Bailout – Who’s next?

So, you know by now that a little ‘Obamania’ has also infected Crane and Matten. But why not enjoy the honeymoon while it lasts. It might be over sooner than later. Among the many daunting tasks the new administration will have to face – the economy, Iraq, Afghanistan, Guantanamo, foreign relations – one of the most difficult animals for Obama to tame reared its ugly head last week: the American auto industry.

Now it makes perfect sense that at a time when Washington is handing out blank cheques to troubled banks, Detroit’s CEOs thought it worth a try to get next in line. And in fact their companies are in dire straits. Poor quality, fierce competition from the Far East and Europe, bad environmental performance of their products, high healthcare costs – these are just some of the issues which have led to the current situation. None of which is really new and good management could have addressed these problems years, if not decades ago.

But the appearance of the CEO’s of the big three on Capitol Hill last week points at a bigger issue Obama will have to face. It is good to see this in a broader context and to pull Stan Luger’s brilliant analysis of ‘Corporate Power, American Democracy, and the Automobile Industry’ from the shelf again. The book analyses the influence on political decision making by the US car industry over most of the 20th century. It puts the recent efforts of the industry in the context of longstanding direct political intervention, lobbying and coalition building.

Last week’s events then point to one of Obama’s biggest challenges, to deliver on bringing ‘change’ to Washington. And for a democrate President, this is no easy task. After all, car companies still are massive employers. Michael Moore’s ‘Roger and Me’ showed years ago what happens to towns in America’s industrial heartland when car companies close shop. In that sense then Obama’s success will in some way depend closely on creating jobs – which in fact is one of his big promises.

Here is the tricky bit: the political power of business in modern democracies is more than just lobbying or other ways of direct influence. In his book (p. 25) Luger quotes the sociologist Claus Offe on this point:

‘The entire relationship between capital and the state is built not upon what capital can do politically via its association […] but upon what capital can refuse to do in terms of investment.’

So every politician needs business to thrive and to invest in order to secure jobs and tax revenue. To deal then with this crucial contribution of business from the political end is a much more complex job for Obama than it seems.

In this sense, with the bailout of the banking industry and potentially others we might witness a watershed in contemporary capitalism: a return of the government as a key player in business. The last three decades have seen the exact opposite with most governments privatizing large parts of the public service delivery and divesting from their business interests. In some ways the bailouts then might even have this one positive effect: corporations apparently have such an importance for the wellbeing of a society that the government has to ‘rescue’ them in a situation where their survival is threatened. Acknowledging this, and granting the government a controlling stake in these companies might actually reverse one important trend of the last years. Rather than accepting a growing influence of business on politics we might actually see the reverse: that we as citizens, represented by democratic governments, regain control of a corporate world which for too long has put shareholder’s and manager’s interests ahead of many legitimate interests of wider society.

Now that sounds a bit like a utopia. And the perspective of more governmental influence on corporations will make most hard nosed business people cringe – isn’t that what socialism was about? Not quite – but anyway: it is essentially what banks and automakers in the US and elsewhere are currently asking for!

Barack Obama to be a boost to CSR?

As many people have remarked, last week's election of Barack Obama to the US Presidency was a historic event. One of the questions we have been musing on though is what exactly an Obama Presidency might mean for business ethics and CSR in the future. The George Bush years are certainly finishing with a nasty bang in terms of the financial crisis and the legacy of ethical mismanagement, as we have discussed in previous blogs. That said, for better or for worse, the free market agenda endorsed by Bush has clearly provided plenty of scope for voluntary CSR initiatives ... and for a fair dose of corporate irresponsibility. So it is perhaps no coincidence that the last eight years have seen the issue of responsible business come to the fore like never before. Without regulatory oversight, business self-regulation has been the main game in town for those seeking responsible practice.

So what of the future then under Obama? Much has been made of the President-elect's commitment to climate change mitigation strategies (specifically cap-and-trade legislation). Andy Savitz, writing in Ethical Corporation recently, suggested that would be the area where he would be likely to make immediate impact:

"Climate change, one of his recurrent campaign messages, is the easiest and most dramatic way for president Obama to deliver on his promise of bi-partisanship at home and to show the rest of the world that we are back in the international relations business. The financial mess may slow it down, but we can expect to see a complete turnabout in Washington, with national cap and trade legislation and the emergence of the US as a leader in the global climate change negotiations."

But there are also many other areas where, we might see the change that Obama promises having an impact on CSR - from health care reform (where private sector responsibilities might be fundamentally reshaped), to labour conditions (where minimum requirements may be put on foreign imports), to clean technology and "green jobs" (where companies may face new incentives and disincentives to accelerate sustainability and oil independence).

So perhaps it was no surprise then that a survey conducted at last week's Business for Social Responsibility (BSR) conference reported that almost nine in ten of the survey's 400 or so respondents welcomed Obama's election as promising a positive impact on advancing CSR. But the scale of optimism was quite remarkable given the circumstances of the financial crisis. Plus, this anticipation of an Obama boost to CSR is matched by an increased expectation of business regulation. The same survey reported that an overwhelming majority (94 percent) anticipated increased government regulation of issues related to corporate responsibility, including climate change (86 percent) and corporate governance and financial transparency (83 percent).

So what's going on here? On the one hand, we see expectation of more CSR, which is typically associated with voluntary activity beyond that required by law. On the other, we're also seeing greater expectation of regulation itself - which according to many would be seen as an alternative to voluntarist CSR. Its an interesting confluence, which at some level is perhaps a reflection of an underlying conviction that the US could move towards an approach to CSR where different constellations of regulation, self-regulation, and voluntarism are developed at the industry level through multipartite initiatives. Certainly, one of the main areas that we see enthusiasm for Obama from the CSR movement is his commitment to a unifying agenda, which many see as promising a new era of collaboration between business, government, and civil society.

The first test of this will probably be in the automotive industry, where the failing "big 3" car companies are seeking financial assistance, and where Obama could potentially see millions of people lose their jobs in the first year of his presidency. At present the rhetoric is still about protecting ordinary workers and ensuring that the car industry remains both economically and environmentally sustainable within a broader agenda of reducing America's oil dependency (which for Obama appears to be more about developing renewable energy sources than military manoeuvring in the Middle East). But there are going to be tough choices to be made here, and it is uncertain yet whether the new administration will have the skill (or the time) to develop a sophisticated package that manages to simultaneously save the industry, protect jobs in the long term, AND turn the American car giants around into sustainable innovators. Whatever the outcome, it appears that we will be getting deep insight into Obama's real impacts on CSR sooner rather than later. Its going to be an interesting few months...

For Asia, the future is green!

This week’s blog comes from Bangkok where CSR Asia is organizing it’s 2008 CSR Summit. It is a long time since Crane and Matten were in Bangkok at the Greening of Industry Network Conference in 2001 – which incidentally was their first joint conference appearance. What back then seemed a rather western idea and topic, parachuted into lovely Thailand to give some academics the excuse to travel to an exotic country on expenses, is now a living practice among Asian businesses.

More than 300 delegates, mostly from companies and NGOs, all over Asia gathered this week in Bangkok. For us it is a brilliant opportunity to check the pulse on business ethics and CSR in one of the most dynamic marketplaces globally. What is fascinating is to see how responsible practices begin to change in this part of the world. CSR in Asia started out very much as a supply chain driven idea, making sure that products manufactured in this part of the world were put together under acceptable conditions – from an ethics perspective.

Now though the tides turn slowly. The biggest issue seems to be the rapid decrease in water and air quality, decline in biodiversity etc. The Environment is highly on the agenda, making CSR a topic much more driven by local stakeholders in these countries. In many places in Thailand, China and Bangladesh, the impacts of global warming in terms of water supply from Himalayan glaciers, rising sea levels or d shifting weather patterns are really palpable. There was a fascinating session on business responses to climate change today – which not only highlighted the urgency of these issues but also showed a fascinating degree of creativity in corporate responses.

In the current, 2nd edition of Crane&Matten we started to include the Asian perspective, next to the North American and European one. We are just getting our act together for the 3rd edition – and one thing is sure: the Asian perspective will not only stay, but become more prominent. More Asian cases seem particularly challenging. If you have any material or suggestions, please join the conversation!

A step forward for technology companies and internet freedoms

If you've been following, as we have, the story of internet companies being implicated in human rights abuses around privacy and freedom of expression - see one of our earlier blogs here - then you'll be interested to see that Yahoo, Microsoft and Google, three of the companies most in the firing line on these issues, have launched a new multi-stakeholder program, the 'Global Network Initiative' aimed at tackling the problem.

This has come in a little under the radar, as there has not been much news of these developments in the business press leading up to the launch, but it appears to have arrived as a pretty well worked out program. With a tagline of "Protecting and Advancing Freedom of Expression and Privacy in Information and Communications Technologies", the initiative is a partnership between tech companies, human rights groups, academic institutions, and other institutions involved in media and communications freedoms. It has a set of principles, guidelines on implementation, including a commitment to human rights impact assessments, and a built-in review process. Most importantly, there is also a commitment to institute independent monitoring of companies' compliance with their commitments (though not, as far as we can tell, a commitment to report publicly).

It is, it has to be said, a difficult area to navigate for technology companies. Dealing with overseas governments can raise a host of problems that they are ill prepared to deal with, especially when they are operating overseas through a subsidiary or joint venture. So the initiative is certainly welcome. It establishes a clear framework for action that should make a meaningful difference to decision makers inside the organizations concerned. Of course, the devil will be in the detail of how such principles will be realized in practice. Especially interesting in this respect for us are the commitments to actively lobby governments to shift their expectations and demands:

"Participating companies will encourage governments to be specific, transparent and consistent in the demands, laws and regulations (“government restrictions”) that are issued to restrict freedom of expression online.

Participants will also encourage government demands that are consistent with international laws and standards on freedom of expression. This includes engaging proactively with governments to reach a shared understanding of how government restrictions can be applied in a manner consistent with the Principles.

When required to restrict communications or remove content, participating companies will:

• Require that governments follow established domestic legal processes when they are seeking to restrict freedom of expression.
• Interpret government restrictions and demands so as to minimize the negative effect on freedom of expression.
• Interpret the governmental authority’s jurisdiction so as to minimize the negative effect on to freedom of expression."

There are so many tricky details in that one passage alone, but it is heartening to see that the participants seem to be fully aware of the complications. As the Wall Street Journal blog, China Journal, put it:

For the most part, however, members decided not to include specific rules on issues such as where to host servers — outside servers can keep data out of problematic territories — because they felt that fast-changing technology might make them quickly irrelevant.

“The idea is that we believe the guidelines will need to be reviewed, and we will have to revise them as we take into account the actual experience,” says Sharon Hom, the executive director of Human Rights in China, which also helped develop the framework over two years. “It envisions an ongoing process of learning and sharing best practices,” she says.

So, there is still a lot to work out as the initiative unfolds. Let's just hope that Microsoft, Yahoo and Google can stay friends long enough to do all that mutual learning and sharing before they fall out with one another again...

Corporate engagement through CSR blogs?

One thing we've been taking a look at recently is the development of CSR blogs written on behalf of companies, usually by a senior CSR executive or team. Although there do not appear to be a large number of them about (or at least if there are, no one's reading them and they're not appearing in our not-very-scientific Google searches), the phenomenon does seem to be gaining some momentum. Probably the most well known is the McDonald's blog 'Open for Discussion' which launched back in 2006, but CSR blogs have probably been most conspicuous amongst technology companies, with the likes of Intel, Sun Microsystems, and Lawson Software all launching CSR blogs of one kind of another. Although IT companies may not be the most prominent in the CSR and sustainability world, especially compared to fast food companies like McDonald's, there are clearly a whole range of responsibility issues that the industry is having to deal with. The interesting thing though is that they are choosing to use their technology focus to develop new ways of engaging with stakeholders through the medium of blogs.

OK, so in reality, the CSR blog is not a major breakthrough in the development of stakeholder communication, but it does represent an attempt to connect with people about responsibility issues in a potentially more personalized and interactive way than corporate reports, press releases and TV commercials. As Intel claims, it is an "intent to create greater transparency through open dialogue". Or, as McDonald's puts it: "Get personal perspectives on the issues, hear open assessments of the challenges we face, and engage in civil dialogue with the people behind the programs at the Golden Arches."

Clearly the rhetorical emphasis here is on dialogue, although according to our reading, there doesn't seem to be too much real conversation going on. Much of the content in these is mainly about presenting the corporate position on CSR issues, but simply using another channel of communication to do so. The titles of two recent McDonald's blogs on "What my little league days say to me about the root causes behind obesity" and "An alternative perspective on larger-scale agriculture" won't leave anyone guessing that the answers are in any way in doubt - i.e. fast food is not to blame and big agriculture is good for us.

Other CSR blogs take a different approach - the law firm Addleshaw Goddard, for example sets out "the mental meanderings of our CSR Manager" as more of a diary for its CSR programme than anything else. And the Lawson "Frankly CSR" blog is also somewhat idiosyncratic, but actually says relatively little about the firm's program. It focuses more on what the VP is currently finding interesting in the CSR world.

So there are clearly different ways if going about this. Our view is that the more corporations simply use CSR blogs as another vehicle to "get their message out", the less successful they will be. We already hear enough about what they are doing. So it is not exactly surprising that most CSR blogs, even for major corporations like McDonald's, seem to get relatively few comments. As Bob Langert, the company's VP for CSR said in response to a comment on the blog recently: "I wish we received more comments". But from our perspective, this isn't likely to happen so long as Langert persists in thinking that :

"Poor perceptions of McDonald's are frequently the result of a lack of information. People need easy access to information about our social and environmental policies and progress so that they can draw conclusions based on facts. "

People are not looking for more information, and corporations suffering from "poor perceptions" should not be deluded in thinking that more information will solve their problems. Corporations need to engage with people in a different way - a way that treats their concerns seriously, that seeks to find common understandings and solutions, and that, yes, genuinely engages in dialogue. CSR blogs hold some potential for this, but at the moment, it is not being realized effectively. A change in mindset is required, not simply a change in communication channel.

But don't go thinking that we don't see anything positive in the current CSR blog phenomenon. There are some interesting discussions starting to happen out there. And perhaps most of all, what is pretty refreshing is to get a real person, an individual with a name and a face, writing about a company's CSR activities. With personalization, with a "moral face" even, there is greater potential for a meaningful ethical shift than with the bland bureaucratic messages of the faceless corporation. Plus, they tend to have a lot more fancy technological finery than our rudimentary efforts...