The one good thing about the now ended WEF annual vanityfest at Davos is that that very few Australian business people attend. And the numbers would appear to be shrinking each year. There is obviously quite a lot of good sense among business leaders.
I actually think a useful topic for businesses to consider is how to combat the terrorist-like attacks emanating from unaccountable and often goverment funded NGOs. Craven cowardice, backing down and sucking up to NGO leaders are not strategies that I would recommend.
But here is the final press release that Adrian Monk has produced. (The releases come thick and fast and are without exception complete drivel, including one citing the appalling Christine Lagarde.) Read it and weep.
And note the Davos organisers seem to have no qualms about Greenpeace holding their Public Eye Awards ceremony at Davos in which ” two corporations which serve as examples of WEF members and companies whose social and ecological misdeeds show the downside of purely profit-oriented globalisation”. Go figure. (Goldman Sachs and Shell, hold your heads high.)
Business Leaders Call to Include Social Goals in Corporate Decisions
Businesses must include social goals in their mission and incentives, or they will eventually collapse and humanity will not meet its challenges for the next century, business and civil society leaders said today at the 43rd World Economic Forum Annual Meeting in Davos, Switzerland.
“Businesses have more power and money than ever before. They can destroy large parts of the planet. If your impact is high, your responsibility is high,” said Feike Sijbesma, Chief Executive Officer and Chairman of the Managing Board, Royal DSM, Netherlands. Sijbesma said that governments cannot solve world problems such as climate change, resource scarcity and food shortages on their own, so companies must step in.
William W. George, Professor of Management Practice, Harvard Business School, Harvard University, USA, said, “Any company that focuses only on shareholder value will eventually self-destruct.” George listed GM, Kodak and Sears as examples of companies that entered crises because they paid attention only to short-term profit. He said that for a company to flourish, “it must create a shared sense of purpose and values, then align incentives to reflect the needs of all the people you are serving.” Many companies had lost their way, especially in the run-up to the 2008 financial crisis, George said. “We got distorted. We started bowing to Wall Street.” George said that if companies do their job, which is to create value for society, their shareholders will be rewarded, too.
Carlos Danel, Co-Chief Executive Officer, Compartamos, Mexico, who has created a profitable publicly-traded bank by focusing only on microfinance, said his firm set metrics and incentives to ensure employees focus on social value as well as economic value. One such incentive is that loan officers are compensated based on the number of clients served, not on the volume of funds loaned. The bank’s average loan size is US$ 400. “We need to be profitable to attract money from the capital markets, but if that is all we do, we have not fulfilled our purpose.” Danel admitted that there can be tension between social and financial goals, but he said “there is common ground”.
Many companies are already making the shift to include societal goals. Mary Robinson, President, Mary Robinson Foundation-Climate Justice, Ireland, cited widespread corporate approval of the UN Guiding Principles for Business and Human Rights, which include the obligation for businesses “not just to do no harm, but to perform due diligence and look at their supply chain”. Robinson said this change in business must accelerate quickly, since “we probably only have seven or eight years left to avoid a climate cliff”.
The panellists agreed that governments must create incentives for businesses to adopt social goals. “Governments can’t solve problems any more, but they can help change the system,” Sijbesma said. There was a strong consensus that fiscal incentives would spur businesses to change their focus, with suggestions including a capital gains tax based on the length of time an investor owns shares, reduced taxation on labour and increased taxation on resources, and tax benefits for companies that create value for all stakeholders, not just shareholders.
A quick edit should fix this:
Ian
27 Jan 13 at 12:42 pm
So shareholders, suppliers, contractors, employees, and above all customers, are not part of “society”??
Businesses goals are purely social: to make people happier and wealthier by producing things and services they want at prices they can afford.
Basically these sfb’s are ruling out any and all economic activity from “society”, which, given that freedom to trade has more provable benefits for human beings than pretty much anything else we’ve ever invented, is absurd.
wreckage
27 Jan 13 at 12:47 pm
So Mr. Harvard-Brain thinks GM and Kodak got into trouble solely as a result of single-mindedly pursuing profit. Has this idiot ever heard of (a) unions, or (b) digital photography? It also makes you wonder why every other business out there which is pursuing profit isn’t similarly crashing and burning.
cuckoo
27 Jan 13 at 1:45 pm
If only Horse & Buggy Enterprises had quit focusing on profits and shifted its focus to social justice.
Infidel Tiger
27 Jan 13 at 1:54 pm
I wonder where these middle class “educated “drones will get their undeserved salaries pensions and perks from when they destroy Capitalism?From the soshalist run industrieswhich are always totally inefficient and of course being run by unionist/alp aparatchiks totally corrupt?
Borisgodunov
27 Jan 13 at 2:00 pm
Of course Emerson is over there name dropping…
ar
27 Jan 13 at 2:23 pm
Of course Emerson is over there name dropping…
(stuffed up previous link…)
ar
27 Jan 13 at 2:26 pm
If
was any good at it he’d be Billy George, CEO of Something Wildly Profitable. He’s not.
I doubt AMP or BHP-Billiton Aged Engineers Super Fund or individual stock market players check on Billy’s opinions before they buy or sell shares in things each day.
Mick Gold Coast QLD
27 Jan 13 at 2:45 pm
William W. George, Professor of Management Practice, Harvard Business School, Harvard University, USA, said, “Any company that focuses only on shareholder value will eventually self-destruct.”
Of the example cited, I can speak confidently of one; Kodak.
One of the canniest and most successful investors I ever met advised dumping Kodak early in the 90s and the reasons had NOTHING to do with it’s single-minded focus on shareholder value.
To the contrary.
Kodak failed because it did not demonstrate the agility to exploit the technological tsunami of digital photography,home editing and printing which emerged in the 90s.
However my friend particularly noted a series of press releases spruiking Kodak’s environmental and employee friendly policies, its “social responsibility” charter and its “multi-stakeholder” theory.
If a Harvard professor of Business can’t understand the basics what hope do we have?
Let’s go through it slowly and clearly;
*A business which has a clear and unashamed focus on increasing shareholder value and does it successfully will make profits, it will grow and it will develop new products/markets.
*Profits will be taxed – the more profit the higher the tax take
*Growth will lead to more jobs
*Development of new products = innovation = investment in new technology
Lets hope when he returns to Harvard, someone tries to explain this.
I’m so glad I don’t have a Harvard MBA
Jim from Brisbane
27 Jan 13 at 3:00 pm
Mick Gold Coast,
Those shareholders and CEOs sure as well might when Mary Robinson and her merry international brigade of ‘new public health specialists’ produce shoddy research reports that implicate mining and their employment practices in disease and disability.
That strategy by the ‘new public health people’ has worked before in many an instance.
Jessie
27 Jan 13 at 3:05 pm
Quite So Jessie -
Dianne
27 Jan 13 at 3:08 pm
Good to see the Legover Man enjoying the last few months on the taxpayer’s teat.
H B Bear
27 Jan 13 at 3:13 pm
True, true. Profit is evil, shocial goals are what drive business. put food on the table.
As posted elsewhere:
Each exhibitor paying minimum $1000.
But hey, they stuck to their “social goals”.
Gab
27 Jan 13 at 3:47 pm
Is Mary Robinson still lurching around being stupid, running into UN hallway walls?
Years ago, after Ireland and at the UN, after some quaint little coloured people died somewhere she bumbled her way through an earlier version of “Who gives a rat’s how they died? I must survive and I have!” ™ Hilary of the Oversized Head.
She was appalling then, she’d be as old now as the US First Evah Girl Presidentette Elect and just as dangerously incompetent.
I’ll note that I have a deep, abiding disrespect for just about any female in politics, because of the likes of her. They tout themselves as better, fonder, fluffier, more insightful yet with the exception of Thatcher, Ghandi, the marvelous Golda Meir and Corazon Aquino (who all were as they said they would be) if I encountered any of the studied liars I’d make a point of ordering “Coffee, black.”
Mick Gold Coast QLD
27 Jan 13 at 4:03 pm
Spot on, Ian.
I do not invest my money to #*%¥ benefit society. Society can go #*%¥ itself. It will be a cold day in hell before I would treat a socialist or any grouping of which they were part, as anything better than a polio virus. The sooner they’re extinct, they happier and healthier we will all be. So no I will not demand that the people using my savings maximise the benefit t gonnorhea, prion viruses or worse, socialists.
The social contract involves all parties pitching in so we all do better than we could by ourselves. Socialists give nothing, always take, and persecute those who attempt to contribute.
When the last pasping death rattle issues from the cancer-raddled lungs of the last parasitic leech known as a socialist, then perhaps the society that remains could justifiably seek some consideration. Until then, yes I #%^¥ing did build it myself you ignorant leeching half-american.
WhaleHunt Fun
27 Jan 13 at 4:17 pm
all just puffery. what do firms gain from not signing-on to such puffery?
Jim Rose
27 Jan 13 at 4:22 pm
“Good to see the Legover Man enjoying the last few months on the taxpayer’s teat”
Good one. I’ve seen it called the “red barren”‘, “that which resides in the lodge”, and even Juliar, but Legover Man is a new one, and apt given the series of married men over whom it has….
WhaleHunt Fun
27 Jan 13 at 4:23 pm
“l note that I have a deep, abiding disrespect for just about any female in politics, ”
Surely you are forgetting the deep regard in which you hold the NZ PM that signed a painting that she never painted ans allowed it to go to auction. An act like that must place her high on the scale of admiration, higher even that our current…
WhaleHunt Fun
27 Jan 13 at 4:26 pm
Alchian (1950) argues that The pertinent requirement-positive profits through relative efficiency’. Positive profits accrue to those who are better than their actual competitors, even if the participants are ignorant, intelligent, skilful, etc.
• Realized profits, not maximum profits, are the mark of success and viability in any market. It does not matter through what process of reasoning or motivation such success was achieved.
• Realised profit is the criterion by which the market process selects survivors: those who realize positive profits survive; those who suffer losses disappear.
The crucial element is one’s position relative to actual competitors. As in a race, the award goes to the relatively fastest, even if all the competitors loaf.’
the relatively fastest will in fact be profit maximizers, and so, in this case selection will lead to the survival only of profit maximizing firms.
Jim Rose
27 Jan 13 at 4:27 pm
And Aung San Suu Kyi, Mick.
Steve of Ferny Hills
27 Jan 13 at 4:45 pm
She was a shocker squared WhaleHunt Fun, and there was no good reason to not charge her over that.
I’ve had a crack at my NZ rugby mates about her – it’s a mystery to me how a country can single mindedly grow and present the elegance and excellence of Buck, Michael Jones, Sir Ritchie, the 1st and 2nd XV, half a dozen Whitelocks, three Hadlees and a couple of Crowes yet allow itself to be conned for a decade by hateful, devious commo sods like her.
Mick Gold Coast QLD
27 Jan 13 at 4:54 pm
A person 2000-odd years ago made a good point about how things should work in the real world, ie, “Render to Caesar what is Caesar’s, and to God what is God’s.”
Sensible man.
I invest my money in companies that I expect to produce decent returns, from which I pay taxes.
I do not expect the board to be also using part of my pre-tax earnings to be assisting the government in its “social justice” causes, which are meant to be funded by tax-paid dollars.
When a board starts down that course, it’s time to sack the board or sell the stock.
mareeS
27 Jan 13 at 4:55 pm
The answer to this social push on business lies in the recent Liberty Clip
http://catallaxyfiles.com/2013/01/26/liberty-clip-january-26-2013/
Mandatory government spending well exceed income so passing the net problem onto the private sector is the alternative. Can not possibly consider cutting mandatory spending. Think about the poor and unfortunate!
Biota
27 Jan 13 at 5:06 pm
Steve of Ferny Hills – even your beloved leader, Comrade Broad Beamed Helmsperson, recently leapt on Air Force One with a fleet of photographers to allow Aung San Suu Kyi to bathe in her reflected glory and international credibility.
As the diplomatic genius generously presented beads, mirrors and a few swatches of colourful fabrics, I imagine the lady wondered “Why have you not once contacted me during my 20 years of honest toil? … and why do you not consider my people worthy refugees?”
Mick Gold Coast QLD
27 Jan 13 at 5:10 pm
Yes mareeS, unequivocally yes.
Mick Gold Coast QLD
27 Jan 13 at 5:13 pm
Short them massively with puts and buy their preferred debt. Grab them buy the balls, Milken style.
.
27 Jan 13 at 5:46 pm
Or Carl Icahn.
That man is a living legend.
.
27 Jan 13 at 5:46 pm
Mick Gold Coast,
Could add a real Julia onto your admired female politicians list? Quite a spectacular woman this lady.
Jessie
27 Jan 13 at 5:49 pm
More delusional Davos-speak from the utterly discredited “carbon economist” Lord Stern.
That great organ of record, The Grauniad, breathlessly reported:
“The Stern review, published in 2006, pointed to a 75% chance that global temperatures would rise by between two and three degrees above the long-term average; he now believes we are “on track for something like four “. Had he known the way the situation would evolve, he says, “I think I would have been a bit more blunt. I would have been much more strong about the risks of a four- or five-degree rise.”
He said some countries, including China, had now started to grasp the seriousness of the risks, but governments should now act forcefully to shift their economies towards less energy-intensive, more environmentally sustainable technologies.”
And so on, and so on.
Is it any wonder that Davos is increasingly marginalised and attended by wannabees?
johanna
27 Jan 13 at 9:01 pm
johanna, Richard Tol in 2006 on Lord Stern:
Jim Rose
27 Jan 13 at 9:18 pm
this is nort lord stern’s first fall from a state of grace:
on P.T. Bauer, Nicholas Stern who wrote that “Dissent on Development is not a valuable contribution to the study of development (1974, p. 209).”
Bauer was instead both prescient and courageous.
Jim Rose
27 Jan 13 at 9:25 pm
Jim, the late, great Ian Castles and a colleague were the first to point out that Stern’s economic projections were rubbish because of flawed use of the discount rate. It was such an embarrassing rookie error, one which no decent economics faculty would let an honours student get away with, and yet Stern and his pals never flinched.
And here he is years later spouting off at Davos as though he has some sort of credibility.
johanna
27 Jan 13 at 9:44 pm
It’s called leading with your chin.
.
28 Jan 13 at 5:47 am