Corporate social responsibility
Lerner's roundtable produces lively discussion
10:52 a.m., March 17, 2011----Corporate social responsibility is a hot topic these days with stakeholders and non-shareholders alike questioning the role corporations should play in the public and environmental arenas. To address these issues, a panel of faculty in the Alfred Lerner College of Business and Economics convened last Friday to share their thoughts and insights.
With the annual Carol A. Ammon MBA Case Competition to be held Friday, March 18, the faculty roundtable also came at an opportune time to support students' preparation of their case presentations on corporate social responsibility.
Fishing, filtering, math
Moderator Stephan Zweidler, a UD alumnus who received an MBA in 2009, opened the evening by briefing the audience on Beneficial Corporations, or B Corps, created in recent years to represent those who feel corporations must address all stakeholders and social responsibility.
“Is a corporation essentially just a vehicle that exists to enrich its shareholders? And to what extent should corporations be socially responsible?” asked Zweidler to kick off the discussion.
He then turned for further comment to the faculty panel, which included John Antil, associate professor of business administration and marketing; Stacie Beck, associate professor of economics; Fred Bereskin, assistant professor of finance; Roger Coffin, associate director of the Weinberg Center for Corporate Governance and associate professor of finance; Jay Coughenour, department chair and associate professor of finance; Paul Laux, professor of finance; Bob Schweitzer, the Donald J. Puglisi Professor of Finance and Economics; and Kent St. Pierre, professor of accounting and MIS.
According to Coughenour, it is important to consider a few themes when analyzing the issue of corporate social responsibility.
“Perspective is the first important theme,” said Coughenour. “Are you looking at the issue as a manager of a firm concerned about saving money, recruiting talent or enhancing your brand, or are you an investor who wants to earn the fair market rate on your investment and feel good about the company you've invested in? You also need to examine whether a company is maintaining its mission and how it chooses to make its own investments, and you need to keep scale in mind.”
The evening continued with lively discussion between panelists and audience members, who had the chance to pose questions to the roundtable.
Schweitzer explained that the idea of corporate social responsibility isn't new, but rather something that has come around every few years and then seems to fade out.
“We have a history of using different institutions for different purposes,” said Schweitzer. “We use corporations for the purpose of investing our savings and funneling them to productive purposes, and use charitable organizations for other purposes.”
St. Pierre suggested, however, that it is possible things are different this time around and there are opportunities and benefits to firms that choose to differentiate themselves.
“Research has shown, at least in the field of accounting, that the cost of equity capital is lowered if you report social responsibility,” said St. Pierre. “If you can lower the cost of equity capital and lower your risk -- all these things people are concerned about -- it's time to acknowledge this is a critical factor that can drive B Corps and general corporate social responsibility.”
In a spirited discourse about responsibility of the individual versus the corporation, Antil noted that Ben & Jerry's, a company perceived as socially responsible, nearly failed at one point in its history. He also cited McDonald's, for leveraging the Ronald McDonald House charitable organization to improve the company's own reputation, despite the fact that the organization “is mostly funded by donations.”
Antil also questioned, despite corporate socially responsible acts, whether such companies can truly claim to be socially responsible while selling products that impact public health on such a large scale. At the same time, he pointed out the role of individuals in making decisions to support those companies and purchase those products and how firms must consider their own bottom lines and growth.
Said Laux in amused response to Antil's statements, “Wow, did you hear how well Prof. Antil just characterized and crystallized the issues? I got scalability, I got tradeoffs, I got competitiveness, valued allocation of capital, marketing and information flow, sustainability beyond the founders of an organization, and regulation versus consumer choice. I think you got everything!”
“Everything,” however, was just short of tax breaks, legal ramifications, government regulations and corporate governance, which the panelists also shared their views on.
“The housing industry is a cautionary tale for extending tax breaks for investment in any industry or sector, however good the intentions,” said Beck. “In that case, the goal was to make housing affordable, but the tax break was extended far beyond that purpose. It subsidized far too much investment into housing and it diverted capital from other unsubsidized uses that would be creating jobs and improving our standard of living today. It also opens the door to fraud, abuse and political favoritism. As much as possible, firms should compete for investors' funds on a level playing field.”
Bereskin further indicated that firms have a lot of discretion already, and that corporate governance must be carefully addressed.
“A problem to be aware of with B Corps is that they potentially introduce a governance problem in that managers and directors are held less accountable to the shareholders than is otherwise the case.”
Coffin confirmed the important role of governance with B Corps.
“Corporate governance is designed to protect the interests of the shareholders of a corporation,” advised Coffin. “People who invest in B Corps will do so with the expectation that the company will place social goals on par with the desire for financial return. New governance approaches may have to be considered to balance these new interests.”
Zweidler thanked the panelists and audience for their spirited discussion and encouraged attendance at the case competition to be held Friday at 1:30 p.m. in 125 Alfred Lerner Hall.
Article by Kathryn A. Marrone
Photos by Duane Perry