Thursday, September 14, 2006

Business Schools and "Business and Society"

Yes, it has been too long since my last post. Too busy, plus I suppose there has not been that much in the news of late to stimulate me. We did definitely have some record cold the other night in northern New England, and oil and gas prices appear to be starting their predicted decline. But not enough excitement to warrant anyone's time.

Here is an issue, though. It is somewhat close to home, and I generally don't like to write about things that are Tuck School related, but this one does have some generality that makes it OK.

I am Faculty Director of the Allwin Initiative for Corporate Citizenship at the Tuck School. I am currently trying to define just what this Initiative should be and do. It is sort of like a Center, if you know what centers at universities tend to do. But it has lacked clarity in its area of focus and its mission, and I think it has suffered somewhat from taking on a bit too much of an "advocacy" role. If there is one thing I feel strongly about, it is that academic institutions should advocate only for the truth, not for any particular value system. If you look across business schools and even universities, you will see many centers or programs in environmental areas or in corporate social responsibility generally where it is real clear that the institution has taken a stand on what the proper policy of either corporations, individuals, or governments is. That kind of advocacy bothers me. I think we should stand for the pursuit of knowledge and of truth and not much else.

That said, any modern business school has to have some kind of organizational structure that facilitates students and faculty in exploration of issues that, in the language that I find most illuminating, lie at the intersection, or interface, of business and society. The trick is in defining this area, and the activities that the organization will engage in, in ways that are true to the "pursuit of truth" ideal but that also stimulate student, faculty, and broad audience excitement. There can be no doubt that in today's cultural environment, there are many MBA students who want to discuss those issues that fall in the arena known as "corporate social responsibility." The discussion just has to be consistent with our pursuit of knowledge and truth rather than advocacy (if you don't understand the difference, go watch Al Gore's movie...).

So here is some language that I wrote this evening that attempts to define the area of focus for the Allwin Initiative for Corporate Citizenship at Tuck (and yes, the name may not be perfect either). Reaction is welcome.

The Allwin Initiative focuses its attention on the intersection between business and broader society -- where issues of the overall impact of business activity on social welfare, of corporate objectives and responsibility, and of ethics, citizenship, and leadership become paramount . Rather than defining the precise areas where the Initiative will work, we prefer to set the defining characteristics of the areas that are most interesting and relevant for us. These defining characteristics are three-fold: first, the topic should be one that involves a large potential impact on society; two, the topic should be one that is mainstream, in that a typical Tuck MBA student would be likely to encounter such an issue in their career; and third, the issue should involve a situation where laws, regulations, and/or cultural norms are non-existent, poorly defined, or changing. The first two conditions are self-explanatory, but the third needs clarification. We wish to work in areas where the quality of management, leadership and knowledge will make a large difference. At the intersection of business and society, it is those situations where it is unclear what should be done -- what the right course of action is -- that are important to highlight for both Tuck students as a learning experience and for faculty as scholars, for research purposes. When regulations, laws and cultural norms and expectations are lacking in clarity, that is when the value-added from leadership and from knowledge will be greatest.
It will be useful to note just a few specific topics that meet these criteria at this point in time. Part of our desire to state only the defining characteristics rather than particular areas is our belief that the world is always changing, and the topics that are relevant today will not be tomorrow. We should also note that situations of classic market failure – in the formal economics sense – will almost always be of potential interest to us, but that there may be topics that are not clearly classic market failures, but will still be of interest to us. To put it differently, conditions of market failure are sufficient but not necessary to create interest by the Allwin Initiative. Here are four examples of topics that would currently meet our tests for interest and relevance:

The case developed by a certain Tuck professor of a cement factory being constructed in Vietnam. There are issues of environmental damage and cultural damage. Both of these issues could be construed as classical market failures, with the cement factory not being made to bear the cost of damage to the environment and to cultural artifacts and sacred areas. There are also issues related to the exposure of banks and other lenders due to possible liability from future laws and regulations. There are important embedded questions for the plant managers, for the banks and lenders, for non-governmental organizations, and for governments. The issues are common in large scale economic development projects in the developing and developed world and are therefore mainstream.

There has recently been much criticism of WalMart, in regard to its effect on communities; its employment practices; and even its effect on international trade and our relations with China. Questions concerning the impact on broader society of new business practices and organizational forms, like those related to WalMart, are prime fodder for the Allwin Initiative. Note, however, that it is not at all obvious that these issues are ones of classic market failure. They are instead questions on the overall impact of business on broader society that get to the heart of the role of free enterprise and market economies. Note also that the laws, regulations, and customs surrounding the role of "“big box"” retailers are definitely in a state of flux, not just in the US but globally.

• Another traditional topic for an entity like the Allwin Initiative would be the impact of plant closings, perhaps especially when brought on by a merger or acquisition. This is a topic that falls clearly in the realm covered by “corporate social responsibility” as typically defined, and would be of interest to the Allwin Initiative. These issues are definitely mainstream for Tuck students, and there can be no doubt that the laws, regulations and customs around issues of plant closings and employment reductions are in flux.

One last one, and one that we used at Tuck as the theme for the Halpern Lecture on Business Ethics in 2006: the topic of executive compensation. There is a lot of interest of late in this topic, and it is clearly important (with recent academic papers calculating the relatively large fractionof corporate earnings that actually go to compensation for top executives). Laws and regulations concerning executive compensation are also in flux.

We believe that by studying situations like these, from both a student perspective and from a scholarly/faculty perspective -- and in both a traditional academic learning environment as well as a more active, experiential learning environment -- we can add to knowledge and we will be better able to prepare our students to be effective managers and leaders of tomorrow'’s organizations.

No comments: