Down-under, are things upside down?

Last week we talked about executive pay and bonuses. If you read or watch the news today in Australia you will come across an entirely different story though. In a time when bankers have to be told off by governments to stuff their pockets, CEOs get stripped of royal titles for their reckless actions or presidential hopefuls turn out to be ruthless maximizers of personal wealth – this story sounds like a fairytale.

Ken Grenda, the owner of a bus operating and manufacturing company in Melbourne has given all his staff a AUD 15 million bonus (US$ 15.3m), averaging $8,500 per employee with some receiving as much as $30,000! The background of the payout is a sale of the family-owned company which netted Ken some $400m. His rationale:

"A business is only as good as its people, and our people are fantastic. This is to recognise that. We have had people here who are second generation, and one fellow in the same job for 52 years. We have grown from just four bus routes ... in 1945 to operating 1300 buses in Melbourne, Adelaide and Perth. You only get there if you have good people."

Now that’s exceptional. And good on Ken and his family – sure enough. The facebook page of the event is full of praise, amazement and disbelief. It is indeed a gesture which is rare, if not unprecedented in today’s economic climate.

It makes you think though. Ken’s rationale, above, is perfectly sound. Especially in a service company, the personnel at the customer interface, such as bus drivers, can make all the difference. In a time, when bonuses have become a common instrument for people at the top, there is no good reason to exclude workers from the same thinking.

Recently, The Guardian has published a piece on the intellectual heritage of the current situation of excessive bonuses. It is really hard to understand why Michael Jensen and his colleagues, when suggesting share-price related remunerations for top management, never thought to include the lower ranks.

The real question here though seems to be why those performance related elements have to be just this discretionary, pseudo-feudal benevolence of a rich guy. It’s a great gesture of philanthropy, as some bloggers say, but if employees are really so vital to a company’s performance why not make it a right of the employee? After all, $15m of $400m is not all that much. What would be a fair share? And who should decide about that?

As we have commented earlier in this blog, there is a funny bifurcation in the debate on CSR and industrial relations.  From a CSR perspective we should praise the Grenda family; but from an industrial relations perspective we might ask the question why – if what Ken Grenda says above is true – the employees should not have a right to their share in the growth of the company’s value to begin with?

It all points to the role of worker’s representation and collective bargaining. These used to be the classic tools to make sure that workers participate in a company’s overall prosperity. But Australia and New Zealand have seen the highest declines in trade union membership over the last two decades, between roughly 30 to 50%. In that sense then, Australian industrial relations are pretty similar to the rest of the world and Grenda's example more a one-off than something of a rule. Other solutions might be share ownership of employees, which apart from examples such as John Lewis (department stores, UK), Westjet (airline, Canada) or W.L. Gore (Gore-Tex, US) have remained exceptions.

In as much as gestures such as that of Ken Grenda deserve praise and respect as a single incident – they also raise these more general question of how sustainable this approach is. As critics in the Australian blogosphere point out, is this just the final golden handshake, before the new Brazilian owners of Grenda take over and expose workers to an entirely new game to make their new investment pay off?

Picture by Natinaal Archief, reproduced under the Creative Commons License.

What is CSR? Free download of introduction to CSR now available

[This post has now been updated with the new edition of our textbook and a new free download. Go to the post "Corporate social responsibility in a global context - a new free download"]

We've just posted online our introduction to CSR from our 2008 text co-written with Laura Spence, Corporate Social Responsibility: Readings and Cases in a Global Context. It's available for free download here at  the Social Science Research Network, albeit only in the pre-typeset version.  In the paper we examine the nature and definition of CSR, and its emergence in different national and organizational contexts. It should be a good basic CSR 101 for anyone trying to get their head's around the subject.

Of course, the question of what corporate social responsibility (CSR) is should be pretty straighforward. It is obvious that CSR is about the stuff that companies do to improve society, right? Or at least what they do to make it less worse. Or perhaps its what they tell us they're doing to make things better, but in reality they're not really doing much of because its expensive, uncompetitive, and difficult. Or maybe its what they should be doing, or doing more of, if only they were a little more, well.... responsible.

So 'what is CSR' is a deceptively difficult question to answer. It almost immediately brings up questions of whether firms have particular types of responsibilities, what those repsonsibilities are, how much firms should be doing, for who, and why. In fact it is easier to come up with a list of questions rather than a simple short definition that pleases everyone.

Still, that's no excuse for ducking the question. Our approach in the CSR introduction paper is not to get too caught up in definitions, but to explore what unites the different definitions that are out there and use that to identify the core characteristics of CSR. In all, we identify six of these components, as shown in the figure below. To find out more, just take a read of the paper....

 
This figure is not actually in the chapter, but feel free to use and reproduce under a non-commercial creative commons licence, giving appropriate citation to the original source of the idea.