Blurred corporate structures, why unions are important and can the environment be a stakeholder?
Hurdles for hybrids
The boundaries separating the for-profit and non-profit sectors are beginning to grow fuzzy. Businesses are engaging in philanthropic activities, while NGOs are generating revenues through the sale of products and services. This blurring of lines is resulting in a new-look entity: the hybrid organisation. The ideal underlying such hybrids is a heartening one. There should be no choice between mission and profit, the theory runs. Everything they do should result in social value and commercial revenue. Magic.
But how realistic is this mission-driven, profit-generating concept? Based on an extensive study by researchers at Harvard Business School, this intriguing paper looks at the challenges that hybrid organisations face. The first two are eminently practical: how should they finance themselves, and how should they be constituted?
Tax-exempt non-profits typically turn to grant-makers and other donors, while for-profits look to equity capital markets and other private-sector investment streams. Hybrids fall between the two. Likewise, laws governing non-profit and for-profit institutions open some doors yet close others.
Many hybrids are therefore opting for a dual structure, pursuing some activities under a for-profit division and others under a non-profit one. Regulatory innovations like the UK’s community interest company model, which provides tax benefits in exchange for capped dividends, reveal a positive way forward.
The paper raises two other, less obvious challenges. One relates to the subjects of hybrids. Are they customers or beneficiaries, or both? This is more important than it seems. What if your beneficiary group lacks the financial means to pay for the value they receive, for instance?
A key issue here is what the authors term “mission drift”. It’s not difficult to see how finance pressures might push hybrids into targeting more profitable market segments, thus undermining their social mission. Remember Body Shop?
The other challenge centres on talent. Who do you get to work for you? Evidence suggests that it’s not straightforward to turn a social worker into a banker, or vice versa. To get round this, many hybrids are taking on young graduates with no career baggage. That might stymie growth initially, but it’s proving more sustainable in the long run.
This research paper usefully flags up the potholes ahead for hybrids. It behoves policymakers, financiers and hybrid entrepreneurs themselves to resolve how to fill them.
Battilana, J et al (Summer 2012), “In Search of the Hybrid Ideal”, Stanford Social Innovation Review 10(3): 51-55.
Unions: responsibility’s blind spot
Consistency, it is said, is the hallmark of ethics. That presents a troubling issue for today’s band of “corporate citizens”, argues Cedric Dawkins in this paper. His study of US companies active in corporate responsibility shows widespread condemnation for egregious labour practices such as child labour and human trafficking. Yet there’s a notable absentee in the list: the right to collective bargaining. A search of leading ethics-related journals turns up only five articles on trade unions over the past decade.
Why the absence? The implication is that respect for freedom of association conventions is a peripheral issue. US firms are reticent about the issue for a number of reasons, Dawkins suggests. The most obvious is the cost of suddenly dealing with a unionised global labour pool. Many a business model is still built on labour flexibility and low pay.
The interesting question is why US corporations haven’t been called up on this. Controversially, Dawkins points the finger at corporate citizenship ratings. These allow firms to strategically emphasise certain features of their social performance and downplay others.
Clearly, that’s not as it should be. Not only because obfuscation is bad, Dawkins says, but also because not all aspects of the responsibility agenda are equal. Dawkins defines freedom of association as a “supernorm”; a core human right that carries more moral weight than – say – executive compensation.
As the 20th century philosopher Charles Frankel noted, “responsibility is the product of definite social arrangements”. This is a clarion call to ethicists to reappraise the place of unions in the fabric of corporate responsibility.
Dawkins, C (July 2012), “Laboured Relations: Corporate Citizenship, Labour Unions, and Freedom of Association”, Business Ethics Quarterly 22(3): 473-500.
Stakeholders and sustainability
More than two decades ago, James Post wrote an influential article entitled Managing as if the Earth Mattered. In it, he argued that the natural environment should be considered as a stakeholder.
Now, Kevin Gibson questions this conclusion. His primary reason for doing so is his discomfort with the notion that nature is just one stakeholder among others, and must be juggled accordingly. Instead, he argues that the environment should be considered as a reflection of human sustainability: something on which all humanity depends. Conceptualised thus, woolly ideas of preserving nature can be replaced by concrete sustainable frameworks and associated standards of tenable, quantifiable action. Think carbon offsets, he suggests, or pollution controls.
The eye of company practitioners will be drawn to the paper’s final section. Here, Gibson draws on notions of stewardship to suggest that stakeholder management must actively promote environmental sustainability. Stakeholder managers need to be part visionary, part coach, part good citizen, and part “servant to others”. Above all they need to exhibit an “other-regarding” attitude. Only then can they elicit the kind of collaborative responses that the environment needs.
Gibson, K (Summer 2012), “Stakeholders and Sustainability: an evolving theory”, Journal of Business Ethics 109:15-25.
On campus
The University of Nottingham is looking to appoint a leading academic for a new chair of sustainable chemistry, which will be part-funded by pharmaceutical giant GSK.
Student group Net Impact has opened registration for its annual conference in Baltimore, 25-27 October.