-term effects of, or minimizing adverse short-term or long-term effects of, the flexible purpose corporation’s activities upon any of the following:

(a) The flexible purpose corporation’s employees, suppliers, customers, and creditors; (b) The community and society; or (c) The environment.

The obvious breadth of potential purposes was intended by the drafters of SB 201 — to allow shareholders to define their desired special purposes without regard to what third parties might deem to be valid or desirable societal objectives.

A flexible purpose corporation can amend its “special purpose” by amending its articles of incorporation. If the amendment would materially alter any special purpose stated in the articles, such amendment must be approved by the affirmative vote of at least two-thirds of the outstanding shares of each class of the corporation’s stock, or a greater vote if required in the articles, regardless of whether a class is entitled to vote, and a majority of the outstanding shares of all classes entitled to vote. A similar vote is required for a flexible purpose corporation to amend its articles to convert into a traditional California corporation (which can be done by amending the articles to eliminate the special purpose provisions). A unanimous vote of all shareholders, regardless of whether shares are entitled to vote, is required to amend a flexible purpose corporation’s articles to convert it into a non-profit corporation.

In discharging his or her duties, a director of a flexible purpose corporation “may consider those factors, and give weight to those factors, as the director deems relevant, including the short-term and long-term prospects of the flexible purpose corporation, the best interests of the flexible purpose corporation and its shareholders, and the purposes of the flexible purpose corporation as set forth in its articles.” SB 201 specifically states that there shall be no private right of action created for members of the public to sue a flexible purpose corporation for failure to pursue or achieve its special purposes, and directors are not responsible to any parties other than the flexible purpose corporation and its shareholders.

A flexible purpose corporation’s board of directors is required to send an annual report to shareholders each year that includes a management discussion and analysis (MD&A) concerning the short-term and long-term objectives of the entity relating to its special purpose or purposes, the material actions taken during such year to achieve such objectives, the impact of such actions, and the causal relationships between the actions and outcomes, future material actions expected to be taken in the short-term and long-term to achieve the entity’s special purpose objectives, the measures used to evaluate the entity’s performance in achieving its special purpose objectives, and any expenditures incurred in achieving these objectives. The entity’s board of directors also must make the annual flexible purpose MD&A publicly available by posting it on the entity’s website or providing it through similar electronic means.

Flexible purpose corporations also must send to shareholders and make publicly available current reports summarizing (i) any expenditure or group of expenditures that are likely to have a material adverse impact on the entity’s results of operations or financial condition for a quarterly or annual fiscal period or (ii) any decision by the board or action by management to (a) withhold expenditures that were to have been made in furtherance of the entity’s special purpose where the planned expenditures were likely to have a material positive impact on the entity’s impact in furtherance of its special purpose objectives or (b) determine that the special purpose has been satisfied or should no longer be pursued. The shareholders of a flexible purpose corporation with fewer than 100 shareholders can elect to waive the requirement for the entity to send and publish annual and current reports, and the disclosure requirements are deemed satisfied for any corporation with securities registered under Section 12 of the Securities Exchange Act of 1934 if the corporation includes the required disclosure in its periodic reports.

A flexible purpose corporation can merge with any other California or non-California entity in the same manner as for-profit corporations, except that if the disappearing corporation in a merger is a flexible purpose corporation and the surviving corporation is not, or the surviving corporation in a merger is a flexible purpose corporation with materially different special purposes than a disappearing flexible purpose corporation, then in addition to other approvals typically required the merger must be approved by the affirmative vote of at least two-thirds of the outstanding shares of each class of stock of the disappearing flexible purpose corporation, or a greater vote if required in the articles, regardless of whether a class is entitled to vote. If the disappearing corporation in a merger is a California for- profit corporation and the surviving corporation is a flexible purpose corporation, the merger must be approved by at least two-thirds of the outstanding shares of each class of stock of the disappearing corporation, or a greater vote if required in the articles, and all shareholders of the disappearing corporation not voting in favor of the merger must be afforded the opportunity to sell their shares to the surviving corporation for cash at their fair market value (i.e., exercise dissenters’ rights). Essentially the same requirements apply if a California for-profit corporation chooses to convert to a flexible purpose corporation. If a flexible purpose corporation merges with a non-profit corporation and the surviving entity in the merger is the non-profit corporation, the merger must be approved by all shareholders of the disappearing flexible purpose corporation, regardless of whether shares are entitled to vote.

Benefit Corporations

A benefit corporation also will be set up much like a traditional for-profit corporation, but its articles of incorporation must state that it is a “benefit corporation” and it must be organized to pursue a “general public benefit” and, if it chooses, one or more other “specific public benefits.” A general public benefit is defined as a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard.” The optional specific public benefits can include any of the following:

(1) Providing low-income or underserved individuals or communities with beneficial products or services.

(2) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business.

(3) Preserving the environment. (4) Improving human health. (5) Promoting the arts, sciences, or advancement of knowledge. (6) Increasing the flow of capital to entities with a public benefit purpose. (7) The accomplishment of any other particular benefit for society or the environment.

The “third-party standard” utilized by a benefit corporation refers to a “standard for defining, reporting, and assessing overall corporate social and environmental performance to which all” of a long list of requirements apply. B Lab, the original proponent of AB 361, reportedly has developed such a standard and offers its certification services at fees ranging up to $25,000 per corporation per year.

Any traditional for-profit corporation can become a benefit corporation simply by amending its articles to state that the entity is a benefit corporation, and likewise a benefit corporation can terminate its status as a benefit corporation simply by amending its articles to delete such statement. In either case, the amendment requires approval of at least two-thirds of the outstanding shares of each class or series of stock of the corporation, regardless of any limitation stated in the articles or bylaws on the voting rights of any class or series. In addition, the corporation changing its status must provide dissenters’ rights to all shareholders not voting in favor of the proposed change. A benefit corporation may amend, add or delete any additional, specific public benefits identified in its articles by amending its articles with approval of at least two-thirds of the outstanding shares of each class or series of its stock (or higher threshold if specified in its articles).

In discharging their respective duties, the board of directors, committees of the board and individual directors of a benefit corporation are required to “consider the impacts of any action or proposed action upon all of the following:

“(1) The shareholders of the benefit corporation;

(2) The employees and workforce of the benefit corporation and its subsidiaries and suppliers;

(3) The interests of customers of the benefit corporation as beneficiaries of the general or specific public benefit purposes of the benefit corporation;

(4) Community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located;

(5) The local and global environment;

(6) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by retaining control of the benefit corporation rather than selling or transferring control to another entity; and

(7) The ability of the benefit corporation to accomplish its general, and any specific, public benefit purpose.”

Having to consider all these factors for every issue that comes before a board of directors may be a tall order. AB 361 specifically provides that directors are not required to give particular weight to these specific factors or interests unless the corporation’s articles of incorporation state a preference for particular factors or interests. While this approach provides much flexibility, the new law does not make clear what standards directors should follow in making decisions, resulting in some commentators expressing concern that directors of benefit corporations may have too much discretion and lack accountability to shareholders.

AB 361 limits directors’ liability for monetary damages for failure of a benefit corporation to create a general or specific public benefit and states that directors shall owe no fiduciary duties to beneficiaries of the benefit corporation’s general or specific public benefit purposes. Nevertheless, AB 361 expressly contemplates that a “benefit enforcement proceeding” may be brought against a benefit corporation or its directors or officers by the corporation itself or derivatively by shareholders, directors, persons who hold more than 5% of the equity of a parent entity or other persons specified in the articles or bylaws of the corporation. AB 361 also specifically requires an officer of a benefit corporation to consider the same interests and factors that board members must consider (as described above) whenever an officer has discretion to act and an action may materially impact such interests or factors, and the officer shall be deemed not to have violated his duties when he or she so acts.

Similar to the reporting regime required for flexible purpose corporations, a benefit corporation is required to deliver to each shareholder and make publicly available on its website (if it has one) an annual benefit report that (i) details for the applicable year the process and rationale for selecting a third-party standard used to prepare the report, the ways in which it pursued a general public benefit and any specific public benefits and any circumstances that have hindered the creation of such public benefit purposes, (ii) assesses the social and environmental performance of the benefit corporation according to the third-party standard, (iii) identifies any person that owns five percent or more of the corporation, (iv) includes a statement of the corporation’s board of directors regarding whether the corporation failed to pursue its public benefit purposes in all material respects during such year, and (v) identifies any connections between the corporation (or its directors, officers or material owners) and the entity (or its directors, officers or material owners) that created the third-party standard used by the corporation to assess its pursuit of its benefit purposes, in any case that might “materially affect the credibility of the objective assessment of the third-party standard.” There is no mechanism for a benefit corporation or its shareholders to opt out of these annual reporting and disclosure requirements.

Anticipated Usage

It remains to be seen whether entrepreneurs and investors will embrace these new forms of corporate entity in California. Organizing a flexible purpose corporation or benefit corporation will require more initial thought and work than forming a traditional for-profit corporation, particularly in 2012 as practitioners come up to speed on the requirements for the new entities. As between the two forms, the flexible purpose corporation offers greater flexibility in terms of defining the special purposes to be pursued by the corporation and less onerous governance requirements, while the benefit corporation offers the advantage of being used and recognized in a handful of other states.

Gibson, Dunn & Crutcher’s lawyers are available to assist with any questions you may have regarding these issues. For further information, please contact the Gibson Dunn lawyer with whom you work or either of the following:

David M. Hernand - Los Angeles (310-552-8559, dhernand@gibsondunn.com) Stewart L. McDowell - San Francisco (415-393-8322, smcdowell@gibsondunn.com)

Attorney Advertising: The enclosed materials have been prepared for general informational purposes only and are not intended as legal advice

The Hunger Project

Sun, 18 Sep 2011 02:42:00 -0400

Last week I was invited to hear Cathy Burke, CEO of the Hunger Project (Australia) talking about the work they are doing to help in the battle against world poverty. Her stories were inspiring, as they attempt to create a sustainable model for change. Their words are better than mine:

We function at the grassroots level, finding local leaders who then work within the community to set their own agenda and priorities.

We focus on women as change-agents. Women are disproportionately impoverished, yet they carry a large part of the burden of work and raising the children. Many studies verify that women do the most to improve health, nutrition and education when given the opportunity.

We have a clear exit strategy. Strong, locally-run programmes create self-reliant individuals, therefore The Hunger Project can leave a sustainable economy in 5-9 years.

All of this leads to a greater efficiency at The Hunger Project versus other NGO models. In fact, the consultants at McKinsey & Company verified that The Hunger Projects costs are one fifth of the best NGO models. (Average cost to end chronic hunger per person US $72 per year versus The Hunger Project: US $5-15 per person.)

As always, it was the stories of the women affected which spoke loudest. I have attached just one of these stories as it is impossible to deliver the message as powerfully: http://www.thp.org/node/1038

Paradox of Choice

Sun, 18 Sep 2011 00:03:00 -0400

Paradox of Choice:

This is the TED lecture that I recommend in my post below. Well worth the 20 minutes!

Freedom from Choice - where do you get it?

Sat, 17 Sep 2011 23:57:00 -0400

The Sydney Writers’ Festival recently invited Jonathon Franzen, featured on the cover of TIME Magazine as arguably the greatest living American novelist, to be interviewed on his work, his views on American society and the impact of 9/11.

In a wonderfully erudite and often amusing 40 minutes, he challenged whether 9/11 has had the impact critics often attribute to it, regaled stories of the joys of birdwatching and touchingly exposed regrets on the relationship with his mother. However, the thing that I found most interesting was his discussion on “freedoms” in western society. While the interviewer tried to categorise the types of freedom Franzen dealt with in his most recent novel of the same name (Freedom, 2010), Franzen himself was more interested in framing a less restrictive prism through which he approached the notion of freedom.

Indeed, to him, one of the greatest freedoms occurs when choice is removed or limited from daily life. Reducing it to its simplest, he spoke colourfully of the existential angst he experienced when faced with 22 brightly displayed, cleverly marketed jars of peanut butter. The confusion and near paralysis which jostled for attention when choosing between “smooth with medium salt” from “smoother with less salt” was enough to set him running to the nearest exit of the supermarket.

This was music to my ears! I have long felt that while we all say choice is freedom, it does not necessarily lead to more optimal outcomes. So, since last Tuesday (the night of the interview) I have been listening more closely to conversations which touch on the subject of choice. The first came the night after when a talented woman was churning through the options available for her daughter’s schooling. Public/ private? Should she send her to the closest school (to which she could walk) or the one in the city (which she thought had a more diverse student body). What about the third school which had better grounds and music programs? One had better results, the secon had better pastoral care… and on it went. All legitimate questions - none of which provided a simple answer. Finally, in frustration, she despaired “if only there was just one school! I wouldn’t have the responsibility… and guilt… which will come no matter which choice I make!”

The day after, I had coffee with a friend who was getting married. She was outraged with the celebrant who had literally handed her a “bible” of choices for the ceremony and wording. All she wanted was for the woman to help her arrange an acceptable marriage ceremony which included a few personal things about bride and groom. Instead, she got 10,000 ways to say “I do!” It was the tipping point. After the final meeting with the celebrant she decided to throw it all in, go to a registry and have a party afterwards.

Choice fatigue is paralysing us all, and it is only the brave few who can actively process all of our daily choices to produce optimal outcomes. In my endeavour to understand how to get the most out of choice (rather than letting it getting the better of you!) I came across this excellent TED lecture that I wanted to share. There are a million great lectures on “choice” - so this post might at least help you with which one to choose! I have provided a link to it in the above post (but here it is if you choose to do it this way!)

http://www.ted.com/talks/lang/eng/barry_schwartz_on_the_paradox_of_choice.html

Photo

Fri, 22 Jul 2011 17:22:06 -0400

High achievers hijacking their potential?

Sun, 05 Jun 2011 07:41:00 -0400

As part of the Women in Business and Finance Program, I have been “matched” with a wonderful mentee who is scheduled to meet with me twice a month over a 6 month period. As part of a wider commitment to diversity, the Program is designed to help a range of women progress to more senior management roles quickly and more effectively.

Having been the beneficiary of some outstanding mentoring, I wanted to “share the love” and provide my mentee with a spectrum of thinking that would complement both her short and long term vision.

While personal experiences (and mistakes) will inevitably create a large part of my advisory toolkit, I have also been hunting through some of the management literature to integrate personal experience with some of the latest thinking in the area.

In the process, I came across a very interesting and practically based article on how not to hijack your potential. Professor of Management Practice at Harvard University, Thomas J de Long, and his psychologist daughter Sara de Long, detail how anxiety amongst high achievers can lead to career limiting behaviour. Simply put, a fear of failure is often found to hold a manager back from extending themselves beyone what they perceive is their sphere of competency.

At a recent conference on Women and Diversity, a Recruiter provided considerable anecdotal evidence to suggest that women were particularly likely to practice this type of overly conservative behaviour. Faced with the possibility of applying for a more senior role where she only fulfilled 85% of the prerequisites, the female applicant would be considerably more reluctant to apply than her male counterpart.

Whether this type of behaviour is more prevalent in female than males is not dealt with in the article. However, for both men and women alike, this article provides common sense suggestions in a clearly written piece.

And yes… my mentee is getting the article too!

http://hbr.org/2011/06/managing-yourself-the-paradox-of-excellence/ar/1

The Culture of Penny Pinching - Philanthropy in Australia

Sat, 04 Jun 2011 14:29:00 -0400

The growing chorus of calls for more and better social investing by Australians is encapsulated in a timely article in this weekend’s Sydney Morning Herald. Citing Australian of the Year, Simon McKeon, and his observations that the “elephant in the room [is that] we really are not overly generous,” it details how our wealthy are remarkable penny pinchers with 33% of people earning over $1 million per year not making any charitable donation. This stands in stark contrast with the United States, where a long-standing culture of philanthropy has spawned programs like the Giving Pledge where Gates and Buffett have announced that the majority of their wealth will be bequested to philanthropic institutions. They are not only working in the US, they are approaching the wealthy globally to galvanize similar action in other parts of the world: http://www.smh.com.au/business/philanthropy-is-big-business—except-in-corporate-australia-20110603-1fktm.html

Why we are so reluctant to give is little understood. Whether it is because of the lack of a “culture” of public giving, or something more fundamental is unclear. What may produce a shift, however, is the growth of “philanthrocapitalism” - or the investing of money into social ventures to which business methods and measures are applied. Whether this investment be by way of social bonds, venture philanthropy or other technique, the prospect of enhanced social outcomes and perhaps limited capital return may make it a more attractive investment alternative.

Additionally, there is a growing acceptance that business models which integrate enhanced social outcomes, not only benefits the community but also the participating corporation. With increased recognition of Corporate Social Responsibility and the need for more effective business integration with their community, more funding will start to flow to the third sector.

However, leading US authority on company strategy and competitiveness, Michael Porter together with Mark Kramer, have recently taken the debate one step further. In January in an article entitled “The Big idea: Creating shared Values: Rethinking Capitalism”, they put forward the idea that the legitimacy of the capitalist model was under threat, and would only be sustainable when the intersection between corporate performance and society is reconceived. The traditional neoclassic approach to economics which characterises social issues as an externality to business, is flawed, and they posit a new paradigm which demands that enhanced social outcomes be integral to the business process itself. As Corporate Social Responsibility is merely a “bolt on” or response to external pressure from regulators or the community, it is considered to be a “dead end.” Instead, where the business and the community have “shared values” ie where corporate value is attributed to both the social and business imperatives of corporate activity. Porter raises the Fair Trade example of business process as a good example of Shared Values creating successful and sustainable outcomes.

While some detractors have called these ideas “old wine in new bottles,” it is certainly generating much discussion. A brief version of their article is at http://hbr.org/2011/01/the-big-idea-creating-shared-value/ar/1.

I have posted the video blog with Michael Porter and the Harvard Business Review in a separate post.

Biology of Resistence

Fri, 03 Jun 2011 22:09:00 -0400

Does your body learn how to deal with stress or does it switch receptors on and off which can you more susceptible to disease? Children who have been subjected to considerable stress at an early age have been shown to have greater cortisol release and higher long term anxiety and stress than others. A very interesting discussion with Brian McKewan (Professor of Neuroscience and Neuroendocrinology): http://www.abc.net.au/rn/allinthemind/stories/2010/2834581.htm

Michael Porter on “The Big Idea: Creating Shared Value:...

Thu, 02 Jun 2011 03:38:00 -0400

Michael Porter on “The Big Idea: Creating Shared Value: Rethinking Capitalism”

The end of Corporate Social Responsibility … or “old wine in new bottles?”

I have discussed this in my post on the “Culture of Penny Pinching” above.