Sunday, June 29, 2008

what is corporate philanthropy?

The roots of the word “philanthropy” are “love” and “man”. A philanthropist, therefore, is a lover of mankind, someone who loves his fellow humans and exerts himself or herself for their wellbeing.

Philanthropy is defined by the Oxford English Dictionary as “practical benevolence towards men in general; the disposition to promote the well-being of one’s fellow-men.”

Thus, while philanthropy has taken on a general meaning of charity out of a compassionate disposition, its underlying meaning points to a much more strategic scope of endeavor.

Philanthropy in gross would encompass any action aimed at improving the well-being of humanity. Philanthropy would therefore include solving problems such as disease, lack of education, poverty, war, famine, global warming, excess consumption of natural resources, tyranny, and so on.

Corporate philanthropy would be the appropriate efforts of business to address these problems and challenges. It implies more than just making charitable donations in an effort to share wealth with the less fortunate.

Corporate philanthropy is then the responsibility of business to make our world better, even through the products and services offered for sale and the ways and means of bringing those products and services to market..

But given the primary social office of business to create wealth on a profitable and sustainable basis for the amelioration of social conditions, corporate philanthropy should have its proper role and function. Business should never seek to substitute for bad government; rather, bad governments should be changed and new, more responsible institutions of public power should take their place. Nor, on the other hand, should business assume responsibility for non-profit operations which seek to provide public or quasi-public goods that do not respond well to market incentives.

Corporate philanthropy can embrace strategic responses to the material concerns of a business’ stakeholders, bringing the demands of corporate social responsibility within its fold. The case can thus be made that corporate philanthropy is not merely optional volunteerism, unrelated to core business functions. No, corporate philanthropy is merely another way of framing the fundamental requirement of business to meet the terms of its contract with society. Under that contract, business must enhance the social capital, the human capital, and the reputational capital on which it depends for successful market performance in order to get back from society those necessary capital inputs.

Saturday, June 7, 2008

Who is responsible for global warming after all?

Standards of corporate social responsibility do not make business decisions any easier. In fact, they most likely complicate the decision-making process by adding on to more focused concerns for costs and prices a range of more intangible factors involving analysis of many circumstances outside the enterprise - like the future price of oil or the real demand functions of customers.

A recent article I read on global warming is a case in point. William Balgord recently wrote an op-ed commentary pointing out a link between sunspot activity and temperatures on earth.

It seems that past periods of cool temperatures on earth correlate in time with low sunspot numbers. And to the contrary, high sunspot activity leads to warmer temperatures here.

When there is weak solar activity - few solar flares sending "solar wind" to bath the earth protecting it from cosmic radiation, more cosmic rays (high energy protons) penetrate through and ionize oxygen and nitrogen molecules in our atmosphere. These ions then become nucleating sites for water vapor that so condenses into clouds. With weak sunspot activity, more clouds form on earth and reflect back more sunlight into space, cooling the earth.

In 2007 there were abnormally few sunspots. From January 2007 to January 2008, the average global temperature fell by nearly 1 degree fahrenheit. Rare snowfalls struck Buenos Aires, Cape Town, and Sydney. China was hit by a huge blizzard. Floe ice spread in the Arctic Ocean into the Bering Strait.

The inference for corporate social responsibility of all this would seem to be that, if sunspots are a major determinant of earthly warming and cooling, what is business to do about that? And, how much effort should be made to reduce emissions of green house gases from the factories and usages of human civilization in order to prevent global warming?

From whom should business learn how best to consider its long-term self interest upon the whole set of material considerations impinging on its prospects for success or failure?

Tuesday, June 3, 2008

Systemic short-termism

In his recent article in Foreign Affairs, former Singapore Ambassador and now Dean of the Lee Kwan Yew School of Public Policy at the National University of Singapore Kishore Mabubani asks whether Western democracies have been "hijacked by competitive populism and structural short-termism"?

"Structural short termism" - now there is a concept worth pondering.

How can short-termism be structural and therefore more insidious a departure from wise strategic thinking?

One way of course if for it to be institutionalized in the goals and compensation patterns of government and business. Clearly, the notorious single-minded focus by many Americans in business on quarterly earnings and hitting the very numbers expected by "Wall Street" is institutionalized short-termism.

But a more dangerous location for structural short-termism is cultural. If short-term thinking drives our beliefs and our values, then our actions will follow along accordingly like sheep to the slaughter.

No law of nature that I am aware of requires that business focus exclusively on immediate earnings. In fact, better heads who have made a lot of money like Warren Buffet expressly look to the long run and the underlying fundamentals of valuation more than to short term results.

I would suggest that our culture is the source of "structural short-termism". A culture that has few if any truths to sustain us, many moral quandries to delude us,and a foundation of nihilism that expresses itself in the seeking of sensation and the accumulation of experiences, is nothing but short term. As John Maynard Keynes once retorted "In the long run we are all dead." So, he inferred, thinking about the long run is a waste of time.

Yet as Kishore suggests, if short-termism is a short-cut into the shallows and miseries of fate, then we should examine our culture more carefully to restore some deep sense of truth and of a sustainable sense of purpose to our lives.