Business Case Studies, Executive Interviews, Roger L Martin on Corporate Social Responsibility

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Executive Interviews: Interview with Roger L Martin on Corporate Social Responsibility
September 2007 - By Dr. Nagendra V Chowdary


Roger L Martin
Dean,
The Joseph L Rotman School of Management,
Toronto.


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  • What is the role of leadership in ensuring high standards in Corporate Social Responsibility? Should he lead from the front? How should a CEO balance shareholders' interests and stakeholders' interests?

  • The role of leadership is important as it is in all things in setting the tone. If a leader grouses and complains about regulations, then his/her organization will be inclined to be as lax as possible about compliance. If a leader always asks, for example, what the lowest level of contribution competitors make to charity rather than what is the highest level, then his/her organization will always be a laggard in the choice quadrant.

    And if the leader insists on certainty of success before venturing into the frontier, his/her organization never will do so. I have answered the third question already.

  • To paraphrase one of your focus areas ‘does globalization kill virtue?'

    It doesn't have to but it can. My view is that the future of globalization rests on whether globalization raises or lowers the average civil foundation around the world. Consistent with my earlier statements about the relative thinness of the civil foundation in developing countries, I believe that advanced country corporations have a pernicious arbitrage opportunity when they invest assets in developing countries. Because the civil foundation is much thinner in the host country, the corporation in question can set standards for activities in the developing country that are well below acceptable standards at the top of its home country civil foundation but are actually at the very top of the civil foundation in the host country.

    In this case instead of investing dollars in its home country, by investing them in the developing host country, the corporation is engaged in averaging down the global civil foundation—i.e., a greater weighting of dollars has gone into an economy with a lower civil foundation and the investment is made at the top of a lower civil foundation.

    If, instead, the corporation has to decide that it didn't matter what was required or expected in the host country but instead it chooses to apply its home country CSR practices in the host country, its activities in the host country would be well inside the host country frontier. Over time, this would have the effect of pulling up the civil foundation of the host country and thus the corporation would have contributed to the averaging up of the global civil foundation. This is the challenge for globalization. Globalizing advanced country multinationals need to operate in the frontiers of their developing country hosts in order to contribute mightily to the averaging up of the global civil foundation. If they do, globalization will proceed and it will contribute to making the world a better place. If they don't, the opponents of globalization will stop its forward progress and start to roll it back.

  • What is the role of regulation in ensuring high standards in CSR? Should they be made mandatory? For instance, mandating the companies to devote a certain percentage of their revenue to CSR initiatives?

  • Regulation is tricky on this front. It plays an important role in the civil foundation by creating the compliance quadrant. And if one tried to regulate mandatory performance in CSR, all there would be is one quadrant—the compliance quadrant.

    I would not favor that. The approach assumes that governments can judge precisely what amount of CSR by every corporation is the most positive for the economy. I don't think it can—not even close.

    I also think this sort of approach would stifle innovation in the Frontier. Corporations would increasingly think that they don't have anything to think about CSR except while complying with government CSR regulations.

    I prefer governments in a responsive mode. When a group of companies trying to do something in the structural frontier approaches government and suggests a regulation that would make a good thing possible, I would want government to listen carefully. Or, when an initiative that started in the strategic frontier and migrated to the choice quadrant of the civil foundation, by way of others copying it, government should think about transitioning it from the lower left quadrant (choice) to the lower right (compliance) by way of regulation.

1. Corporate Social Responsibility Case Study
2. ICMR Case Collection
3. Case Study Volumes

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