Catallaxis

CSR and Stockholder Value

Daniel O'Connor  |  Integral Ventures, LLC

For nearly 40 years, economists have debated the question of whether or not corporations have any social responsibility beyond the delivery of profits to their stockholders.  During that same time frame, corporate social responsibility has evolved from a counter-cultural idea into a mainstream movement with voluntary participation by countless corporations from all industries.  Despite its popularity, or perhaps because of it, CSR remains as controversial as ever, with critics and advocates alike repeating the same arguments over and over again, without resolution. 

In a recent essay, Gary Becker of the University of Chicago addressed the perennial question: Do Corporations Have a Social Responsibility Beyond Stockholder Value?

Do corporations have any responsibilities beyond trying to maximize stockholder value, adhering to contracts, implicit as well as explicit, and obeying the laws of the different countries where they operate?  My answer is "no", although maximizing value, meeting contracts, and obeying laws help achieve many of the goals by those claiming corporations should be "socially responsible" by taking care of the environment, considering the effects of their behavior on other stakeholders, and contributing to good causes.  Still, laws and contracts, and individual use of their own resources, rather than corporate behavior, should be the way to implement various social goals.

Who Governs the Corporation?

Daniel O'Connor  |  Integral Ventures, LLC

In a recent article, The Economist highlights the latest wave of high-profile CEO shufflings in US firms--from AIG to Morgan Stanley to Boeing to HP to WorldCom--and suggests that it may not represent the return to good corporate governance that many imagine it to be.

In different ways, each of these examples appears to point to the same, welcome conclusion: that the imbalance in corporate power of the late 1990s, when many bosses were allowed to behave like absolute monarchs, has been corrected.  Alas, appearances can be deceptive.  While each of these recent tales of chief-executive woe is a sign of progress, none provides much evidence that the crisis in American corporate governance is yet over.  In fact, each of these cases is an example of failed, not successful, governance.

Stockholders: The New Special Interest Group

Daniel O'Connor  |  Integral Ventures, LLC

In an era in which the central debate in corporate governance circles is that between the traditional model of stockholder governance and the progressive model of stakeholder governance, it is always a shock to discover the extent to which some corporate executives cling to the positively regressive notion that they are accountable to neither stakeholders nor stockholders.  The latest example is profiled in this recent article in The New York Times: Managers to Owners: Shut Up.

Professionalizing Business Management

Daniel O'Connor  |  Integral Ventures, LLC

Harvard Business School professors Rakesh Khurana and Nitin Nohria, along with research associate Daniel Penrice, have written an interesting new article entitled Is Business Management a Profession?

The article is really an inquiry into whether business management should be recast as a formal profession along the lines of law and medicine.  As motivation for this inquiry, the authors cite the sad state of business management evidenced in the recent wave of high-profile business scandals and recent polls indicating that business leaders are about as trusted as politicians.

The Dismal Science of Business Ethics

Daniel O'Connor  |  Integral Ventures, LLC

In an article entitled Bad for Business?, The Economist comments on a soon-to-be-published article by Sumantra Ghoshal in which he argues that many of the “worst excesses of recent management practices have their roots in a set of ideas that have emerged from business-school academics over the last 30 years.”

CSR's Grim Reaper

Daniel O'Connor  |  Integral Ventures, LLC

“Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible.  This is a fundamentally subversive doctrine.”

Milton Friedman, Capitalism and Freedom, 133.

With these words, Milton Friedman, future Nobel Laureate from the University of Chicago, garnered for himself the devotion of countless corporate libertarians around the world, most of whom are among the more than 100,000 MBAs graduating each year.  And with these same words, Friedman, perhaps unwittingly, set himself up as an easy target for corporate egalitarians who have apparently tired of denouncing a simple metaphor once uttered by a Scottish philosopher over 200 years ago. 

In Defense of CSR?

Daniel O'Connor  |  Integral Ventures, LLC

Business for Social Responsibility published a response to The Economist survey on CSR.  Without mincing words, BSR identified the following "reasons why The Economist is wrong on CSR:"

CSR: Just Good Business?

Daniel O'Connor  |  Integral Ventures, LLC

An article in the recent Economist survey on corporate social responsibility framed the CSR debate in a useful way by posing two questions concerning any act of "supposedly enlightened corporate citizenship:"

• Does it improve the company's long-term profitability?
• Does it advance the broader public good?

CSR: Cosmetic Treatment or Systemic Reform?

Daniel O'Connor  |  Integral Ventures, LLC

A recent survey in The Economist casts a rather skeptical eye on the growing movement for corporate social responsibility.  The lead article, entitled The Good Company, begins by acknowledging that CSR has "won the battle of ideas" and then summarizes the survey's conclusions:

What's in a Name?

Daniel O'Connor  |  Integral Ventures, LLC

Catallaxis is a name I invented in 2002 through the fusion of two important concepts: catallactics and praxis.

Catallactics is a little-known term that refers to the science of exchanges, namely commercial exchanges.  Although its use seems to have been limited primarily to the great work of Ludwig von Mises and Friedrich Hayek, it is a terrific alternative to the more common name for this particular science: market economics.  Furthermore, as Hayek himself reminded us, the classical Greek term from which it derives, katalattein or katalassein, meant not only to exchange but also to receive into the community and to turn from enemy into friend.  To me, this is suggestive of a deeper, wider meaning for the whole notion of commercial exchange, one that embraces the traditionally differentiated and increasingly antagonistic economic, social, and political aspects of the market and its institutions.  Moreover, this multi-faceted catallactic dynamic emerges not from bureaucratic direction but as a spontaneously self-organizing and progressively evolving order consistent with the Greek notion of a kosmos.

Praxis is a Greek term in its own right and generally means action, practice, or the practical application of theory.  It is also used to denote the idea of a theory of practice—that is, a theory of how to design one’s actions in order to achieve certain results.  Douglas McGregor once said that "there is nothing more practical than good theory."  As I see it, the really good theories that make a difference in the world are theories of practice, or praxes, grounded in an understanding of how and why people act.

A Catallactic Praxis, then, may be thought of as a theory of how people participate in this evolving market process in their various roles as entrepreneurs, employees, customers, investors, and householders.  Such a theory of how the market really works would shed light on the surprisingly difficult questions of how the market is supposed to work, why it doesn’t always work as promised, and how we can make it really work for us.  This, of course, is the focus of my inquiry.

Thus, Catallactics x Praxis = Catallaxis.