Insight into business-NGO collaboration, some arguments on shareholder primacy and why mining mountain tops is bad

Partnering properly

Everyone has one, so why are they so difficult to get right? Business-NGO partnerships are plagued with problems. Cultures conflict. Objectives differ. Personalities clash. Yet the greatest deficiency of such partnerships is a lack of systematisation, this paper maintains.

Two examples are taken by way of study material: mining company Rio Tinto’s tie-in with environmental non-profit Earthwatch, and Royal Bank of Scotland’s alliance with the Prince’s Trust. All the “micro processes” involved at each stage of these partnerships comes under the microscope.

Among the obvious, but often overlooked, insights is the fact that business-NGO partnerships are not a one-way street. An NGO linking its name to that of a corporation could backfire spectacularly. Little wonder that Earthwatch undertook an informal risk analysis before jumping into bed with Rio Tinto. Employees, trustees and members all had their reservations. The NGO set about answering those concerns. In doing so, the selection process neatly and naturally began to feed into the partnership’s actual implementation.

Structuring the partnership right is all-important too. Establishing a “virtual team” is among the authors’ chief recommendations. Team members essentially act as “counterparts” in one another’s organisations, thereby increasing mutual understanding, trust and communication. Other effective processes thrown up by the case studies include partnership reporting, bi-weekly partnership management meetings and annual reviews.

How do you know you’re getting it right? One quick tip: ask yourself if you use the personal pronoun “we”, or is it still “them” and “us”. Just one helpful diagnostic of the potential pitfalls of NGO-business partnerships – and how to avoid them.

“Implementing CSR Through Partnerships” by Maria Seitanidi and Andrew Crane, Journal of Business Ethics, Vol 85, No 2, Winter 2009.

Rawls and regulation

Corporate responsibility cliché number one: shareholder primacy impedes corporate responsibility. As with all aphorisms, the argument has some basis in fact. But there are untruths lurking there too. This paper starts with the easier of two questions: is shareholder primacy legal? Despite regulations on directors’ fiduciary duties, the paper comes to the surprising conclusion: no. The shareholder primacy norm is no longer legally enforceable in the US or the UK. That said, most managers still treat it as a norm, making it de facto if not strictly de jure thus. Why? Largely because shareholders enjoy sole voting rights.

The second question is less straightforward, but no less interesting. What would philosopher John Rawls say? Rawls is famous for his social contract theory. In a nutshell, Rawls says arbitrators should don a “veil of ignorance” and determine the fairest (and most personally beneficial) route when acting in community with others. The deliberation on offer falls between shareholder primacy and the concept of stakeholder equality. The presumption is that the second would be fairer: all stakeholders are considered equally, thereby delivering the most benefits and least burdens to all. Not so, the authors argue. Economic efficiency determines the best governance principle. And the most efficient of the two options is shareholder primacy.

But before advocates of shareholder primacy start lording it over stakeholder theorists, the paper has a sting in the tail – legislation. Rawls’s theory of justice imposes “exogenous constraints” (ie regulations) on shareholder primacy. Stakeholder theory, in contrast, is susceptible to constraints of an “endogenous” nature (ie internal). So this debate resembles that between mandatory rules and self-regulation, just dressed up in philosophical clothes.

The lesson of all this? Don’t write off shareholder primacy just yet. But if you’re serious about corporate responsibility, make sure that regulations are sufficient to constrain such primacy adequately.

“Corporate Social Responsibility and the Legitimacy of the Shareholder Primacy Norm: a Rawlsian analysis”, Insead Working Paper, January 2010.

Mining moratorium

Academics usually shy away from policy recommendations, but a group of eminent scientists has issued a categorical advisory: the US government must ban mountaintop mining. If not, vast and permanent destruction of natural habitats will result. Furthermore, people will be exposed to serious health consequences.

The study details the disruption to river and forest systems as a result of such mining techniques, which use explosives to break up rocks to reach the coal buried below. Fish populations are among the worst hit, with deformities affecting more than 50% of those born close to mining areas as a result of waterborne contaminants. Small streams are also buried, affecting the health of entire watersheds. Damage on such a scale is irreversible, the authors argue.

Previous research into this aspect of mining has fallen almost exclusively to government scientists. As far as in-depth independent studies, this is a first. Activists will certainly welcome it. The mining lobby may not.

“Mountain Mining Consequences” by M Palmer et al, Science 8, Vol 327, January 2010.

Campus news

A new study shows that North American universities are struggling to make their campuses more sustainable. The Climate Neutral Campus Report finds that 50% of universities are still educating themselves on possible environmental measures. One in four, meanwhile, aren’t sure how to finance such measures.

The Network for Business Sustainability has compiled a list of Top 10 research insights for 2009. The articles are available at:

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