Socially Responsible Capitalism and Management

Henri Savall,Michel Péron,Véronique Zardet,Marc Bonnet

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351978606
• Edition: 1
• Topic: Betriebswirtschaft
• Subtopic: Organizational Behavior

In the current crisis context, capitalism is questioned by its detractors or defended by its partisans. The concept of Socially Responsible Capitalism (SRC) is based on the entrepreneurial spirit. It encourages exemplary behaviors, such as effective, efficient and ethical behaviors, by stimulating social responsibility of companies and organizations. This is combined with the development of economic empowerment and legitimate efforts of each citizen-actor.

Socially Responsible Capitalism and Management does not confuse financial capitalism and entrepreneurial capitalism. The first one improves the creation of artificial value which leads to financial bubbles that periodically burst and bankrupt the real economy. Quite the reverse, entrepreneurial capitalism creates both solid economic value and employment. This is justified by the production of goods and services that meet legitimate needs of consumer-citizens.

This book shows that by putting Human Beings at the heart of action enables producing sustainable economic value, and anthropological values which are inseparable. The innovative aspect of this book lies in its analysis starting from the macro-economic level to the individual one, by presenting a detailed analysis of the micro-economic level of companies within its managerial issues. Socially Responsible Capitalism and Management is dedicated to present the different aspects of SRC for the Society, companies and organizations and also individual actors, as citizens, producers and consumers.

Part I
Socially Responsible Capitalism in Society

1
Financial Capitalism Versus Entrepreneurial Capitalism

The socially responsible capitalism (SRC) proposed in this book is a viable and pertinent alternative to the contemporary economy. It distinguishes itself clearly from the excessively financial capitalism that entails speculative practices and dries up the investment flows that would otherwise irrigate enterprises and organizations, all producers of value added. This capitalism contributes to solving contemporary social issues, linked to the employment crisis or to the degradation of societal, national and global performance. The second subsection presents a synthesis of the thought of several great economists, whose theories implicitly point toward SRC without naming it; Petty, Bernácer, Keynes, Schumpeter, Perroux and Allais then situate socially responsible capitalism and its concrete incarnation: the socioeconomic management (SEAM), with respect to Marxism and other capitalism detractors.

Social Economy and Solidarity Capitalism

It is not for us to extol the rejection of capitalism in favor of a social and solidarity-driven economy that relies only on great principles such as the human primacy on capital or the choice of global interest as an objective without describing any concrete implementation process. By the way, this evolution of the social economy concept was first defined in the Oxford English Dictionary in 1845 as “laws that take directly into consideration the health, the comfort or the well-being of people”. Bruno Frère’s book title is revealing to this point: Économie sociale et solidaire: béquille du capitalisme (Social and Solidarity Economy: Capitalism’s Crutch) (Éditions Textuel, 2011). Pascal Salin (Libéralisme [Liberalism] 2000, Odile Jacob) also criticizes the social and solidarity economy, which does not allow a clear exercise of individual responsibilities, however essential they may be to him. The investor, or rather the saver, would give to this configuration a meaning of his/her placement without sacrificing profitability. His/her objective is to ensure that money really helps to promote projects in social industry or to finance urgent activities in matters of the environment. SRC inserts this démarche in the framework of its opposition to speculative finance in accordance with its objective to work on the return of these resources in the service of the real economy.

In the same general idea, we have to negatively answer the question asked by Virginie Seghers in her book title La nouvelle philanthropie réinvente-telle un capitalisme solidaire [Is the New Philanthropy Re-inventing a Solidarity Capitalism] (Autrement, 2009). Actual philanthropists are waiting for “a return on investment” for society, or maybe for themselves, without any doubt. Jean Baptiste Say (Cours complet d’économie politique 1828–1829 [Completed Lessons about Political Economy 1828–1829], 1953, p. 194) noticed, “The poor’s hope does not have for basis rich’s charity. It is based on his/her interest”. Carlyle was saying that even the term philanthropy is the most odious word of the entire English langue. But do not forget, after all, following the Industrial Revolution that pulled the common laborer down into poverty, some CEOs reacted by seeking to demonstrate the capital/labor relation as uncontentious (in the debate on complementarity or substitutability of those two factors, the last one won). As Robert Owen (1771–1858) or Josiah Wedgwood (1730–1795), they struggle to treat their employees as individuals and to build them a welcoming and stable environment that fostered of course the productivity. The notion of socially and sustainably responsible capitalism may be considered to have been in gestation when those visionary CEOs realized that ensuring employees’ commitment in their organization was an essential approach. Ida M. Tarbell in her book New Ideals in Business: an Account of their Practice and Their Effects upon Men and Profits, published in 1916, pulled up this evolution of the CEO’s state of mind during the 1910s.

We think that the notion of socially and sustainably responsible capitalism comes under the jurisdiction of philanthropists only by incidence. Certainly, according to the Economist, we are attending the birth of philanthro-capitalism at this moment when all the billionaires are considering themselves as social investors and entrepreneurs. Bill Gates, Warren Buffet and George Soros in the USA; Jack Ma and Chen Guangbiao in China all apportion billions of euros to foundations that they created themselves, or to public and private charitable organizations, as Andrew Carnegie and John Pierpoint Morgan did in their time. Nevertheless, they still are wise investors. The Bill and Melinda Gates Foundation spend fortunes in Nigeria to eradicate polio and measles, but put millions of dollars in regional oil companies. Warren Buffet encourages its richest fellow citizens for donating at least 50 percent of their fortune but gambles on IBM via its enterprise Berkshire Hathaway Inc., 10.7 billion dollars in an investment that has already gained 12 percent because the stock value is increasing on Wall Street market (NYSE values consulted on Le Figaro Économie, November 15, 2011).

Moreover, this gambling is still a productive investment, the fruit of “an attentive lecture from IBM annual reports since 50 years”, and it is speculative only from the first meaning of this adjective with the Latin root specula, which indicated an observatory. Adam Smith used it to show philosophers and physicians (physicians is preferred to surgeons), whose “business is to observe everything, without doing”. We find at this place Quesnay (Smith,1776, p. 168), who gets into that supposed neutral position, free of the external contemplative approach derived from the flourishing positivism of the nineteenth century. Jack Ma advocates that using his money for a good cause could pay off, but he pretends that his company Alibaba.com exists in order to solve social issues instead of simply doing business (Chen & Miller, 2011). By submitting its enrollment to the stock exchange, Jack Ma has felt forced to reaffirm to his employees his principle of first serving the client, then the staff and at the least the shareholders (Desné, J. 2012). We notice that this laudable intention is expressed under the form of a linear sentence that is not significant because it results in a circular and indivisible process of three parts without any preference for one or the other. Georges Soros is the blazing financier who made his name through monetary speculations—the English pound in 1992 or Thai baht in 1997—while forging his reputation as a philanthropist by distributing considerable sums to charitable organizations worth billions of dollars in their own right. But facing this crisis and its risks, he revealed his intention to give back the funds placed into his company to his investors in order to make it a family business.

Muhammad Yunus, Nobel Peace Prize laureate has even been suspected of seeking to personally enrich himself using micro-credit development as an intermediary, because lending money to poor people could be considered a profit source. Yunus insists on the fact that beneficiaries should not be considered as recipients of donations, but rather as clients (Building social business: The new kind of capitalism that serves humanity’s most pressing needs, 2010). This idea is not brand new because the tradition of offering loans to the industrious poor dates to a time far in the past. In England, in 1699, philanthropists founded a specialized institution called “The Charitable Corporation for the Relief of Industrious Poor” in order to assist poor citizens by granting small sums of money with “a loyal interest rate” (Lipson, 1958). Donors considered their donations as investments. This is not matter of charity, in the truest sense, because we insist on the fact that there is no dependence between the lender and borrower, but instead there is interdependence. Nowadays, the charitable industry may be submitted to the market laws with a new financial tool, the social impacts bonds (New York Times International Weekly, November 26, 2013).

Previous examples that we could enumerate do not match our vision of a socially and sustainably responsible capitalism. SRC is the closest and the most contributing economic regime to the concrete local and daily democracy. The project is not to save abstract capitalism, even less so the financial capitalism often called speculative, but instead to foster a concrete form of a socially and sustainably responsible capitalism that allocates value creation into social performance (anthropological, physiological, sociological and economic needs satisfaction) and economic performance (few resources creation and regeneration). Those examples fit into the generic vision of corporate philanthropy, perceived as altruistic interventions that answer those social exigencies not taken into account or not enough ensured by public authorities. McDonald’s, for example, has created a charitable organization to help families with children who need hospitalization. This safe philanthropy improves the company’s image in the external environment. In the same order, Michael Bloomberg, former New York City mayor, when confronted by social services’ powerlessness regarding the situation of disadvantaged young people, decided to solve this deficiency by allocating a part of his personal fortune to the problem, perhaps in light of reelections.

It is fair to consider philanthropy not as the expression of altruistic solidarity but as a means for entrepreneurs to settle their sociopolitical legitimacy in the eyes of the public. It follows that they have to earn the support of people and from public authorities not only in the emerging countries but also in more advanced countries in which legislators and governmental agencies wield economic influence and could foster such and such industries with financial repercussions. It is interesting in this regard to refer to the analysis made by Heli Wang and Cuili Qian entitled Corporate Philanthropy and Corporate Financial Performance: The Role of Stakeholder’s Response and Political Access (Academy of Management Journal, 2001). Not only do we have to respond to ethical internal requirements of companies to their shareholders but also make all the “stakeholders” react well to politics. Stakeholders in the socioeconomic approach to management (SEAM) include both public and private institutions. But in a more general way, this philanthropy/performance relationship is supposed to come into play only for large companies whose CEOs are well introduced in political context. The socioeconomic theory of tetranormalization (see Part 2) highlights this game and explains how the game is different for different kinds of actors, by generalizing it to all kinds of stakeholders and not only for big companies (trade unions, cab unions and non-governmental organizations, for example).

Such an approach of enterprises’ philanthropy recalls for us the “super-capitalism” denounced by Robert Reich, former labor secretary under Bill Clinton. For him, the big competitive companies seek not only to influence markets but also the political community in order to tip the scales in their favor under norms, decrees and regulations on their industry (Reich, 2008). A similar approach linking business evolution and democracy is evoked in Supercapitalism: The Transformation of Business, Democracy and Everyday Life, Reich, 2008). A recent article extracted from Academy of Management Review (Muller, Pfarrer & Little, 2014) and entitled A Theory of Collective Empathy in Corporate Philanthropy Decisions attacks the well-spread interpretation of philanthropy as a tool used by directors in order to reach strategic objectives (p. 1) in an approach that is essentially rational. He advocates that the excerpt results in taking into account social issues may lead to tax and financial advantages, coupled with an improvement of the brand image without reallocating the shareholders’ money. Its authors, Muller, Pfarrer and Little, argue that philanthropists’ decisions, which may only be matters of calculation, are influenced by empathetic motivations derived from employees’ regard for people in need both inside and outside of organizations. Just because a company is interested in profitability, that does not make it blind to the emotional concerns of its employees. The socioeconomic theory considers that human behavior is a mix of emotion and reason.

Our conception of a socially and sustainably responsible brand of capitalism may lead one to consider that the philanthropist’s interventions, from the etymological sense should be those aiming to contain within reasonable limits the destructive strengths of technology, excessive regulation and extravagant globalization with a main objective—quality of life. This aspect is taken into account to a certain extent in the sphere of economic activity at this time when reactions from public opinion need to be integrated with investment decisions from public and private institutions (in the framework of social and environmental value added seeking ambition) and on the other hand with entrepreneurship strategies. Therefore, it always prevails in the economic sphere that in order to survive on a market made increasingly competitive because of globalization, the most effective method is to reduce indirect costs (first, employees) and to enhance productivity (Datry & Savall, 2015). That is representing the “skeleton of the entrepreneurship approach” according to Eric Maertens (Henri Savall, Véronique Zardet et Marc Bonnet, Management socio-économique: une approche innovante, 2009a, p. 171).

Experience shows that by taking into account hidden costs, using the socioeconomic method helps avoid massive layoffs, which we refuse to support while negotiating our intervention contracts, because almost 40 years of experimentation show that method enabling wage increases to be self-financing. Hidden costs are costs not detected by the information systems of a company or organization. They are engendered by the accumulation of dysfunction that affects economic performance by entailing excessive functioning costs, an insufficient productivity, a loss of quality … Those dysfunctions lead to chronic overconsumption of technological resources, financial and human that is largely underestimated. To think of such costs as a necessary evil is irresponsible. To reduce or eliminate those hidden costs frees up sums that could allow the increase of remuneration, among other things. Measuring the hidden costs is an important task because they represent a potential deposit of overall and sustainable performance improvement. When those hidden costs are not identified, quantified or steered in accounting system, the company cannot elaborate objectives of reduction in order to ameliorate its immediate profitability (Savall & Zardet, 2005b).

We do not take into consideration preeminence to ethical action on a particular so-called economic behavior. If we wrote socioeconomic with a dash, it would assert that our method lies in the articulation and not on the assimilation between these two approaches. Increasing efficiency and productivity of a company and having as a secondary effect a progress on a societal plane is a fantasy because reaching the first objective lays on a restructuration plan mournfully renowned as “downsizing plan,” rather than socioeconomic on an action plan based on the socioeconomic background and adopted progresses after communication, coordination and cooperation (3C) in a spirit of exchange. Such approaches only enable organizations to recycle existing dysfunctions. Achieving both objectives together is possible because this approach generates energy and constitutes an essential lever in a company’s actor mobilization. Moreover, given that it exists in employers’ representations as well as for employees’ trade unions, it is vital that dialog run through a will stir project, based on a preliminary study.

We should not forget to mention the social capitalism that the Anglo-Saxons highlight, suggests a wild and depraved capitalism bent on getting social management under the state supervision that should allow a better market functioning (by protecting it from eventual manipulation) and the optimization of the production. The phrase social capitalism, which could appear as an oxymoron, does not imply antagonism between socialism and capitalism. We find the elementary principles since 1995 in Kees Van Kers-bergen’s book Social Capitalism: A Study of Christian Democracy and the Welfare State. This approach is clearly macroeconomic in light of the utilization of the word poor in order to notice the underserved workers and not the deprived persons. This sense has been used at the end of nineteenth century by The Economist in order to indicate the masses of Indian workers, whose inheritance were constituted as written by Adam Smith (Wealth of Nations, 1776, p. 110) only by the strength and their hands’ dexterity. By using the word dexterity, Smith let us understand that besides raw strength, the only quality that Taylor (1911) should be recognized in workers, there still exists a practical intelligence form regarding an intellectual approach of work. We could not impeach ourselves by thinking that the mournfully famous English Poor Laws that were promulgated for the first time in 1620 and the return of a welfare state, which is an excessive recourse, are polemic.

In the social capitalism framework, the general help programs for the poor are s...