Making CSR work

freeman03-11-13-39.jpgFreeman presents ideas that are forthcoming in Freeman, Harrison and Wicks, “Managing for Stakeholders”, which will be published in 2007. His core proposition is “Business is all about value creation and trade”. In his opinion, “capitalism” refers to a number of different debates in society: Often the term is confusing and opaque. He’s stating that, if we think about how a society can sustain a system of voluntary value creation and trade, then capitalism can be beneficial. And he highlights traditional models of capitalism, portraying markets as the main metaphor for most models of business. However, what does it help a business, to think about creating value in trade, he asks. And: What does the entrepreneur do?

Economies work in part, “because there always is a better way to start”. However, the problems with competition are captured by four arguments: the global, historical, societal framework, and the human nature argument. Historical: Value creation and trade has emerged in a time *before* the nation state. The traditional idea is that capitalism works because people compete with each other - and that entrepreneurship must relate to the concept of a singular, egotistical entrepreneur. Freeman thinks this is wrong.

Following up on this, he remarks: How can we have an ethical theory separated from business, if we always have been value creators and traders? The overall internalised presumption is that business is morally questionable - without realising the benefits of business. And thus, businessmen are mostly interested to answer the question “what do you stand for” rather than “what business are you in”.

To Freeman, capitalism is a system of social cooperation. It is about how to create value for each other - something that no-one does on their own. And exactly this is, why capitalism works. We have simply forgotten that business works because we can work together and because we have joint interests. He calls this “stakeholder co-operation”.

In addition to this, “stakeholder responsibility” is needed to create, trade and sustain value: parties agree that they accept responsibility for the consequences of their actions. When third parties are harmed, they must be compensated, or a new agreement must be negotiated with all of those parties who are affected.

Value can be created, traded and sustained because human beings are complex psychological creations, capable of acting from many different values and points of view. Economists ignore a lot of what we already know about human behaviour. They talk about “rewards and punishments” and ignore that human beings have complex emotional lifes. Freeman states: this exactly, this complexity is the reasons why business works. That’s where capitalism starts. And this is stakeholder engagement, adding to stakeholder responsibility and stakeholder co-operation. So, according to Freeman, the classical and scholarly debate between Freeman and Friedman is “beside the point”:

“Stakeholder engagement is the essence of what business is all about.”

Update: Freeman’s keynote.

1 Comment »

  1. Marcus Kreikebaum said,

    March 26, 2008 at 2:53 pm

    I remember hearing Freeman saying, that we need to change our narrative model on what capitalism is and how it works.
    1. This implies an important presupposition, namely that there is a predominant narrative model on capitalism, that has so far informed all of our actions and beliefs concerning business.
    2. Secondly he implies that we can become fully aware of this model.
    3. And this statement suggests that it is possible to change our model.

    In this comment I argue that in order to change our model I need to change from a dualistic to a non-dualistic mode of thinking about business as well as from a binary thinking in terms of signifier and signified to a more complex discourse model.

    What are our “narrative” traditional models of business and capitalism?
    To me, there are two ways to think about this: The first way is to look at great heroic narrations as entrepreneurical archetypes, which serve us as blueprints for our autobiographical novel, which we write through our (professional) lives, decisions and actions.
    Take for example Homers “Ulyss” as an example of modern strategic management. Adorno did this, for example, when deciphering the encounter of the Sirens in Homers “Ulyss” as a metaphor for value-creation.
    I think, that Goethes “FAUST” has very much expressed and influenced the entreprenuerical archetype or narrative model, at least in Germany. I am sure, there are similar narrations in the US, in France, Poland, China and Africa, who function as metaphors in George Lakoffs sense, as a clustering of propositions on what a sucsessful living in and for business means.

    Another way of thinking about our narrative model is, to see, what it essentializes and where are its contraints are. And fherefore what it excludes, omits or opposes: My personal narration of capitalism has been so far very dualistic: Capitalism is the opposite of Socialism. Capitalism aims at a technical utopia, Socialism at a social utopia, Capitalism is driven by individualism and egoism, Socialism by collectivsm and altruism, and so on…

    Now Freeman asks me to change my narrative model, in the sense, that I should integrate these binary metaphors into one named “stakeholder capitalism”. Sounds like a good way to integrate, what has been separated and fiercely battled about in the last century and bring back the notion of a social utopia, which has been lost due to the agonizing disenchantment and fall of the idea of state socialism and to place it among people and markets.

    Is Freeman then actually proposing a paradigmatic shift in our narration of capitalism by changing that which is signified instead of further manipulating the signifier (crest smiles)?
    If so, this is a very challenging task. It means to overcome dualisitic and binary thinking and to look at the whole process of signification / production as the result of a democratic discourse among the stakeholders of a business in order to find out what we need, what serves us best, how we all can survive. This seems to be a great idea. I wonder, if it is already put to work somewhere.

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