Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Greed has taken over and corporations have been urged to ignore broader social responsibilities in favour of narrow Shareholder value. A society devoid of selfishness is difficult to imagine, but a society that glorifies and rewards selfishness can be nothing more than base. Lets take a look at the half truths on which the syndrome of selfishness is built; (We refer to each as a fabrication to convey that they are assumptions)

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Economic Man (1st Fabrication)

Homo Economicus obsessed with our own self interest, never satisfied always wants more. Like it or not, individuals are willing to sacrifice a little of almost anything we care to name, even reputation or morality for a sufficiently large quantity of other desired things. Everything, everyone, every value has its price.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Economic Man (1st Fabrication) However for many people, integrity and self respect are basic values, beyond material goods lays an inner sense of what is good/right. Beyond Calculation lies judgement, indeed is this not the essence of responsible management? To judge the difference between short term gains and deep rooted core values? Economic Man drives a wedge of distrust into society, between our individual wants and our social needs.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Shareholder Value (2nd Fabrication)

Corporations we originally granted charters to serve society.

Corporations must justify their existence by their overall contribution to society, specifically they must serve a balanced set of stakeholders, (or at lease that was the opinion until perhaps 10 years ago) The Business Round Table advocated a balanced view of the corporation inc stakeholders until 1997. The notion that the board must somehow balance the interests of stockholders against the interests of other stakeholders, fundamentally misconstrues the role of directors, it is moreover an unworkable notion as it leaves the board with no criteria for resolving conflicts..
ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Shareholder Value (2nd Fabrication) Milton Freidmann (economist) Businesses attend to the economic whereas government takes care of the social. Perfectly simple except for one fatal flawEvery economist readily recognizes that social decisions have economic consequences, in that they cost resources. So how can any economist or business exec fail to recognize that economic decisions have social consequences as they directly impact human beings? Divine Right of Capital, Marjorie Kelly: compares the privileges of todays shareholders with the feudal lords. New breed of shareholder: Giant Mutual funds buy and sell millions of shares each day, alongside these are day traders, who buy and sell within hours looking for arbitrage or momentum opportunities. Are these shareholders interested in products service or customers? Shareholder value thus drives a wedge between those who create the economic performance and those who harvest its benefits, a wedge of disengagement.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Corporations require heroic leaders. (Third fabrication)

How have shareholders got hold of so much power and appropriated so much of the benefit? Answer is simple, by disproportionately rewarding performance; They have bought off the chiefs. CEO direct compensation has risen out of all proportion.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Corporations require heroic leaders. (Third fabrication)

Media wants personalities and simple explanations.

Heroic leaders who single handed raise stock values by over 40bn$.... The have promoted the notion of larger than life leaders riding in, not to save the daybut to raise the stock price! These heroes, cash in their stock options if the stock goes up, and bail out with golden parachutes if it goes down, sometimes both.. Heroic leadership is detached; it drives a wedge between leaders sitting atop their pedestals and everyone else, a wedge of disconnection seeing leadership as something apart.
ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

The effective organisation is lean and mean (Fourth fabrication) Fashionable term these days: however the fact that mean has been made into a virtue is a sad sign of the times. There is nothing wonderful about firing people. Like the other half truths we have seen, this is no exception. Lean and mean offers half the truth: Lower costs, higher productivity, flatter and more flexible structures, packaged in glib phrases like, doing more with less and win-win sure all this can happen, but its half the truth.
ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

The effective organisation is lean and mean (Fourth fabrication) The other half: Burnt out managers, angry workers, quality losses in the guise of productivity gains and unhappy customers (lose-lose) The worst consequence of this restructuring is the breaking of a basic covenant between employer and employee. The implicit pledge of security in return loyalty. The lean mean organisation drives a wedge of discontinuity between the present and the future.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

A rising tide of prosperity lifts all boats. (Fifth fabrication)

The notion of win-win has filtered into society; Everyone prospers in the selfish economy, this is either: A wonderfully convenient truth, or a cynical justification for greed. In 1989 the US had 66 billionaires and 31,5 million living below the poverty line. A decade later the n of billionaires had increased to 268 and those below the poverty line to 34,5m.

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

A rising tide of prosperity lifts all boats. (Fifth fabrication)

Should a society (ranked n1 in GDP) feel comfortable when more than 30% of its households have a net worth including homes and investments of less than 10,000$?
A wedge of Disparity has been driven between prime beneficiaries of stock price increases and the large ns of people disadvantages by the corresponding actions. So free trade will solve every problem win-win once again. The economic will magically take care of the social. Have we made progress in recent years? Societal ?? Financial??

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

A series of damaging wedges has been driven into our social fabric. Material wants, benefits for stock holders, leadership, productive efficiency, economic prosperity and even selfishness can be met, but not as ends in themselves.

Toward Engagement-

ESCI International Strategic Management 2009 Andrew Coles

Integrating Sustainable Development

Toward Engagement-

Take the case of a woman from State Farm Mutual Insurance Co, she was converting a paper data base into an electronic one. Why are you working so energetically? someone asked her Dont you know that youre working yourself out of a job? Sure she answered, but Ive been here long enough to know that I can trust them, theyll find something else for me, if I didnt believe that, I might be tempted to sabotage the process

How much sabotage has been taking place in our lean and mean organisations? Imagine, in contrast, the value (inc shareholder value) of this kind of engagement.

ESCI International Strategic Management 2009 Andrew Coles