Intel Shareholders Persuade Company to Include ESG Reporting as Fiduciary Duty

This is something many of us have been waiting for. The resolution was introduced by Harrington Investments, a socially responsible investment firm that specializes in shareholder activism on CSR issues.

As a result, Intel is now creating a Board Committee on Sustainability. While this resolution had been voted down by management the previous year, the company is now convinced that environmental, social, and governance (ESG) reporting helps preserve the longer-term interests of the company. Thus, Intel directed its outside legal counsel to write a legal opinion specifically stating that pursuant to Delaware law, corporate responsibility and sustainability reporting based upon the committee's charter, was part of the fiduciary duty of company directors.

This legal opinion may help form a basis for the position that such reporting is a critical factor in corporate financial performance. Ultimately, the Securities and Exchange Commission (SEC) may decide to make ESG reporting mandatory, especially in the current government trend toward increasing corporate regulation and accountability. ESG reporting represents a growing realization that corporate social responsibility (CSR) is not only the right thing to do ethically, but also provides a firm foundation for long-term stability as this chart from Pax World Investments indicates.

Ethical Corporations Outpace S&P During Downturn

Here's some good news: The S&P 500 over the last five years has showed a 4% loss, while Ethisphere's list of the World's Most Ethical companies (WME) of 2010 has shown 53% growth. This list of 100 of the world's most ethical companies also substantially outpaced the FTSE 100 by over half as much as it did the S&P.

Interestingly, 18 of the 52 companies listed 0n the 2007 WME list underperformed the S&P. These are of course averages, so we should expect that a minority of the 2010 WME also underperformed the S&P and FTSE averages. It's worth noting that all listed returns in this study only occurred over the last year, as the previous year showed losses across the board.

Overall though, the lesson seems to be that the WME tends to outperform the rest of the market even during times of negative growth, namely, 2008-09, in which WME losses were lower than the other two averages. Indeed, they were only at about 1/3 of the other overage losses.

Deep Beats Idle Conversation in Reaching Happiness

This just in from the University of Arizona!

"It may sound counterintuitive, but people who spend more of their day having deep discussions and less time engaging in small talk seem to be happier, said Matthias Mehl, a psychologist at the University of Arizona who published a study on the subject."

Of course, being deep might also lead to disillusionment and dismay at the direction the world is heading in. But perhaps those two facets aren't necessarily mutually exclusive. Still, makes me wonder if the college students interviewed are rather solipsistic.

Nevertheless, this finding is very much in line with virtue ethics, since this activity is inherently self-realizing (self-actualizing) which is the very definition of Aristotelian happiness.

What's more, a new Cornell study finds that lust for material things fade but unique experiences remain with us for a long time.

Google Withdrawing from China

A fascinating case of global business ethics leadership has finally come to a head in China vs. Google:

"Google said Tuesday it would shut down its operations in China unless the government there agreed to stop using its search engine for spying or to censor political information posted on it. About 80 million Chinese use Google" (AHN).

The company has long been accused of facilitating suppression of information current and historical (e.g. the Tiananmen Square massacre) the government deems potentially threatening to its firm single-party grip on power.

It will be interesting to see what Yahoo and AltaVista do now. Yahoo even went so far, back in 2007, as to turn over internet search records of at least two Chinese political dissidents, who were jailed as a result.

Interestingly, this marks a 180 degree shift in policy for Google, which also in 2007, voted down an anti-censorship shareholder initiative very much like what the company has finally just chosen to do.

Ultimately, this may not compel China to change its repressive policies. However, it will likely inspire its competitors Yahoo and AltaVista to follow suit. This could in turn work to stigmatize the country from the rest of the developed world. It could also embolden its people to revolt once more in the name of freedom and democracy if, as a result of these corporate actions, it becomes impossible or very difficult for ordinary Chinese citizens to continue doing global business on the internet.

But Baidu, the Chinese seach engine, controls already 63% of the market. So perhaps little will change.

Still, this a refreshing and reassuring act of courageous leadership from a company that is clearly still trying to stay true to its founding motto: Don't be evil.

France Bans Ads From Major Television Networks

This is a surprising story, which has had precious little coverage in the Anglo-American press. The nominally right-wing government headed by President Sarkozy decided already over a year ago to ban all ads from the major networks, which until January 2009 could receive a maximum of 45% of their funding from advertising. The rest came from taxes, mostly funded by a public yearly fee payed by every television owner. This is a bit like the way our own--yet much smaller and less prominent--Corporation for Public Broadcasting (CPB) works, which runs PBS and NPR. It's funded in part by taxes supplemented by voluntary viewer members and limited advertising. The main difference is that in France, there are no free riders as all television owners are required to pay.

Interestingly, in an age of decreasing media market regulation at least in the U.S., France is increasing it. Starting a year ago, almost immediately after Sarkozy's election, the French have banned ads on the major networks (channels 2, 3, 4, and 5) after 8:00 PM. The plan is for a full ban on these stations at all hours by 2011. Since January 2009, these four public stations receive an additional 450 million Euros (divided between them, presumably unequally since some provide news and others do not) to make up the loss of revenue.

The reason of course is to increase the independence of programming from commercial interests and what the President calls the "tyranny of the audience" that tends to debase the culture via the constant influx of American sitcoms, dramas, and so-called reality shows. Specifically, the measure is intended to provide greater amounts of quality cultural programming as well as journalistic freedom. The major national television networks are hence widely considered to be a means to educate the public and elevate the culture.

Pretty amazing. If you can read French, here's a piece announcing the change from this time last year. And here's another from earlier this week.

Evidently, the new system is receiving wide support and already seems to be working.

What this suggests in contrast about the American television broadcasting environment and American attitudes on media regulation and ethics is an interesting question to ponder.

Can Big Business Save the Earth?

Jared Diamond (author of Collapse) seems to think so! NYT Week in Review piece from last Friday.

Where Business Meets Philosophy

Here is an article of mine from this week's Chronicle of Higher Education special review on business education. It discusses the challenge business ethics faces as an academic discipline (subscription required).

Here's an excerpt:

Students who succeed in my classes learn to apply canonical ethical theory to contemporary business dilemmas, wrestling with their values and reconsidering the proper role of business in society. That is not easily done. It can be daunting for business students to re-evaluate their own views about, and relationship to, the corporate world they are about to enter as potential leaders. But once they get a taste for it, their intellectual curiosity blossoms. A few years ago, I added to my syllabus a section on consumer ethics, forcing students to confront issues of personal choice and responsibility. If consumers spent more responsibly, there would be fewer market failures; the same goes for investors. So how self-interested should we be? To grapple with such questions is to do applied ethics.

It remains to be seen if many business professors will achieve tenure by doing ethics properly speaking. Most of what now gets published in top business journals under the rubric of "ethics" is limited to empirical studies of the success of various policies presumed as ethical ("the effects of management consistency on employee loyalty and efficiency," perhaps). Although valuable, such research does precious little to hone the mission of business itself.

While the public clamors for the return of managerial leadership in ethics and social responsibility, surprisingly little research on the subject exists, and what does get published doesn't appear in the top journals. The reasons are varied, but perhaps more than anything it's that those journals are exclusively empirical: Take The Academy of Management Review, the only top journal devoted to management theory. Its mission statement says it publishes only "testable knowledge-based claims." Unfortunately, that excludes most of what counts as ethics, which is primarily a conceptual, a priori discipline akin to law and philosophy. We wouldn't require, for example, that theses on the nature of justice or logic be empirically testable, although we still consider them "knowledge based."

The major business journals have a responsibility to open the ivory-tower gates to a priori arguments on the ethical nature and mission of business. After all, the top business schools, which are a model for the rest, are naturally interested in hiring academics who publish in the top journals. One solution is for at least one or two of the top journals to rewrite their mission statements to expressly include articles applying ethical theory to business. They could start by creating special ethics sections in the same way that some have already created critical-essay sections. Another solution is for academics to do more reading and referencing of existing business-ethics journals. Through more references in the wider literature, those journals can rise to the top. Until such changes occur, business ethics will largely remain a second-class area of research, primarily concerned with teaching.