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Can Corporations Have Religion?

Last week, the US Supreme Court heard oral arguments in an important pair of cases, namely Sebelius v. Hobby Lobby and Conestoga Wood v. Sebelius. Hobby Lobby and Conestoga are companies that want to be allowed to opt out, on religious grounds, of the U.S. Affordable Care Act’s requirement that employer health plans pay for contraception. The First Amendment to the U.S. Constitution, after all, forbids the government from passing laws that restrict the free exercise of religion, and the practice of some religions includes refusal to engage in (or, apparently, to promote) the use of certain forms of birth control.

(Set aside for now the apparent hypocrisy implied by the fact that Hobby Lobby apparently invests some of its 401(k) employee retirement plan’s money in the pharmaceutical companies that produce the very contraceptives that Hobby Lobby is so hell-bent on avoiding paying for.)

The cases before the Court seem to hinge on the question of whether corporations can have religious beliefs. For some, the answer is obvious. The corporation, they say, is “merely an inanimate vessel,” and as such it cannot have beliefs or exercise a religion. But as Kiel Brennan-Marquez rightly points out, it is of course possible for corporations to be religious, because we have an entire category of religious corporations called churches, whose entire raison d’être is religious and who are given special treatment on that basis. The question, then, is really whether for-profit corporations like Hobby Lobby should enjoy the same protections that non-profit corporations like the Catholic Church enjoy. The key difference, for Brennan-Marquez, is that a church — as a non-profit — cannot be owned. Because a corporation can be owned, and because its assets are therefore transferrable, attributing a religion to a corporation would raise thorny questions in cases of corporate acquisitions, mergers, and so on.

More to the point, perhaps, is the question of instrumentality. As I argue in a forthcoming paper in the Georgetown Law Journal, there are cases in which we should think not in terms of the rights the corporation should enjoy, but in terms of the appropriate limits to be placed on the corporation, understood as a tool for achieving human objectives.

Now, there are cases in which it may be genuinely useful to think in terms of the corporation itself as having rights. The interests of corporations are not always directly reducible to the sum of the interests of its various stakeholders. But in other cases, it is more illuminating to think of which legal protections are necessary to protect the rights of persons who make use of the corporation as a way to carry out their own objectives. In such cases, the legal protections that the corporation should have are just those necessary to protect the human beings involved.

So, consider the difference here between a church and a for-profit corporation. A church just is an instrument for engaging in the exercise of religion. People form churches in order to express their religious beliefs and carry out their religious commitments; failure to allow religious freedom to a church is a failure to allow religious freedom to the people who make it up. A corporation, on the other hand, is many things to many people &mash; an investment, an employer, a supplier, and so on. And it will only be in rare cases that the exercise of a single religion is a fundamental goal of a sufficiently broad range stakeholders to justify attributing freedom of religion to the corporation as a whole.

Thinking of the question this way lets us avoid thorny metaphysical questions about what sorts of things can “have” religion. If we think of the corporation (for-profit or otherwise) as an instrument or technology by means of which people seek to achieve their goals, then it becomes clear that the rights (or “rights”) of different kinds of corporate persons depend not on what kind of entity they are, but on the the demonstrable goals of the human beings involved.


    
 


Japan’s loophole flouting is bad for business

In government, as in business, it’s important to think not just about the direct effects of your actions, but also about the indirect effect your actions have in terms of the example they set for others, and the way your actions shape who you are.

Bearing that in mind: what message do you think the cynical letter-of-the-law approach that the government of Japan has heretofore taken to the question of whaling has on business culture in Japan?

As you may have heard, U.N. Court recently ordered Japan to stop whaling in the southern ocean. And it seems like Japan has decided to honour the order, announcing plans to cancel its whale hunt off Antarctica, at least for this year.

Japan has flouted the 1986 moratorium on whaling, making use of a loophole that allows whaling for scientific purposes. In effect, the country’s fleet kills whales for what it claims are “scientific” purposes, and sells the meat for human consumption. You don’t have to be an ardent defender of the world’s whales to see the problems inherent in an having a key player in the world’s economy flouting an international standard.

And just think for a minute about that approach to compliance. It effectively means adopting the credo, do what you want, spirit of the law be damned, as long as you can find even the narrowest of loopholes. What example does has the country’s leadership been setting for the business community? How can government ministers look business leaders in the eye and encourage them to cleave to the meaning and intent of regulations? How can the government ask business, without risking hypocrisy, not to make cynical, self-serving use of loopholes?

Naturally, the government of Japan is not alone in this dilemma. The demands of political expediency often mean that political leaders get caught in a do-as-I say, not-as-I-do self-contradiction. But Japan’s stance on whaling seems a particularly blatant example. And the future of the issue still remains unclear. Japan has only committed to cancelling its whale hunt for this year. Time will tell whether the Japanese government, on this issue at least, demonstrates character worthy of emulation, or instead goes back to an approach aimed merely at securing short-term gains.


    
 


A practitioner’s reflections on the problems of shared value
After our article on shared value came out in the California Management Review, and we published our last blog piece summarizing our critique, we've had a lot of response from various academics and practitioners in the corporate responsibility field. In fact, we've probably had more emails, comments and calls on this one article than we've had on anything else we've ever published. It has clearly struck a nerve. In the main, these responses have been very positive, suggesting that a lot of people have just been waiting for an article like this to come out. Here's just a smattering of some of the responses we've received (you can also read the comments to our blog post for more):

"This is a long over due excellent and comprehensive critique on the overly optimistic and shallow CSV framework that doesn't really address the real trade offs required to get to sustainable development."

"Good on you for re-framing this topic in a manner that more fully reflects the spirit of corporate social responsibility."

"It is some of the most enjoyable reading I have done in a very long time."

"Just read you CMR paper on CSV - well done. It is about time that someone took this idea apart."

Of course, many commentators, even whilst being supportive of our critique, have also pointed out some of the pragmatic benefits of Porter and Kramer's approach, like this one:

"I can see how the win-win wonderland (in Mintzberg's words) could be a diversion, but I wonder how it might crack existing inertias, and/or if any positive momentum could be leveraged for fashioning a more complete framework."

Such considerations of the lifeworld of business is a theme that is addressed in the discussion we have with Porter and Kramer at the end of our article, but is not something that we fully elaborate on. With this in mind, we thought it worthwhile to post here one of the more thoughtful and extended responses we received from a corporate responsibility practitioner. This is from Rory Sullivan, a veteran of the responsible investment community, now working as an independent advisor as well as being a Senior Research Fellow at the University of Leeds. He explores some of our points with regard to how CSR and CSV might be seen from a practitioner perspective. We thought they deserved reproducing here as they help to frame an important element of the debate in a constructive way:

"A proper analysis of the concept and value of ‘Creating Shared Value’ has been needed for some time, and your article does an excellent job of setting out the strengths and weaknesses of CSV. I was disappointed that Porter and Kramer failed to engage with the substantive points that you raised; their bludgeon of a response seemed at odds with the nuanced and careful arguments you presented in your article. While I support the broad lines of argument and analysis in your article, I would like to offer some reflections from a practitioner’s perspective:

  • Your discussion of “CSR as a Straw Man” is fair in its treatment of the academic literature (which has argued that CSR should be a corporate strategic priority). However, CSR in practice is quite different. In far too many companies, CSR continues to have limited business relevance (in terms of its influence on strategy or capital allocation) and remains far closer to philanthropy than the theoretical literature suggests (or would like).
  • On the originality of CSV: Your review of the literature ignored the many important practitioner contributions (e.g. by John Elkington, Stuart Hart, CK Prahalad) which have influenced CSR in practice. I suspect that many practitioners see CSV as a glossy reformulation of ideas such as the triple bottom line, rather than as a new framing of the debates around the role of business in society.
  • On the evidence for CSV: One of the key challenges faced by companies in practice is that ideas that work at a local level and at a small scale, may or may not work [in fact, they often don’t] when they are scaled up to the corporate level or when other companies try to replicate the experience. There are various reasons – the generalizability of approaches, the transaction costs, etc of moving to scale, the problems of taking projects and processes from one corporate culture and trying to implement them in another.
  • I’m not convinced by your argument that CSV is based on a shallow conception of the corporation in society. My (personal) reading of the Porter and Kramer article was that it was best understood as an analysis of the corporation in society, where the corporation is taken as the central unit of analysis (perhaps akin to every western individual being at the centre of their own personal narrative). In that frame of reference (which, I accept may not be what they had in mind), the concept of CSV could be interpreted as simply an argument that there are things that companies can do to make them a little more useful to (or a little less harmful) to society."
Plenty of food for thought there. Any more practitioners out there want to throw their two cents in?

Photo by Ross. Reproduced under Creative Commons licence
    
 


Bribery is Still a Challenge for International Business

Bribery and other forms of corruption continue to pose a challenge to international business. Bribery is a problem because it distorts markets, saps economies, and hurts local communities. For all these reasons, bribery is illegal just about everywhere that has a functioning legal system. And as reported recently in the Wall Street Journal, many countries are stepping up efforts at enforcing anti-bribery laws. Both because of the possibility of prosecution, and because of the slippery slope between bribery and other forms of criminality, bribery poses significant business risks.

Clearly, improved enforcement is an important part of combatting bribery, and combatting corruption more generally. The temptation to win ‘by any means’ will always be there, and so tough rules need to be in place.

But another element is the promulgation and adoption of good, clear, international business standards. As it happens, I’m currently in Madrid as part of the Canadian delegation to an International Standards Organization working committee that is drafting a new “Anti-Bribery Management Systems” standard (ISO 37001).

Christian Levesque, Chair of the Canadian ‘mirror committee’ and head of the Canadian delegation here in Madrid, had the following to say about the project:

“It is important that we, as Canadians, be part of this discussion and this drafting process. We are pleased to see that the matter of Anti-bribery is seen by ISO, and by many countries, as an important matter that needs to be addressed at an international level. We need to be vigilant about bribery as a global community, and ISO is the international platform to offer solutions to deal with that challenge.”

The ISO’s working committee is still in early days of its 3-year process. When completed, the standard will describe a set of best practices for companies that want or need to establish management systems that will help them avoid, detect, and deal appropriately with bribery wherever it is encountered — either in their own operations or potentially in the operations of business partners. And, to the extent that their business partners are compliant with the standard, businesses will have some assurance that those partners have processes in place to ensure the integrity of their own operations, thereby reducing risk. The standard will constitute the core of an eventual ISO certification regime, alongside certification regimes for Quality Management (ISO 9000), Environmental Management (ISO 14000), Social Responsibility (ISO 26000) and many others.

Establishing an ISO standard, of course, doesn’t mean the problem of bribery is going to go away. But it does give global businesses a target to aim at, and it gives companies of all sizes access to a set of best practices, such that if they really want to be diligent about avoiding bribery, they’ve got the tools to put that ambition into practice.


    
 


Baseless Accusations Aimed at Lady Gaga’s Charity Foundation

Accusations recently arose that Lady Gaga’s charitable foundation, the Born This Way Foundation (BTWF), was spending its money in what looked like an irresponsible way. For example: according to 2012 tax filings, BTWF spent almost $60,000 on publicity fees, $50,000 on social media, and nearly $80,000 on travel, but spent “only” $5000 in the form of “grants to organizations or individuals.”

BTWF was founded in 2011 to “foster a more accepting society, where differences are embraced and individuality is celebrated.” But how, commenters wondered, could the foundation accomplish that mission when the vast majority of its spending is goes to what many organizations would consider mere overhead?

As it happens, the accusations were more smoke than fire — not surprising, since the story originally broke on ShowBiz411 and were popularized by Gawker.

Gaga’s mom (who is also co-founder and president of BTWF), Cynthia Germanotta, responded recently, saying that the nature of BTWF had been misunderstood:

“First and foremost, we are an organization that conducts our charitable activity directly, and we fund our own work. We are not a grant-maker that funds the work of other charities, and were never intended to be.

Our activity has included The Born Brave Bus Tour, which has travelled to 23 communities, interacting with more than 19,000 young people and raising awareness to the tune of more than 300 million media impressions. The foundation’s messages of kindness and bravery have touched more than half a million online users via our website, which includes the Bravest Map Ever and the Play Brave Game, as well as social media channels such as Twitter and Facebook — which on a peak week can hit 50 million individual users.”

In other words, the ShowBiz411 story betrayed a lack of understanding of what BTWF is for, and what it takes to run a foundation of that kind. It doesn’t make sense to insist that a charity give away more money to charity — when it is itself dedicated to doing what most charities do, namely spending donated money in ways that aim to help people directly.

Of course, the fact that BTWF (or any other foundation) is dedicated to doing good does nothing at all to put them beyond critique. Indeed, a do-good mission is itself a good reason to insist on accountability, since a do-good mission is liable, in at least some cases, to make those who run a foundation feel a sense of entitlement. And the need for accountability is all the more relevant with regard to charities that accept donations from the general public: when people are trusting you with their money and when all they get in return is your promise to use it well, well, you’ve got an obligation to live up to that trust.

So yes, accountability at charitable foundations is an important topic. Too many (that is, more than zero) foundations spend too much on overhead and too little on doing good. Were I a donor to BTWF, I would like to know a little more about just how the foundation spends its money, why it had to spend so much in 2012 on lawyers ($150,000).

The lesson here is one that should be heard not just by charitable foundations, but by organizations of all kinds. It’s not enough to be doing good. You have to communicate that to key stakeholders. And that means telling them not just that you are doing good, but letting them know how you’re doing it.


    
 


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