We are excited to present a partnership with the What Does it Profit? podcast series.
The main question posed by What Does It Profit? is “can businesses and corporations align growing returns with the greater good?” Addressing this, the host Dr. Dawn Carpenter talks with world’s leading thinkers, researchers, entrepreneurs and executives, exploring the most innovative ways we can reconcile capitalism’s demand for profit with the long-term well-being of people and the planet.
By partnering with the podcast, we are fully supportive of the initiative and have taken the opportunity to reflect and discuss the important issues raised in the series, especially in the context of the United States.
In the spirit of partnership and cooperation, we have decided to provide an accompanying commentary for the first podcasts. It is hoped that this will ignite debate on and around substantive issues of CSR, regulation, whistleblowing, and the wider impact of corporations on our society. It is envisaged this debate will support future episodes of the podcast by providing a fertile source of areas for future scientific exploration.
The editorial board of the Corporate Social Responsibility and Business Ethics Blog encourages our readers to take the opportunity to listen to these very insightful and interesting episodes, and participate in the discussion with their comments.
On this occasion, our reviewers have commented the following podcasts:
- Short-selling for the Common Good
(Commentary by Bianca Maria Oprea)
- Corporate Consciousness & the Healing Power of Business
(Commentary by Ololade Durodola)
- Shareholder Activism and Long-term Values
(Commentary by Stephen Holden)
- Politics – Corporate Style
(Commentary by Costantino Grasso)
Short-selling for the Common Good (Commentary by Bianca Maria Oprea)
Episode one of the What Does It Profit? Podcast, entitled “Short-selling for the Common Good”, represents an insightful discussion between Dr. Dawn Carpenter and her guest Fahmi Quadir, known as the assassin of Wall Street. Fahmi is one of the youngest hedge fund managers in the world. She is the founder of Safkhet Capital, a woman-run short only fund. Short only funds can be understood as traders who spend their energy finding overvalued stocks which are selected on the basis of expected poor relative or negative returns regardless of horizon or benchmark weights.
The podcast offers a very informative outlook on two of Fahmi Quadir’s trades. One was in Valeant Pharmaceuticals, a company which was plagued by an accounting fraud scandal. The second and more recent one was in Wirecard, a fintech company which collapsed this year because of money laundering practices. She reveals that her deep research and evidence collection was what helped her understand how the companies operate.
Fahmi Quadir defends short selling by claiming that it is beneficial for the market quality, correcting overpricing and increasing liquidity. Also, she argues that it helps investors minimize any potential losses by decreasing the price inflation and avoiding corporate deceit. She makes certain significantly forward declarations, such as the fact that her short investing strategy is based on “companies where if they cease to exist, the world would be a better place”. I completely agree with that, as unethical companies that exploit the market stability pose a risk to market stability and may be used to exploit investors and must be stopped.
I thoroughly enjoyed reading Fahmi Quadir’s 2019 letter to BaFin, the German securities regulator, after Dr. Dawn Carpenter enquired about it. Quadir viewed the regulator’s ban on short-selling on Wirecard as clear evidence of a complicit role in the Wirecard scandal, claiming that BaFin was entirely aware of the allegations against the company and chose not to act upon them. Her 15-page letter represents advocacy of the role of short selling in society and the dangers of this ban. Perhaps avoiding the risk to be too long for a podcast, the discussion is rather brief and only touches upon the surface of the subject matter, without addressing certain delicate and detailed aspects that built up the background and causes of the Valeant Pharmaceuticals and Wirecard controversies. It would have benefitted the discussion greatly if the guest addressed further issues such as whether auditors could have a more significant impact into the practices of large corporations or what were the exact consequences suffered by the short-sellers during the German securities regulator’s ban.
However, the sole purpose of Fahmi Quadir’s work to better the society by way of capital, by reallocating the capital used by fraudulent companies to benefit businesses and to maintain market liquidity has an extremely rewarding impact on the society. I share her very committed opinion on how justice should look like in these circumstances because companies engaged in unethical and illegal practices must be shut down completely and I agree with Dr. Dawn Carpenter that through her work, Fahmi Quadir represents a hero.
Corporate Consciousness & the Healing Power of Business (Commentary by Ololade Durodola)
Dr Dawn Carpenter on her new podcast “What does it Profit?” spoke with Professor Raj Sisodia about businesses and the way they operate. He advocated that if corporations behave consciously, then they can be engines of impactful, positive influences in the communities and societies in which they are based. On the other hand, they can be a source of pain, marginalization and exploitative practices if they do not operate consciously. Professor Raj described this consciousness in the corporate world as a way of redefining corporate successes to mean more than profits. He made reference to the financial benefits that businesses who are responsive to conscious capitalism enjoy, that they actually make better financial returns, have lower employee attrition rates as well as appeal better to consumers. Dr Dawn on asking Professor Raj the genesis of his conscious capitalism and the healing power of business journey ensured that there was an opportunity for the listener to understand how the work he started in 2008 was originated. Professor Raj’s epiphany came out of frustration after several years of making money as a marketing professor, who as part of a male-dominated business environment where trillion-dollar marketing campaigns yielded little than expected returns, was without any fulfilment. He started to think that there must be better ways of conducting business after researching and writing his first book, Firms of Endearment: How World-Class Companies Profit from Passion and Purpose in 2007. This made him establish the Conscious Capitalism Movement which he described as his life mission.
Professor Raj attributed how growing up in a patriarchal, almost misogynistic alpha-male caste system in India forged his upbringing in the same way as the male ego-driven, profits-at-all-cost behaviours seen of many businesses in the world. Yet, this childhood was also instrumental in helping him gain clarity on what corporates require to achieve their healing power, as his mother had provided. He termed this ‘Mother Energy’. This energy he described as the empathetic, people-focused energy required to balance out the male-dominated ways of doing things. It was linked to Adam Smith’s first work, the theory of modern sentiments, his masterwork, which was a roadmap to how businesses should operate and lamented that Adam’s second work, the wealth of nations, was rather heavily focused upon, to the detriment of businesses in particular and society in general. Many may say this isn’t a new phenomenon as it sounds like topics that have been previously tackled in business ethics, corporate governance and corporate social responsibility. Yetunde Hoffman talks about Love-based leadership in business, JUST Capital talks about helping companies improve how they serve all their stakeholders – workers, customers, communities, the environment, and shareholders. And the UN SDGs goal 16 requests the promotion of peaceful societies and encourage business to do more to be better so that no one is left behind. Professor Raj acknowledges the work of many others in the corporate consciousness work. His mission does add to the inspirational examples that are given in this podcast of what societies with conscious corporates may look like. This made the podcast relevant.
Dr Dawn’s questioning did not include the global Coronavirus pandemic of 2020 and how peoples and societies could experience more pain and suffering due to non-existent corporate consciousness, where there are already reports in the US, the UK and many parts of the world, of PPE scandals, furlough scheme fraud, inhumane stockpiling of palliatives and lack of adequate benefits to help citizens in these unprecedented time. There could have been an exposition into how corporate consciousness may have contributed positively at this time and how more will be needed in the nearest future if people are to come together, trust that corporates by proper stewardship are on their side and will not resort to unethical behaviours in endeavours to get corporate profits back up quickly to pre-pandemic times. Listeners may worry that business decisions which Professor Raj rightly highlighted are usually driven by hyper-masculinity traits of power, ego and money, may continue to put profits before people, shareholders before all stakeholders, which ultimately may mean that the road to Uhuru, on the corporate consciousness and the healing power of business is afar off, long-winded and never-ending. There was also missed opportunity on the podcast to expand into historic problematic corporate behaviours such as excessive risk-taking as a result of testosterone-driven egos, a lack of the duty of care and accountability to many stakeholders especially employees as well as the problems of gender and racial inequalities and executive remuneration. Exploring these topical issues confronting organizations right now would have made the podcast less flowery and overly-aspirational about what corporate consciousness is or wants to be. The podcast could have spoken to more solutions. For instance, of female influences as Professor Raj’s mother had been in a patriarchal society; on how that relates to the mother energy leading to a more caring, conscientious and purpose-driven corporate world which may then take the lead in healing all of its communities and not just increasing profits for its business stakeholders. It would therefore have answered on its topic of what anyone is advantaged, if they gain the whole world and lose themselves, by emphasising on the benefits of the denial of self and doing away with selfishness and greed unlike that seen in corporations, as the good book asks of all.
Shareholder Activism and Long-term Values (Commentary by Stephen Holden)
Bruce Herbert of Newground Social Investment argues business can be a force for good and positive change, however, within the context of the discussion around shareholder activism this runs the risk of failing to address a latent social injustice, but lobbying corporations to take actions to right their own existing wrongs and address their failures, and for this to be seen as virtuous.
Shareholder activism may be understood as a form of participation with the corporate decision-making processes by shareholders, encouraging companies to improve business practices and undertake ethical decision making.
Through shareholder activism, interested parties can engage more directly with the board, and impress upon them not only the importance of operating ethically and the requirement of corporate social responsibility (CSR), but also encourage operating more sustainably in the long-term corporate interests. Meeting these commitments, a corporation can maximise long term profits and reduce risks on the horizon, including future legal costs and damages, reputational harm, environmental damage, and be able to attract and retain skilled and higher calibre employees.
These risks are exemplified by the Chevron case discussed in the podcast. Over decades Texaco, later acquired by Chevron, dumped toxic waste in local lakes and rivers within Ecuador, leading to birth defects, health problems, and environmental damage, yet refuse to pay damages and compensation as ordered by Ecuadorian courts. By engaging directly with shareholders, it is possible to exert pressure on Chevron to meet their legal and ethical responsibilities, despite the substantial cost. However, this would allow Chevron to improve their global reputation, reduce costs of ongoing legal proceedings, and allow executives to refocus on the business without the distractions of international litigation.
While addressing these injustices would be a positive step, it cannot be ignored that without Chevron these wrongs would not require addressing in the first place, and as such, addressing these problems is neither moral nor virtuous, but a requirement of the social license to operate. Accordingly, justice should not be a secondary concern to profit, and while practices, where the exercise of morality is also a method through which profit can be made, are welcome, it is important that the normative condition of exercising CSR is not that it is also profitable.
Similarly, Herbert provides an example of lobbying McDonald’s to use fewer pesticides in their potato growing operations. A pilot programme was so successful that McDonald’s rolled out the programme to its entire growing operation and encouraged other fast-food chains to follow suit. This caused a dramatic reduction in pesticide use, lower costs, improved supply chain simplicity, improved health outcomes for workers exposed to fewer pesticides, greater ease in meeting food quality standards and enabled McDonald’s to act as a market leader in sustainable and ecological farming practices.
However, corporations are allowed to frame their actions as they see fit. Where CSR and loss mitigation coincidentally intersect, corporations can capitalise on the opportunity to demonstrate this as a method to meet social expectations, despite societal concerns being a secondary to profitability. Environmentalism is a fortunate but secondary by-product of pursuing legitimate corporate actions. Considering profit maximisation, this was not CSR in operation, but the actions taken in the pursuit of financial goals. This however does not stop McDonald’s advertising the actions as moral.
This episode focuses on a burning and crucial issue in the area of corporate social responsibility, which is the intersection between corporations and politics. The episode may be conceptually divided into three parts. Each one of them deserves proper consideration.
In the preamble, Dr Dawn Carpenter clarifies that the podcast does not explore the “dark side” of corporate political influence (i.e., the shady deals between corporations and politicians and the relating untraceable corporate money funnelled into politicians’ pockets). The justification is that such an issue has been already discussed comprehensively by others like by Kimberly Reed in the 2018 award-winning documentary Dark Money. This is understandable due to the limited length of the podcast and the complexity of the issue covered. However, we would like to encourage “What Does It Profit” to do not put such a topic aside and plan to explore this crucial issue in the area of corporate irresponsible behaviours in a future podcast.
The first part of the podcast explores how corporations are using their wealth and power to promote a call to action. It brilliantly starts mentioning the Levi’s advertisement, which fosters participation in elections, and the Patagonia’s campaign “Vote the a–holes out”, which is calling on customers to vote against politicians from any party who deny or disregard the climate crisis. It follows an interview with Dan Ekstein, partner at Sagac Public Affairs, which is an organization that aims at assisting companies in “amplifying” their voice to policymakers and candidates within the United States. In particular, they focus on internally “educating” employees to be involved in the political process. During the podcast, Dr Carpenter asks the speaker an extremely pertinent question: “what are the kinds of things that a financial institution would care about in the political domain?” However, the answer offered by the guest appears quite vague and focused on a purported political “neutrality” of financial institutions (“… they are really not taking political stances…”). Such an assumed lack of political views of financial institutions appears conflicting with reality. For instance, it was possible to explore the political influence exerted by banks to counter the post-financial crisis provisions of the Dodd Frank Act. As a result, the podcast lost an opportunity to investigate and discuss the potential influence that such powerful corporations may exert on the political process to push forward various forms of deregulation. The influence of corporations in politics has become a burning issue, especially following the Citizens United decision. It could be said the political authority of corporations is increasing, as the spending of money counts as free speech. This is impacted by lobbying, donations to political parties and politicians, and being consulted in the drafting of legislation. This has even created a situation for State Capture where financial institutions and corporations are actively engaged in political stances to safeguard their interests and concentrations of power.
The second part of the podcast is extremely interesting. It consists of an interview with Gabe Rissman, co-Founder of yourstake.org, which is a data management company that works with investment advisors to help them identify the ESG metrics of portfolios as well as their political leanings. The podcast offers also a real-time experiment through which the guest analyses Dr. Carpenter’s portfolio. This is surely an extremely interesting initiative and was absolutely worth to be included in the podcast. Having said that, the podcast does not investigate the criteria and methodology that are behind such a service. Also, although such an initiative could be surely useful to mitigate the asymmetry of information between stockholders and firms, it seems that its potentially problematic aspects lie in that it is an initiative based on the shareholder primacy approach that has been profoundly criticised over the latest decade (i.e., unfortunately only a minimal fraction of non-institutional stockholders have the time, resources, and will to be actively engaged in such a way).