SOCIAL RESPONSIBILITY, POLITICAL ACTIVITY & COMPETITIVE STRATEGY: AN INTEGRATIVE MODEL

Transcription

1 SOCIAL RESPONSIBILITY, POLITICAL ACTIVITY & COMPETITIVE STRATEGY: AN INTEGRATIVE MODEL Alan E. Singer James E. Holshouser Distinguished Professor of Ethics Appalachian State University Abstract Many tensions exist within the overall nexus of corporate social responsibility, competitive strategy and corporate political activity. These three aspects of corporate strategy are usually considered in isolation. Accordingly, an attempt is made here to set out a general strategic problem of the corporation in which all three aspects are combined and inter-related. To carry out this task, it is first necessary to consider various distinctive political assumptions that the corporation might hold and act upon, such as the classical liberal model, the stakeholder model or global hyper-competition, to mention a few. The overall approach indicates that the perspective of strategic management can potentially inform politics, ethics and economics.

2 Strategic Management Corporate Political Activity Political Theory Similarity or equivalence Business Ethics Similarity or equivalence

3 Context market limitations human goods corporate objectives political assumption Competitive Strategy CSR Tax Components (activities) Lobbying NGO relations Political communication

4 LIMITATION Externalities Monopoly Pref. vs. well-being Information Public goods Alienation Ability to pay Distributive justice HUMAN GOODS Health, justice, wealth Wealth, justice Health, happiness Wealth, health Justice, friendship Friendship, health Various HGs Justice (rights, freedoms)

5 Corporate objective can be either (a) purely financial: the objective is to maximize profit or shareholder wealth, whereupon all CSR and CPA activities are viewed by the corporation (i.e. its agents or strategists) as entirely instrumental to that end (for the relevant period) ; or (b) authentically dual*: there is a genuine willingness (by or on behalf of the corporation) to tradeoff some profit (shareholder wealth) against other HG-related goals. Accordingly, caring for stakeholders or making a net contribution to the HG s are viewed as ends-inthemselves and they express an aspect of the corporate identity. [*this can be viewed as hypothetical, or real, for present purposes, as will become clear by the time we have finished]

6 Strategic activity 1: CS (i) entirely for-profit, or in accordance with the financial objective of the corporation. The goal of CS is essentially to acquire market power for a period of time, in order to appropriate above-normal returns to shareholders, and (ii) necessarily involves the deliberate exploitation of at least some of the KLMBS (most obviously, monopolistic tendencies)

7 Exploit Refrain Compensate e.g. temporary market power e.g. duty to aid

8 Strategic activity 2: CSR CSR activities are open to valid criticism: (i) from the political center-left, to the extent that the funds for them comes from exploitation of market limitations (e.g. anticompetitive practices ), (ii) from the further left, in that they all have the effect of making Capitalism and profit-seeking more politically acceptable, thus distracting citizens and delaying more fundamental change; but also (iii) from the center-right, to the extent that they are considered as deceptive affectations or simply fraudulent.

9 Strategic activity 3: tax strategy corporations do not normally think of payments of corporation tax as a component of their CSR-portfolio, even though logically they should do. Indeed, tax can also be regarded as a mandate (i.e. fiduciary duty and the avoidance of shareholder suits for failure to maximize net profit). However, for authentic dual vision entities, this requirement becomes a legal risk factor (i.e. corporations in general sometimes deliberately skirt the law and risk the consequences). That is, from the perspective of the (hypothetical) authentically-dual entity, the risk of a shareholder suit should be weighed against the ultimate HG/ public good effect of paying an avoidable amount of tax. The tax payment expresses the corporate intention to achieve its HG or stakeholder -related objectives indirectly, in partnership with the government.

10 Strategic activity 4: Lobbying lobbying by businesses can promote corporate self-interest or the public interest or both (i.e. in accordance with the corporate objective), whilst Oberman (2004) suggested that corporate managers have a duty to represent the functional requirements of economic productivity, in the process of creating balanced public policy. Thus, the possibility of a positive impact of CPA remains, such as corporate lobbying for removal of restrictions on technologies that are expected to produce an abundance of HG s. Indeed, several other contributions to the CSR literature (e.g. Freeman 1999, Prakash-Sethi 2003) have referred to a potential (or hoped for) benevolent influence that could be exerted upon governments by enlightened business leaders (generally in LDCs).

11 Strategic activity 5: NGO relations (i) NGO Identity: NGO s come into existence as responses to market and regulatory failures (i.e. the KLMBS). (ii) NGO Motives. NGO s are generally motivated to bring about institutional change. This makes them obvious potential partners in corporate political activity (CPA) but also in the design and implementation of CSR projects. (iii) NGO mission & political assumption: The mission or objective of an NGO is to provide for the public good (i.e. the HG s) as they see it, that is, in accordance with their distinctive political assumption. This may or may not match the political assumption of a particular corporation. (iv) NGO activity portfolio: In addition to their political communication (advocacy) and direct service provision (CSR type projects) some NGO s are also involved in (a) the monitoring of corporate activities (i.e. watchdog NGOs ) and (b) participating in or driving wider social movement(s).

12 Strategic Activity 6: Corporate political communication. Corporate political communication involves marketing political ideas to entire electorates and this can influence governments indirectly. Viewed as a component of the GSPC this activity ought to be carried out in a way that is consistent with the corporate objective and with all the other component strategic activities. Despite any expectation that corporations should stay right out of politics (Heath 2010) several economists have openly advocated corporate political communications of this sort.

13 Competitive strategy Wealth creation Corporation CSR Compensate for selected KLMBS, only to achieve valued reputation effects HG s or common good NGO strategy Ignore or Partner to assist with reputational CSR No marketing of the political assumption No lobbying* (no licensure) Tax individual Shareholders sub-set of HG s stability, contracts, negative-freedom, economic efficiency constrained welfare negative income tax NGO s Lobbying for selected HG s or common-good Government Some direct provision of HG s by NGO s *The forbidden lobbying is assumed to be selfinterested only.

14 Competitive strategy NGO strategy Partner & engage for shared mission Corporation Informative advertising to explain KLMBS & HG-government Some direct provision of HG s by the Corporation CSR Compensate for selected KLMBS, In pursuit of dual mission & vision. (Beyond compliance) progressive individual & corp. tax Lobbying & constructive engagement to encourage HG-governing, anti-corruption, etc. HG s or common good HG-governing Implant & cultivate justice, efficiency, health, etc. NGO s Lobbying for selected HG s Government(s) Some direct provision of HG s by NGO s

15 Competitive strategy NGO strategy Partner & engage for shared mission Corporation CSR Compensate for selected KLMBS, In accordance with government policy Wealth creation Dividend to treasury (owner) Some direct provision of HG s by the Corporation progressive individual & corp. tax HG s or common good HG-governing Implant & cultivate justice, efficiency, health, etc. NGO s Lobbying for selected HG s Government(s) Some direct provision of HG s by NGO s

16 Hyper-competitive strategy Ignore or partner, only to assist with reputational CSR or else disrupt Corporation Political or ideological advertising (unlimited) CSR Compensate for selected KLMBS, to achieve valued reputation effects Narrow lobbying to enable increased exploitation of KLMBS minimize tax globally global quasifeudal corporate society sub-set of HG s stability, contracts, negative-freedom, economic efficiency WTM s, swarming Selectively endorse & support I-NGO s Lobbying for selected HG s or global good Government(1) Government (2) Government (n) Build trust facilitate stability, Huri coordination & harmonization TGI S & Networks e.g. UN, OECD

17 Self- Governance e.g. Global Compact Partner & engage for shared mission I-NGO s Corporation CSR Compensate for all KLMBS, In pursuit of dual mission & vision Lobbying & constructive engagement for common good, Informative anti-corruption, etc. advertising to explain KLMBS & HG-government Lobbying for selected HG s or global good optimize tax globally Government(1) Government (2) Government (n) HG s or common (global) good HG-governing Implant & cultivate justice, efficiency, health, intellect, development (positive freedom) happiness, aesthetics, community, etc. Build trust facilitate stability, Huri coordination & harmonization Endorse & support TGI S & Networks e.g. UN, OECD

18 1. the GSPC can shed some light on the relevance and merits of various political-economic theories or doctrines, because it reframes them and examines them from a different (i.e. corporate) perspective. Porter-izing politics. 2. The GSPC has at its core the idea that all the component strategic activities should be seen as altering and co-creating the macroenvironment (especially when one takes into account the tendency of corporations to act in unison or to follow the example set by leader corporations).[see final slide] 3. the GSPC suggests that the Milton Friedman classical liberal model as interpreted and depicted here would probably do quite well in producing and distributing the human goods, with the coordinated assistance of governments and NGO s. Indeed, the Friedman variant now appears to be not so very far out of line with the global stakeholder model.

19 Appendix.influencing the external environment as part of corporate strategy CS Industry environment 1. Market demand > product-market strategy 2. Industry structure >acquisitions, alliances Corporation Attempts to influence or transform Macro-environment (S.E.E.P.T.) 1. Technological > game-changing innovations (e.g. AI) CPA CSR 2. Social & Ecological > community (aid) projects > greening the value chain > social media, fashion, bio-technology 3. Political-Economic > lobbying, > political communication (to influence taxes, subsidies, regulations but also government policy generally)