The summer of my sophomore year, I split by time between speaking with representatives from conglomerates about corporate social responsibility and working at a social impact venture capital firm. This was all in an effort to better understand CSR in South Korea. I walked away rather frustrated with the fact that no one seemed to really know what it was. There was very little literature on it, and the little literature there was on it seemed to point to the fact that it wasn't a very developed concept in Korea. So I attempted to add to the body of the literature to help understand why it hadn't developed to it fullest potential for the most-part. I used that to understand why social enterprises, which came after a more complete thought process of the "triple bottom line" in the US, arose when it seemed as though Korea had not run out its resources on other fronts. The result was the CSR in Korea was unresponsive to what the public believed were the needs of society. Social Enterprises, which function without the millions of dollars a conglomerate pours into its CSR programs, needed to be more adaptive. At this point, I still wasn't able to form an opinion about what CSR's role should be or how we might go about encouraging more if it at home and abroad.
The semester following this paper, I spent the semester in Copenhagen, with my classes focused on those very things with a cultural twist: Strategic Corporate Social Responsibility, CSR in Scandinavia, and Social Entrepreneurship. I learned a lot but I still had the same qualms and questions; is it possible to convince companies to look at long-term profit maximization? What even was the social responsibilities of businesses? At the end of the day, is it all just a marketing stunt? I hadn't revisited these thoughts until recently, when I came across an article shared by a friend from the Harvard Business Review.
The article was about Novo Nordisk, a Scandinavian Pharmaceutical company which produces insulin for diabetes patients. It is a highly profitable company also well-known for its outstanding corporate social responsibility. I had actually heard and even spoken to representatives from Novo Nordisk through my Strategic CSR class at the Copenhagen Business School and remember being puzzled and skeptical that they would pour resources into finding a cure for diabetes as a part of its CSR initiatives. I thought, "A cure to diabetes would destroy your company; you must be lying."
Months later, I realize she wasn't lying; in Sorenson's, the company CEO's words, "I tell my employees, 'If we wind up curing diabetes, and it destroys a big part of our business, we can be proud, and you can get a job anywhere. We’ll have worked on the greatest social service of any pharmaceutical company, and that would be a phenomenal thing." This sent chills up my spine. I can't imagine how different the healthcare industry would look if we all took on this attitude. But more so, I realized through the concepts I learned through my emerging economies class at the Wharton School, University of Pennsylvania, that the reframing of Sorenson's interview precisely answers what I think many of us ask ourselves: what can we do as a society, government and other actors to encourage corporations to take on corporate social responsibility. Not the "slap some money on" band-aids but really encourage them to own its programs?
I believe that the solution is to build institutions to ensure the interest of the company along with its excutives and other stakeholders that do not conflict with each other. At the core of this belief is an additional belief that we all want to do good in the world; no one imagines their legacy to the world and imagines it to be value-destroying. If you will allow me, I would like to think our "legacy" is the "relationship" we would like to building with the people around us, including the individual people but also the concept of community at large. But you cannot building this relationship without building the institutions that allow the companies and its executives to do so.
Sorensen states that he understands that it is hard for US CEO's to overcome shareholder pressure because it is hard to convince shareholders to not sell their stocks with the promise that the company will maximize long-term profit over the next 15 years, rather than the next two. There are two institutions that allows Sorensen to have this opportunity; first, it is that Novo Nordisk, as well as many Scandinavian companies, are owned by foundations and trusts that are focused on long-term profit maximization. Block ownership such as this keeps CEOs a little more immune to unpopular decisions in the short-run that may help in the long-run. Second, there are not as many institutional investors such as pension funds that pressure Novo Nordisk into performing in the short-run. Sorensen proposes that in order to help companies see long-term goals, rules and behaviors for pension funds need to change. This requires both a change in appropriateness and law.
But Sorensen's suggestions are not all up to the government; flatter pay structures between CEOs and employees leads to higher levels of trust within the organization as employees see the pay structure as "fair." While many may think of this as motivational, it is rather an opportunity for the CEO to show that the system works. Particularly, this means that everyone will be compensated for their hard work and will be given a share of the growth of the company.
The challenge, then for the US, is to create the right institutions that will lead to particular behaviors that will allow for companies to think about the long run. US is known for its innovation but if the US, with its trillions of debt, now needs corporations to pick up the slack in what it cannot provide, the issue of creating the structure to lead to desired relationships between a corporation and its stakeholder may be more pressing than we had ever imagined.
