Monday, August 26, 2019

Open Letter to Business Roundtable and Council of Institutional Investors on "Social Responsibility"

You both represent critical interests in the current crisis over Corporate Social Responsibility, and you both issued dueling statements last week that seem to do little more than continue a debate that is generating more heat than light.

That was catalyst for my new post, "The Reformation of Market Capitalism in The Age of the Customer -- Profiting From 'Social Responsibility as a Service' [Working Draft]", which suggests a new, win-win way forward.

Both of your interest groups should consider working to achieve that new reality. The thesis is that it is customers, not shareholders who ultimately bear the costs of Corporate Social Responsibility, and it is customers, not your members, that should vote with their wallets on how that is addressed -- but that businesses must facilitate that, as agents of their customers. Your members have the power to make that happen, and will profit from doing that. I hope you will consider making this sorely overdue Reformation of Market Capitalism a reality. A capsule on why:
  • Concern -- and confusion -- about whether and how market capitalism can have social responsibility is reaching a crisis point.
  • An exhorted responsibility of shareholders to be beneficent to other stakeholders (customers, employees, suppliers, community,...) can have only limited and uncertain effectiveness -- even if CEOs truly wish to be more beneficent. 
  • Customers have the prime authority, since the funding comes from the customers. Social responsibility is ultimately a "tax" on the customer. To be "represented," each customer should be able to vote with their wallet on how much tax they pay, for what.
  • Businesses now have new powers to involve each customer in mass-customizing the service value propositions that they pay for -- including payments for Social Responsibility as a Service (SRaaS)
  • That will apply the genius of the market -- enabling businesses to profit from being socially responsible as each customer supports. Think of it as a social responsibility tax that each customer agrees to pay -- at an individualized level that both parties agree is fair for that customer.
(I have been developing the ideas that underlie this, as published in two journal articles co-authored with prominent scholars. This is a pro-bono project and I would be pleased to assist in exploring this new way forward.) [If reading this on my blog, the full post is just prior.]