Pilant's Business Ethics

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Tag: Corporate social responsibility (Page 1 of 2)

The Benefit Corporation

The Benefit Corporation

The rise of the benefit corporation, a type of corporate form that didn’t exist before 2010, is remarkable in its speed. This kind of corporation offers an organization not tied to the narrow goal of short term profit maximization. While the “judgment rule” seems to offer corporations a freer decision making climate to be environmentally friendly and exist with some freedom from being sued for loss of share value, there is some legal uncertainty. The Benefit Corporation removes all doubt. This kind of corporation does not exist for profit maximization.

This offers the opportunity for building purposeful organizations with a stated and legal responsibility to do no harm. This is a far better model than the soulless machines of destruction we often experience as the modern corporation.

This may herald a new era in corporate social responsibility. It only takes a small adjustment in the law to have tremendous effects on the culture over time. This may be one of those historical adjustments.

James Pilant

For my students, the most important concepts here for study are the “judgment rule” and “short term profit maximization.”

Delaware Gov. signs landmark social entrepreneurship law

http://www.salon.com/2013/07/23/delaware_governor_jack_markell_signs_landmark_social_entrepreneurship_law_partner/

The benefit corporation, the brainchild of the nonprofit B Lab, is predicated on a simple idea: use the power of business to solve social problems. Companies incorporated under legal frameworks like the one passed in Delaware strive to maximize profits, but can do so while also pursuing a broad range of social and environmental goals, from low carbon emissions to generous employee benefits and transparency in governance. Under traditional corporate law, a firm’s fiduciary responsibility to its shareholders to maximize profits is privileged over other commitments to social or environmental responsibility. The benefit corporation amends this, legally enshrining the interests of stakeholders, including employees, customers, the community and the environment, alongside those of shareholders. Among other things, benefit corporation status shields a company’s social and environmental objectives when it is up for sale. Today, there are at least 200 legally registered benefit corporations (and likely many more, as some states don’t currently track their incorporation), including large companies like Patagonia and many smaller ones like Vermont-based WomenLead and New York-based Clay Marketing. The “shared value” created by these companies is heralded by benefit corporation enthusiasts as a radical refashioning of contemporary capitalism.

From Wikipedia: (I included this section from the Wikipedia article because I want you, kind reader, to get a grasp on the speed of the change in corporate law. Business law tends to be very conservative and usually slow moving, but not in this case. jp)

http://en.wikipedia.org/wiki/Benefit_Corporation

In April 2010, Maryland became the first U.S. state to pass benefit corporation legislation. As of January 2013 California, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, New Jersey, New York, Pennsylvania, South Carolina, Vermont, and Virginia had all passed legislation allowing for the creation of benefit corporations. Legislation is also pending in Illinois that establishes a new type of entity called the “benefit LLC,” making available to limited liability companies the same opportunities afforded to Illinois corporations under the state’s Benefit Corporation Law.[1] Passage of the bill would make Illinois the first state to offer a social enterprise the opportunity to be a benefit L3C.[2]

Some Videos on the Benefit Corporation

Benefit corporations — Robert Shiller (A straightforward explanation)

Benefit corporation: John Montgomery at TEDxHultBusinessSchoolSF   (A history of the path that leads to the Benefit Corporation.)

 

From around the web.

From the web site, IIC Investing in Communities.

http://getgiving.wordpress.com/2012/02/06/public-benefit-corporations-providing-a-legal-framework-for-investing-in-our-communities/

Guest post by Layton Olson. Layton specializes in representing tax exempt community, trade, and professional organizations at Howe & Hutton LTD.

Last month, a dozen companies committed to advancing social good filed to be classified as ‘Benefit Corporations’ in California. …

From the web site, Paradigms for Progress.

http://paradigms4progress.wordpress.com/2013/07/18/the-benefit-corporation-a-promising-corporate-legal-structure-for-sustainability/

Consequently, while there are many contributing factors to the numerous social and environmental challenges humanity’s faces, a very significant factor is the corporation’s pathological pursuit of profit at the expense of public health and environmental sustainability. This pathological pursuit of profit leads many corporate decision-makers to externalize as many costs as possible. As Joel Bakan, highlighted in his book, The Corporation, “It is no exaggeration to say that the corporation’s built-in compulsion to externalize its costs is at the root of many of the world’s social and environmental ills.” (My Emphasis, jp)

From the web site, Pennsylvania Nonprofit Law blog.

http://pennsylvanianonprofitlawyers.wordpress.com/2011/10/12/prosperity-and-integrity-harnessing-the-new-power-of-benefit-corporations/

This new construct, called a “Benefit Corporation,” stresses sustainability along with financial success. More to the point, this new model is a boon to the non-profit world. It provides the opportunity for increased cooperation with a conscientious corner of the for-profit sector and the potential to leverage more sustainable impacts on business practices beyond existing corporations. Benefit or “B” Corporations redefine the modern notion of commercial success by valuing “stakeholders” above “shareholders.” Unlike traditional corporations, B Corporations must facilitate, and publicly report, positive social and environmental impacts through their work in order to register with the non-profit organization, B Lab (http://www.bcorporation.net). …

Steven Mintz Has Written a Pair of Essays on Corporate Social Responsibility

Steven Mintz, the Ethics Sage, has written two quite intelligent essays on corporate social responsibility.

Steven Mintz, the Ethics Sage

The first was 8/24/2011. Entitled What Are Corporate Social Responsibilities (CSR)? , the article is a basic description of the concept with the best paragraph being the following –

In a previous blog I made the case for increased regulation due to the narcissistic behavior of some on Wall Street. The Republicans seem to have short memories and are in denial as to the main cause of our economic woes. The public has lost billions in wealth as measured by losses in investments, retirement funds, and their home equity. Little regulation existed at the time to curtail risky behavior and corporate fraud including misleading and deceptive disclosures on real estate transactions. The expansion in business regulation is directly the result of unethical activities by corporate America with the result being Sarbanes-Oxley and Dodd-Frank. In short, corporate America has no one to blame but itself for the “over-regulation.”

The following article appeared on 8/26/2011 and is entitled: Social and Ethical Obligations of US Multinational Companies.

My favorite paragraph is the one explaining the Rights Theory. Here it is –

In ethics we sometimes use the Rights Theory to evaluate actions and decisions. We could apply the universality perspective to outsourcing by asking: “Would I want other companies to shut down their US plants and move them overseas in similar situations for similar reasons?” In other words, if one corporation moves its plant overseas for cost savings, would I be comfortable if all corporations did the same? Taken to its logical conclusion this would mean a potentially catastrophic exodus of jobs from the US with all the related damages to our economy. Moreover, from a utilitarian perspective an argument could be made that outsourcing causes more harm through lost jobs and economic stagnation in the US compared to any utilitarian benefits that, after all, accrue mostly outside the US.

Generally, Professor Mintz and I agree on most things. However, in the first article he is more charitable to Milton Friedman than I am. I find Friedman’s theories about corporate purpose to echo Machiavellian ethics minus the idealism. I think they are a repudiation of the values of Western civilization and certainly all religious systems.

Aside from that, the Ethics Sage and I share a common opinion on the rest of the issues.

In all events, this is fine writing and deserves your attention.

I recommend you subscribe, at least favorite, the Ethics Sage and read him regularly.

James Pilant

 

 

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Business Ethics

"Social Justice," founded by Father ...

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This is a site about business ethics, also referred to as economic justice.

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The Bastille; the desacralization of corporate power (via Carol Hardick)

"The Storming of the Bastille", Visi...

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This post compares the storming of the Bastille and the eventual end of corporate hegemony. It’s an interesting comparison, and very imaginative. Please give it a read.

James Pilant

Best paragraph –

Corporations and their top tiers, including the stock market which serves them, have grown so huge and so powerful they don’t see the loss of one job as a tragedy, they don’t see the loss of millions of jobs as a tragedy, all they see is statistics. The planet is going to exist in perpetuated chaos until the corporations recognize that there are people behind the numbers. One day as the world is crashing around those on whose backs the corporations created their wealth, executives will look to the horizon and see that their Bastille is going to be stormed. They will be dethroned. -Not because capitalism doesn’t work, it does- but because the people are starving, and they’re starving at the expense of corporate greed. Does this sound similar to the era leading up to the French Revolution? Just like the kings and queens who faced the axe because of their greed and overreach, corporations and the politicians who supported them, will be in the same position and need to seek a peace treaty while they have the chance.

The Bastille was stormed because women had no bread to feed their families. The royalty was desacralized, dethroned and sentenced to death.  Five decades later Karl Marx wrote his manifesto on the plight of the working class. Ironically Marx did not work, but lived off the money of wealthy patrons.  Even when his child was dying as a result, he did not go out and search for work, but searched instead for more entitlements.  How did his manifesto … Read More

via Carol Hardick

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Jayaraman Rajah Iyer Comments on My Post – The Ethics Sage Wants the Politicians Gone!

Jayaraman Rajah Iyer is a buddy of mine. He comments on economic issues and always has something interesting to say and often controversial as well.

Here are his comments in full.

James Pilant

Jayaraman Rajah Iyer

I quote from my bookmark of Washington Post by Jim DeMint “On Sept. 12, 2009, millions of citizens rallied across the country. They gathered in the nation’s capital and other cities to convey a clear message: You work for us; we don’t work for you. Stop the bailouts, the takeovers, the debt and dependence”

In response to the first amendment Freedom of Speech, ‘Government for the People’ maintains stoic silence and conveys ‘yell as you like. Always, it is Government for a few people’.

In India we do have to go a long way in bringing the Government tuned to the people. Those who are trying, struggle but no comparison to the struggle of the masses who exist below poverty line, a 550 million of them. However, there are some initiatives from the government that were put through some years back, would be of considerable interest to the people of United States. It was in 1965 that the government of India brought out a compulsory Cost Audit for manufacturers of vegetable oils as an essential commodity for the masses. Every fortnight companies like Unilever had to go to the government for permission to increase the price of a tin of vegetable oil justifying in detail the cost escalation the company in question had gone through the period of 15 days. [Dr. Kaplan’s ABC that came in 1983, was in full use in 1966 by every such company providing the government with cost data analysis.] The cost audit system was successful and subsequently it was extended to very many commodities including medicine and petroleum that are in vogue even today.

Had not the Indian government introduced the cost audit we would have rich companies, poorer government and higher inflation. In US it is unthinkable that the government would intervene in the running of the companies. Today US is full of companies that are very rich, like Apple is said to have more money than the government, but government is running at loss. The US Senators and Congressmen do not realize that ‘Government for the people’ is no longer with them, it is with a few with ‘massive private gains at public loss’. Corporate Social Responsibility in US is an illusion.

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RESEARCH PAPER ON CONSUMERISM (via My Way Of Expressing!!!)

RESEARCH PAPER ON CONSUMERISM (via My Way Of Expressing!!!)

I very much enjoyed this paper and hope as many people as possible read it.

James Pilant

  ACKNOWLEDGMENT   I have taken efforts in this project. However, it would not have been possible without the kind support and help of many individuals and my college. I would like to extend my sincere thanks to all of them.   I am highly indebted to Mr. SHASHIDHAR CHIRON, our program director for their guidance and constant supervision as well as for providing necessary information regarding the project & also for their support in … Read More

via My Way Of Expressing!!!

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WHAT DO WE KNOW ABOUT HOW MUCH FREEPORT PRODUCES? (via West Papua Media Alerts)

WHAT DO WE KNOW ABOUT HOW MUCH FREEPORT PRODUCES?  (via West Papua Media Alerts)

This is a David vs. Goliath story, if there ever was one.

A lone blogger wants to call a giant American corporation to account for how much ore it takes out of his country.

Well, at least due to the internet, he can make the demand. I’m not sure we could make the company report how much it takes out of the U.S.

James Pilant

WHAT DO WE KNOW ABOUT HOW MUCH FREEPORT PRODUCES? JUBI, 22 June, 2011 It is still very difficult for the Mimika district administration to get information about the quantity of gold and copper produced by Freeport-Indonesia and how much is exported via Portsite, Amamapare. The head  of the mining, energy and minerals department of the Mimika a … Read More

via West Papua Media Alerts

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Andrew comments on my earlier post – Why I do not believe in business ethics? (via Abqur)

(Andrew comments on my earlier post – Why I do not believe in business ethics?)

From Andrew –

“There is no religion and no moral philosophy with Milton Friedman’s dicta that corporations exist only to maximize profit anymore than we exist to maximize our bank account or our stock portfolio”

Except that a corporation is not a person. It is an organization designed and built around the sole idea of delivering a product or service to make a profit. Its business. If its not competitve, then it will die. How socially responsible is it for a company to allow itself to go under and risk the livlihoods of its employees just for the sake of doing whats “socially responsible”? Self interest creates jobs. Entrepreneurs, in the search for greater profits, will build bigger manufacturing plants, bigger offices, bigger everything. That creates jobs. How is that inconsistant with being “socially responsible”?

I dont understand the bipolar nature of this country sometimes. People expect for a corporation to act morally in the same way you’d expect a person to act morally, yet the very same people freak out when corporations are given rights the same as a person would (i.e. campaign contributions).

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Creative Space (via Project CSR)

Creative Space (via Project CSR)

At one point the author talkes about life changes. There have been some major ones in her life. And then she says at one point these words, “I left my career, changed cities, left my community. I wouldn’t advise this radical restructuring. Yet it was necessary for me. I’d been so malformed over the years of being determined by others that I needed space to create, to build my own structures.”

I very much disagree. If at all possible, do what she did, leave your career, change cities, and get a new community.

We all need to break the bonds of our lives and form our own personalities and grab desperately on to the possibilities of a life of meaning, a path with heart in it.

How many of you have gone back to your high school reunion and listen to the guests discuss how high school was the best part of their lives. I remember some vaguely pleasant hours but no whole days. I started having a real life when I became a full adult. I have made many bad decisions and quite a few good ones, but the best one was not to stay in the pattern laid out for me in the communities I grew up in.

I do a job I love, teaching, and I fight to change the world.

That’s not what they taught me. I was supposed to conform and I don’t.

Now, once you have disagreed with a writer (and in the first paragraph no less) you are compelled by custom to do a kind of rain dance of stomping on the rest of the article. Nothing could be further from my intent. I loved the blog entry and the writing in it.

I, old man that I am, thinks she should be more willing to take the example of her life and say, “You ought to do this too!” She didn’t just make the correct decision to leave her community – she made the courageous decision. I don’t think she gives herself enough credit.

This is a good article from a thoughtful writer. I went down the list of her last six entries and that intelligence and commitement is evident in all of her writing. It’s one of those blogs that might very well merit a place in your bookmarks or favorites.  — Project CSR.

James Pilant

“Creation is pleasure and torture at the same time. It’s trying to make something out of nothing. It’s a birth of some sort. Sometimes it’s like pulling a piano out of a swamp. Sometimes it’s like walking on air. The torture of that nothing-space in front of you, and the pure elation of filling that space with something good—it’s one of life’s great juxtapositions. I’m grateful for that—the torture and the pleasure.” Zooey Deschanel I used to thi … Read More

via Project CSR

A Scary Thought (via kevinwutd)

This guy has it exactly right.

This is what is at stake in the struggle for net neutrality – Corporate profit or General access.

James Pilant

I recently watched a video on net neutrality and it scared me. The idea that major corporations may be able to control what we do with the internet is devastating to even think about. I love money, and I love power, but I think that if the cost for those things was to ruin the internet I would have to be content with having little. The internet has been the platform for so many different ideas that have shaped how we live today. It is also a ve … Read More

via kevinwutd

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