More thoughts
Briefs written by the debaters can be found in the September/October 2011 issue of Corporate Responsibility magazine. FA Green also followed up with Karnani and Herman after the debate.
Aneel Karnani:
FA: You said government, not the corporate arena, should be tackling societal challenges, and that government regulations are appealing because they're binding. If government doesn't respond in a timely or satisfactorily manner is it acceptable for corporations to step in with solutions?
AK: The only way to get companies to actually act in the public interest is to have government intervention. The government can then decide whether to provide incentives (e.g., subsidize wind energy), impose penalties (e.g., carbon tax, or cap-and- trade scheme), or mandate some actions (e.g., catalytic converters on cars). If the government does not act appropriately, then it would be great if the companies stepped in with solution, but they will not and it is naïve to expect that they will do so by sacrificing profits.
FA: Do you think collaboration between companies and NGOs can be a good thing?
AK: It can be, but just because companies do it doesn't mean it's good. NGOs need to keep their eyes open and see if collaboration is really good for society. It's bad if the NGO becomes a tool of the company.
FA: You said focusing on CSR can delay or discourage more effective measures to enhance public welfare in cases where profits and public goods are at odds. How so?
AK: Ordinary citizens who are lulled into thinking problems are being solved by corporations may not vote for supporters of tougher laws. Companies who think they're being socially responsible are also lobbying against tough laws.
FA: Beyond HP, GE and BP, can you share examples of companies who present a strong divergence between CR actions (or image) and its performance?
AK: There are many companies with a divergence between their CR actions/image and their business performance. Exxon has a poor CR image but very strong business performance. Tobacco companies are in the same situation: high profitability but poor CR image. On the opposite side, Timberland, Levi's, and Citibank have strong CR image but poor business performance.
R. Paul Herman:
FA: Your debate partner, Vinay Nair, mentioned there's convincing evidence that CR doesn't destroy returns but not enough evidence to show it creates better returns. Can you expand on this?
RPH: There are mutual funds, such as Parnassus Workplace (PARWX) and Portfolio 21 (PORTX), that have a higher alpha and there's clear evidence of outperformance over a three- to five-year period. The challenge is there aren't a lot more available funds or ETFs, though there's an increasing catalog of separate accounts.
FA: The opposing team argued that public welfare is government's responsibility. What are your thoughts on that?
RPH: Government can play a valuable role in acting for the common good where markets fail. To solve big problems, value is added from businesses, government and the social sector [NGOs]. When businesses only are looking through the lens, there may not be enough time, attention and resources.
FA: BP had 760 unreported "willful and egregious" safety violations during the three years prior to the Gulf of Mexico explosion, according to OSHA statistics you referenced. Should investment managers and financial advisors be looking at OSHA data before making investment decisions?
RPH: Yes, we think CR and sustainability are part of fundamental research. The SEC hasn't mandated disclosure of all risks on Form 10-K.