« March 2007 | Main | May 2007 »
I cannot resist linking to this post from William Bernstein at Efficient Frontier. Bernstein is a consistently insightful commentator on issues in modern investment, but here his analysis takes him into executive pay and governance issues as well. For the first time in my career, leading thinkers in finance and management are saying the same thing: the rewards system is confused. We're chasing the wrong carrots, and getting the wrong results.
And the 2006 McKinsey Award goes to...Michael Porter for his outstanding article on the role of corporate social responsibility in corporate strategy. Socialfunds has the story.
Most management articles on corporate social responsibility can be safely ignored. CSR tends to bring out the worst vices of some management consultants - their reliance on platitudes, sloppiness around definitional issues, and especially their reluctance to quantify.
But Porter's piece strikes me as worthwhile. On its own merits, it makes good points about which of the myriad social and environmental issues a firm should be most concerned with (those it understands well and has a stake in). And Porter points out that old-school stakeholder theory (take care of customers, employees, and shareholders and your job is done) doesn't fly anymore.
I suppose I'm also happy to see a prominent management consultant and academic say "when a well-run business applies its vast resources, expertise, and management talent to problems that it understands and in which it has a stake, it can have a greater impact on social good than any other institution or philanthropic organization."
This is a constructive rejoinder to the CEOs who say "it's not my job". As Steven Lydenberg has pointed out, the great corporate success of the past 20 years comes with greater corporate obligations. Porter argues effectively, I think, that corporations are well-equipped to meet them.
What's missing now, is trying. Most companies still act as corporate social responsibility is too hard or too expensive. They are convenient things to say, but come on. In his classic text on forecasting (available online here) J. Scott Armstrong of the Wharton School invokes Gerstenfeld's law of trying.
It was discovered one night by my friend, Art Gerstenfeld, upon returning home from work. Gerstenfeld's son met him at the door, and the following exchange took place between the two:
"Daddy, fix my bike for me."
"I don't know anything about bikes."
"Daddy, please fix my bike."
"I don't know how to fix your bike!"
"Daddy, please fix my bike!"
"I don't know how to fix your bike!"
PAUSE
"But, Daddy, you can try, can't you?"
ANOTHER PAUSE
"Yes, I suppose that I can try."
And then he fixed the bike.
With Porter on board, the time is right to spread the word on Gerstenfeld.
