Creating Shared Value - The future of Capitalism?

General Discussion
#21

Good question, let’s say one hundred years (I’m picking a round number where I’m hoping technology will have come a long enough way to potentially replace or synthesize the resource in question).

Ultimately, I guess it would depend on the resource. Oil is different than water which is different than trees which again is different than vegetables/crops or live animals and so on (countless types of resources).

In the oil example, they are harnessing the resource faster than it replenishes itself but they haven’t come close to exhausting it just yet so in their case, option 1 is by far the best option.

#22

The answer still depends. It’s hard to say.

If demand is hot right now, I’d grab as much of it as fast as I could and like Saki said, find more of it (if it is like an oil well or a “mine” - where there is a finite amount).

If it replenishes at a certain rate (say agriculture), the answer would still depend.

  1. Can technology minimize the wait/accelerate the time to harvest (instead of being able to harvest once a year, now twice a year - not even talking about GMOs - could be greenhouses or hydroponics).

  2. Can technology increase yield (quality of product - or increase quantity per a given set of resources - say land area)

There’s a lot more but that’s what came to mind in the few seconds I thought about this before typing.

1 & 2 are separate from ‘social responsibility’ since they’re not mutually exclusive.

As clochner mentioned, the goal of any business (as per textbook Finance), is stakeholder wealth maximization (‘I need to make a profit’) - why else would anyone do anything in a ‘business’? Social responsibility, I feel, is a form of Marketing (which isn’t a bad word). Marketing is a form of Demand ‘Generation’ or ‘Recognition’ (‘I need this’). Just like ‘Made in USA’ stickers are (or Canada :wink: ).

Whenever someone touts the ‘Social Responsibility’ card, it’s to make the consumer ‘feel good’ about their purchase. “I went green” or “I support local businesses” or “I support Made in X country”. None of them are really because ‘they’re the cheapest’.

“I give back” or “I sponsor this event”, but my logo and leaflets are covered everywhere - yes, it supports a good cause, but it builds ‘Goodwill’ (non-monetary/intangible asset - think Coca-Cola - EVERYONE knows Coca-Cola) and I might generate increased sales via this ‘investment’. The company will also pimp this on their website and have articles and what not (like that brewing company - which I didn’t read yet - haha). There’s also ‘free’ advertising when papers or journals pick up on it and write something about it. Let alone word of mouth (like we’re discussing about this brewery in this very thread).

There’s also ‘prestige’ that a consumer feels about their purchasing habits.

If it happens to help out others, that’s awesome (and I’m actually all for it), but it’s definitely not the ‘raison d’être’ (reason for existing) - which I think clochner is articulating.

But yeah, not a simple answer. Haha!

#23

As per my finance textbook, it’s “shareholder” wealth maximization, not “stakeholder”. Big difference :slight_smile:

I hear you. What I’m trying to figure out (and the reason for this discussion) is whether there’s a case for the concept of “Creating Shared Value” where a company might have a business reason to operate in a sustainable way without hurting profits (in the longer term).

Going back to that Sierra Nevada example. Is their sustainability practice helping their bottom line from an operations stand-point or is it mostly a gimmick to sell more beer? Or is it a value based decision in which case they’re prioritizing stakeholder value above shareholder value which, according to finance 101, is not the best way to help society (and we then come to the main conversation after peeling all the layers, is shareholder profitability truly the best way of operating or is there a better way?)

This is absolutely complex. If it weren’t complex, there would be one simple answer. I guess to a finance person, there is a simple answer but then you talk to a sustainability person, and they’ll tell you a different answer. Ultimately, does the answer start with “It depends…”? Such as timelines, which resource we’re talking about, and so on? Because a finance person won’t begin answering the question with “It depends…”. A finance person will answer the question with “Shareholder maximization is the only correct course of action”. This is what I was taught myself in my finance classes but I’m not sure it’s so clear cut anymore.

#24

Axel - just to be clear, my post wasn’t meant to belittle the topic you raised. It’s an interesting discussion.

But as jspazz alluded to, I’m pretty dogmatic about this stuff lol. I love economics/finance topics.

#25

Admittedly, I’m a Marketing person - though now, ‘Data Driven Marketing/Business Intelligence’ (with an Accounting/Finance-centric education) with small business experience (family business that I helped with when I started college).

Just to help ‘qualify’ the lens that I see through with my reply above. ;D

#26

And your input/views are wanted. I don’t have an agenda, I’m trying to have a conversation. I too learned that shareholder maximization is the way to go. I’m just wondering if that’s still the case.

The world has never been richer than today, even when taking into account the massive poverty that still exists. That says something about capitalism and shareholder maximization and its positive effects.

However, I’m wondering how sustainable this concept is, not from a green environmentalist stand-point but from a business stand-point. In other words, are there scenarios where shareholder maximization is no longer the best business decision and some level of sustainability and stakeholder maximization might lead to better business.

If someone can come up with an example where the latter is true (from a business perspective) excluding marketing campaigns (where the minor sustainable actions are merely gimmicks to sell more of the product), then this shareholder maximization viewpoint may no longer be as clear cut as it used to be.

I like the Sierra Nevada example but admittedly, I don’t know much about them.

#27

Haha! Yes, typo on my end.

(this is what I get for typing replies in between meetints - stakeholders is something I deal with day to day)

Back on track, there are the ‘Co-op’ business models as well that could have a more congruent financial and social goals.

Best example I can think of is REI:
https://en.wikipedia.org/wiki/REI

#28

It’s been proven many times that industries that do not regulate themselves in a manner that protects the public, rather act with decisions based solely on the financial reports, are at high risk of getting regulated with terms that reduce their profits beyond what they imagined. This goes beyond the environmental aspect.

It happens in my industry in both regulatory and I.P. (pharma), it happens to petroleum, etc. But consider what happened in Canada with Rogers/Bell/Telus - they behaved badly and only for profit, and in the end they got f–ked because the people finally said enough is enough. I know the situation is more complicated, but it’s a good example. Corporations acting without the stakeholder in mind usually do not see the blind side and what’s coming at them, until it’s too late. Reactive, not proactive.

#29

1

what were you referring to where BCE and Rogers got fucked?

#30

http://globalnews.ca/news/2030639/a-look-at-the-new-rules-that-take-effect-this-week-for-cellphone-customers/

#31

I think they just changed their denominator to 2 instead of 3 years but adjusted everything else to keep their revenue and profits the same.

Also, it says roaming rates have been reduced but I still have to pay $8/Megabyte for data roaming and $2/minute for voice roaming (zone 1) if I don’t buy a travel package and $12/Meg and $3/min for zone 2. None of that has changed.

#32

They were forced to completely change the way they do contracts. Amongst other things, outlawed were the BS $100-400 cancellation fees - usually added up - your contract is solely based and prorated based on what you paid for the device, based on fair value. Remember the “data cancellation fee” lol.

#33

lol they didn’t get fucked

the big element was the contract lengths. Those are now down to 2 years from 3 years.

The key is your phone bill. Of your 50 dollar a month bill, probably 10 a month goes to hardware subsidization over 3 years. Assume about $360. You paid $299 for your new iPhone? Bell paid $600. They pay half, you pay half.

Now the CRTC has changed the contract length (and thus Bell’s ability to have a guaranteed period over which to amortize their hardware cost subsidization).

You now have 2 choices sir

1 . pay $499 for your iPhone
2. pay $60/month on your bill instead of $50

Everyone would flip out if they had to pay $400-500 for their phone so that’s out.

So…what did Bell and Rogers do a few months ago? instituted a rule that anyone getting a subsidized phone must have a minimum phone bill size. AND they raised the prices on the phones lol.

They’re just fine.

#34

http://www.iphoneincanada.ca/carriers/rogers-telus-bell-challenge-crtc-wireless-code/

http://www.bnn.ca/News/2015/4/1/Canadian-wireless-carriers-brace-for-surge-of-expired-contracts.aspx

Plus, the big three had to be blocked from buying up and blocking new providers in the spectrum auctions. And CRTC ruled against the proposed usage based billing rule for internet, a move they dreamed up to screwed small ISPs. The big 3 are bad business at its worst, at least the CRTC is trying.

The idea was to come up with a non-environmental example of what Axel was talking about - if you can think of a better one, that one came to my mind.

Lots of examples in pharma but the examples gets pretty “legalese” for me. But safe to say any pharma company doesnt really give a rats ass about anyone or anything except the bottom line.

#35

I know, I’m just saying they’re not fucked on that deal. Far from fucked. I thought I’d missed something.

I have an amazing monthly phone plan but when our contracts were up and we could get new subsidized phones (I always get a new one asap sans penalty and sell the old one to fund it) our providers (rogers) told us we would have to give up our existing phone plan and move into something way shittier and 25% more expensive in order to get a phone price break.

For 50 a month I get

  1. 6gb lte
    2 voicemail, call display
    3 200 daytime minutes, free Rogers minutes, free evenings, free weekends, 200 long distance minutes, unlimited text
  2. No fees (no 911, no system access fee)

They offered me 2gb lte and a similar phone plan for $75, 2yrs. Best they could do. So they won’t subsidize 300 dollars of my phone price, and are instead raising my costs by 300 every year lol

The only one who got fucked on that deal, was me. Thanks CRTC.

I want to know what Axel is going to pay us for doing his MBA homework for him

:slight_smile:

#36

Hahaha this was all a ruse ;D

#37

What Saki is saying about the phone providers is truth. That’s what I was saying when all they did was change the denominator from 3 to 2 and adjusted everything to maintain their revenues and profits. They didn’t get screwed, they just raised their prices.

As for my homework, it’s more conversational pieces. I like to hear different perspectives. It gives me points and counter-points to raise in class and within my team. I can’t possibly see all angles on my own so it helps to discuss concepts and see what other people’s experiences and thoughts are.

#38

Lol maybe true. They find a way to screw us regardless. I’m on one of those share everything plans with 3 phones so it works out to $50 a phone, for unlimited LD minutes and shared 8gb. I don’t have a contract though now, so it worked out for me.