The blurred boundaries of company and state, how to learn from BP and why standards can only be applied so far

The absentee state

Sixty miles from Kenya’s capital Nairobi, Magadi Soda Ash’s processing plant crushes trona from Lake Magadi into a fine powder for use in glass and detergents. That’s not all it does. The Indian-owned manufacturer maintains the highway and main railhead into the capital. It staffs a community hospital for 10,000 patients a year. It equips the local school.

The “public responsibility deficit” in many low-income countries is seeing similar examples of private enterprises taking more proactive roles in the delivery of public goods. This brings them into uncertain territory. How should companies manage these quasi-governmental roles?

This paper sets out four possible strategies: supplement, support, substitute and stimulate.

The least attractive is the first. Supplementing government responsibility comes with potentially huge financial, administrative and logistical pressures. Little surprise, therefore, that Magadi Soda Ash gravitated towards a model based on support. Its social investment continues, but responsibility now lies with a multiparty governing body.

Extended discussion of each of the four strategies is provided in turn. Each is packed with real-life examples and challenges. The ideal objective, the authors argue, is for companies to find themselves stimulating the state to do the job it’s designed for. IT companies lobbying governments against censoring the internet so as to better serve their developing country consumers (as is happening under the Global Network Initiative) would be a case in point.

Current thinking on corporate responsibility tends to focus on industrialised economies where the functions of state and private actors are clear. As international businesses invest more in emerging markets, learning how to operate when the lines are blurred will make these strategies ever more relevant.

“Public Responsibility and Private Enterprise in Developing Countries”, Mike Valente and Andrew Crane, California Management Review, Vol 52, No 3, Spring 2010.

Beyond BP

This real-time case study asks four canny questions to unpick what lessons might be taken away from BP’s recent misadventures in the Gulf of Mexico.

The first echoes the cry of the media: who is to blame? Responsibility appears to lie at BP’s feet. The US government certainly thinks so. Tony Hayward, outgoing chief executive of the oil major, flew out to the US in the immediate aftermath to take personal charge. But in an oil-addicted world of dwindling proven petroleum reserves, is it fair to blame BP entirely? Could the demands of today’s economy be at fault too?

The paper’s second and third questions would serve a management training day well: one, if you were advising BP’s chief exec, what would you have said?, and two, if you were on BP’s board, what would you have done?

Clearly, a series of tough technical, regulatory and financial considerations are front-of-mind. But governing these should be leading responsibly. Comparisons with leadership responses by Shell and Exxon after the respective Brent Spar and Valdez disasters are illuminating.

Wrapping up, the paper asks how the disaster will affect BP in the coming three to four years. Initial fears over bankruptcy, buy-outs or bail-outs remain feasible, but unlikely. So BP is left to battle on. The key issue is how the company will reorientate itself around its core values. Could it – should it – make the “irrevocable” move towards becoming a global energy business based eventually on renewable energy, as the case suggests?

No company is ever exempt from finding itself in deep water. Excellent case studies like this ensure managers are better equipped if and when a corporate crisis comes knocking.

“Beyond BP”, case study, David Grayson, Cranfield School of Management, June 2010.

Philosophical limits of standards

Nearly two decades ago, the Algerian-born philosopher Jacques Derrida wrote a seminal paper on the limits of “authentic” justice and its relationship with the law. The two are not the same, he argued. Justice can drive, guide and improve the law, but it cannot be ensured or contained by the law. Pure justice remains locked in an “aporia” – a theoretical truth rendered irresolvable by mutually conflicting evidence. As such, a judge must “reinvent the law” each time to guarantee genuine justice, as justice – unlike the law – cannot be deconstructed.

In this short, intriguing paper, Andreas Rasche takes up Derrida’s proposition and applies it to the labour rights code SA8000.

It is widely assumed that SA8000 and its like are globally valid, and therefore universal in their rollout. Standardisation overlooks the aporia inherent in corporate responsibility. Different cultural and religious norms are one of the numerous examples cited.

These can alter interpretations of forced or child labour, for instance. If true, the implications for the standard – and voluntary corporate responsibility standards in general – are profound. Above all, it means compliance would require a “fresh judgment” by the auditor in every different context.

Conclusions aside, this paper is useful in pointing academics and corporate practitioners away from simply considering the components of various standards to appraising the application and possible contextual modification of them.

“The Limits of Corporate Responsibility Standards”, Andreas Rasche, Business Ethics: a European Review, forthcoming.

Campus news

The US universities of Yale, Duke and Navarra are among the 16 graduate schools deemed to have the “most outstanding Net Impact chapters”, as judged by the campus-based corporate responsibility network Net Impact.

Middlesex University, UK, is to introduce a masters degree on human rights and business. The postgraduate course launches in October and will be run by the university’s law faculty.

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