Relationships with shareholders, a serious look at employee volunteering and why it should be about a single bottom line

The blockers of corporate responsibility

Shareholders and managers don’t always see eye to eye. Indeed, agency theorists have made it their pet project to show the sub-optimal outcomes that emerge from divergences between the two. At the core of the issue is the issue of investor size. In short, small (or more particularly “activist”) shareholders tend to care more about responsibility issues than larger ones.

This fascinating paper puts that hypothesis to the test. Looking at Europe’s largest multinational firms, the authors seek to identify a correlation between companies’ ownership structure (ie the kinds of shareholders they have) and their corporate responsibility policies. It’s a fruitful search. Firms with a highly concentrated ownership perform consistently poorly on responsibility issues, the report finds. The main reason comes down to the “free rider problem”. If a company is going to have an optimal social performance, it’s presumed this will require a financial cost. From the large shareholders’ perspective, they take a disproportionate burden of that cost but don’t receive a commensurate return as the social benefits are realised by all.

So would a more disparate ownership be better? Probably not. For starters, capital goes where it likes. Putting a cap on share ownership is technically feasible, but brave is the financial regulator who tries it. Moreover, the close eye that large shareholders (known in the trade as “blockholders”) pay to financial risks would be sorely missed. Instead, we should be persuading these investment heavyweights to pay more attention to non-financial performance. We eagerly await a follow-up paper on what arguments might win over these blockheads … sorry, blockholders.  

Dam, L & Scholtens, B (November 2013), “Ownership Concentration and CSR Policy of European Multinational Enterprises”, Journal of Business Ethics, 118:117–126.

A meaningful look at volunteering

The Academy of Management Journal is a serious read for serious people, so it’s interesting that it should countenance a piece on something as soft as employee volunteering. Much has been written on the subject, of course. But most of it is about extraneous or strategic stuff; either about the business wizardry that corporate folk can offer their non-profit peers, or the morale boost and teamwork skills that voluntary groups can pass on in return. In a refreshing shift for the field, this paper cuts out the niceties and asks what’s in it for the individual employee. Why do they do it?

Behind the complexities of psychological analysis and occupational behaviour studies, the answer appears to be relatively simple: it all comes down to “meaningfulness”. Volunteering makes employees feel useful and fulfilled. The more meaningful the volunteering opportunity, the more enthusiastic employees are to participate. Interestingly (but perhaps unsurprisingly), similar high enthusiasm levels are identified in workers that don’t encounter much meaning in their day jobs – what the literature rather sweetly refers to as “wanderlust”. One practical implication of the research is to make employees’ jobs more fulfilling. If that’s not possible, then get them volunteering more.

Rodell, J (November 2013), “Finding Meaning Through Volunteering: why do employees volunteer and what does is mean for their jobs?”, Academy of Management Journal, 56 (5): 1274-1294.

Is triple bottom line thinking ‘myopic’?

European Union policymakers are currently weighing up whether to issue large companies with mandatory non-financial disclosure requirements. In that sense, this paper is well timed. Whether its message is welcome is another matter, however. Most folk that care about the future of the planet seem to reckon that “triple bottom line” reporting has to be a good thing. More transparency means more accountability, which should mean more care given to social and environmental issues. Some ecologists dispute the logic. The dominance of non-financial rankings and reporting benchmarks are actually serving to reinforce business-as-usual models, not challenge them, it’s argued.

This paper presents the theory of the triple bottom line as “ill-developed”, “incomplete” and “myopic”. Given the precedence given to the theory within the corporate sustainability field over the past decade and more, these are serious charges. But are they fair? That all depends. What the paper’s authors take issue with is the concept’s fundamental starting point. Triple bottom line thinking is premised on the legitimacy of the original bottom line: namely, financial. Yet critical ecologists hold that the planet must come first. If that fits with a company’s profitability, then great. If it doesn’t – which, let’s be honest, is more than possible – then profits need to be subjugated to the greater ecological good. You can see why business advocates of corporate sustainability’s favourite theory have a problem with such a conclusion. Equally, businesses should appreciate why to those outside the corporate space planetary survival comes before returns for shareholders.

Milne, M & Gray, R (November 2013), “W(h)ither Ecology? The Triple Bottom Line, the Global Reporting Initiative, and Corporate Sustainability Reporting”, Journal of Business Ethics, 118: 13-29.  

Campus news

US investment bank Morgan Stanley is teaming up with Columbia Business School to launch a fellowship programme focusing on sustainable investing. The initiative is designed to support supervised research by Columbia students into market-based solutions to social and environmental challenges.

Gretchen Daily, director of the Centre for Conservation Biology at the University of Stanford, is the inaugural Humanitas visiting professor in sustainability studies at the University of Cambridge. The new post is funded by the Tellus Mater Foundation.

Academic news  Business School Bulletin 

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