Class 5Addiopizzo
Dealing with complex and corrupted environments: there are no places/companies/countries immune to corruption. So, moving from corrupted environments based on the hope of find uncorrupted environment it is just an illusion. This is not the solution.
How to understand corruption? Very pragmatic topic!
Corruption: it is the abuse of entrusted power for private gain. It hurts everyone who depends on the integrity of people in a position of authority/power. The most famous ones are: Bribery, extortion and embezzlement.
Cost of Corruption It destroys trust and legality It introduces a lack of transparency in the market Government official accepts money to speed up the issuing of licenses its economic cost is 3% to 5% premium above licensing fee passed on to consumer. Organized crime controls the marketplace Its economic cost is 15% to 20% extra cost on consumers. Government official overpays in exchange for a kickback its economic cost is that public goods and services are priced 20% to 100% higher than necessary. Underreported taxes for a bribe Its economic cost is that income tax revenue can be reduced by up to 50%. There is a strong correlation between underdevelopment/poverty and corruption.
Types of corruption: Bribery: An action in which someone gives cash, a gift or some other benefit such as an emolument or privilege, to alter the behaviours of the recipients to obtain an unjust advantage (an unjust judgment, a vote or some type of behaviours) by someone in a position of trust.
Those who receive a bribe take advantage of their position of power for personal benefit and act against the duties of their position.
How to recognize bribery?a) Intention of the gift-giver: is the intention to gain an additional advantage or is this just a way to maintain good business relationship?b) Impact on the receiver: is the evaluation influenced by the gift? Is the gift causing unfair competition? c) Perception of others: how would competitors and other players interpret the gift?
We have to recognize the cultural, and context of the specific situation; but we cannot believe in good intentions and we have to consider the basic ethical standardsThe ultimate question: Am I acting in the best interest of my company?
Extortion: It takes place when someone (the extortionist) demands money or some other gift to which he or she is not entitled, through intimidation or undue exercise of authority. It comes from those with decision-making power over something that affects the victim of the extortion.
Extortion vs. Bribery
Offering a bribe is ALWAYS illicit as: - It involves inducing someone to perform a disloyal and unjust act
Accepting a bribe is ALWAYS a moral illicit action as: -It is an action of disloyalty -It is an action of injustice as the recipients are not entitled to the remuneration they receive -It causes unfair competition -It contributes to the spreading of a culture of corruption
Extortion vs. Bribery
Extortion is ALWAYS illicit as: -It causes disloyalty and injustice against the organization to which one belongs -Injustice is done to the person from whom money are extorted -Injustice may be done to third parties -It could also give raise to a scandal insofar -It may encourage others to do likewise thus reducing the sense of solidarity in society
For the morality of giving in to extortion a DISTINCTION should be drawn! -Under certain conditions it may be licit to give in to extortion in order to obtain a right When: -There are NO viable alternatives - One truly behaves with rectitude -Third parties are not involved -There is a moral reason (e.g. continuity of employment) proportional to the indirect negative effects caused by the extortionists action - Moral scandal is avoided
Example: After Addiopizzo it is not more moral acceptable (dependent on the reasons)
How to fight against corrupted environments: traditional approaches Professional and moral competencies Organizational policies and code of conducts Run away Regulation External institutional help
Show the payoff of not being corrupted
Simbolic and Substancial Actions:
Symbolic actions are not enough > we need to send very clear message in order to make clear that we are doing something to change this environment > we could use symbolic and substantial action not only to change our actions but also to influence the overall actions of society and this was what Addiopizzo was capable to do
Social Enterprise: Hybrid organizations
First definition: Are organizations that combine aspects of nonprofits and for-profits by primarily pursuing a social mission relying substantially on commercial revenue to sustain operations (Battilana and Lee, 2012)Second definition: Business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community rather than being driven by the need to maximize profit for shareholders and owners (DTI, 2002)SYNTHESIS.Organizations that adopt commercial ventures to achieve social purposesBlurring the boundaries between nonprofit and for profit.Social enterprises and socially responsible organizations
Case Study Analysis Why have all the attempts to defeat Mafia before Addiopizzo failed? Mafia's power:1. Fear: Mafias intimidating power is very high, so it is difficult to avoid them2. Cultural issue: Culturally accepted in Sicily, so it is hard to get rid of Mafia and the attempts failed. (The most difficult obstacle to overcome is the cultural acceptance of Mafia as a legitimate entity in the country/city. Accepted by society Government corrupted: Mafias social ties with high positions in different positions and influence on political power and on the police as well. Lack sense of community > very important driver Law and academic sectors were also corrupted3. Economic influence: economic incentives - the economic power is also very high, they have 7% of Italys GDP and 80-90% of people would pay the Pizzo.
That is why corruption it is so dangerous and at the same time so difficult to contradict > this kind of drivers can also explain why people alone won't be able to change this situation. Before Addiopizzo the individuals were completely alone and no option to not pay the pizzo and that it is why it was moral acceptable to pay it. Institutions, public opinion did not help the sole person fighting the Mafia so he was naturally killed with very few reprisals for the mobs.
Why has Addiopizzo succeed?
Mix between:1. Lucky enough to be at the right place and at the right time: Environmental factors that help him to get this change: capable to leverage opportunities as financial crisis; 2. But not just lucky > Resources: Leverage resources in order to fight against the mafia
Cultural Fit: Murders 1990s Opportunities: Financial crisisAs much as 80% of Sicilian businesses paid a pizzo, with payments ranging from 250 euros a month for smaller businesses to 30,000 euros a month for bigger firms, according to government officials. However, things have changed during the current financial crisis. The reasons: Some businesses closed and others were struggling to pay their own bills and debts, let alone protection money. Resources: How does Addiopizzo move within the difficult Sicilian environment to engage people and convince them to take action?
Communications with sceptical Stakeholder:1. Very specific points of discussion2. Simplicity vs. Transparency3. Show the payoff
Steps: Pizzini: Target: all society Message (Symbolic): The target of posters is to enhance the passiveness of society and they are to blame for Mafia having so much power. Dignity is the keyword: is one of the most important values in Sicily, so this had a cultural impact. This first action was a symbolic one. Objective: Communicate to everyone who pays pizzi that it is not just a problem of specific group (Shopkeepers) of stakeholders, but a problem of society/all community But specially in Sicilia it was a value very important and say to someone that they are not dignity it is very offensive > so he has very cleaver using this as the first approach Letter(Symbolic): Addressing society but also business owners to fight back. There is a sense of dignity again and there is a common responsibility for all the actions. Consumers: The act of pay the pizzi it is not just a problem of shopkeepers, and consumers should be also liable, because they are subsidizing the mafia paying more for the product. Afterwards, the pizza is payed through the increased prices supported by the final consumer. Banner(Symbolic) All the people - population Website(Substantial): was very important because it had a lot of visibility, courage and was against a previous pro-banner aid. Meeting (Substantial) : The first contact with the real situation; where they understood the real need to act. First step when they did something real and concrete what motivate the internal team as well; they really understood which kind of strategy they should develop It was fundamental to create a network of business owners and the community in general to fight organized the Mafia structure. Here it starts the economic impact, always having the cultural one present. Strategy (Subs/symbolic): Anti-mafia certification - After the anti-racket certificate came, where the target is the consumers (in order for them to protect the anti-Mafia businesses) and this is a substantive action. Mafia did not retaliate against Addiopizzo because the Secret Services were protecting them.
Symbolic actions would not be enough, they had to send very clear message in order to make clear that we are doing something to change this environment. All these steps developed by Addiopizzo based on symbolic and substantial action had the capability to change individual and the overall actions of society as well.
Economic Support Cultural Change > Dignity Became Mafia a marginal stakeholder
Protection > Reliability Ethical Consumption > Justice What are the critical stakeholders hooked by Addiopizzo? Shopkeepers Consumers: are the most critical stakeholder. Media: ability to affect the other people Students Potential entrepreneurs Police
What is their role in supporting Addiopizzos fight against the Mafia?
Need of points of contactHere we are not talking management stakeholders, we are talking about a social movement and non- profitable organization that are trying to keep the other stakeholders to help the shopkeeper in order to change a cultural and social intrinsic mind-set of corruption.
Mafia now is a marginal stakeholder and shopkeepers are not alone anymore.
Addiopizzo had very cleaver vision, because it was really difficult to destroyed a huge and powerful network as mafia in Sicilia
Addiopizzo Today 826 entrepreneurs pizzo free 10450 consumers explicitly supporting Addiopizzo and Pizzo free entrepreneurs 37 local institutions involved in the project 176 schools involved in the project 3585 sent to from all over the world to sustain the project A social enterprise, called Addiopizzo Travel leveraging business opportunities that lie behind ethical tourism in Sicily: Social enterprise promoting sustainable tourism in Sicily: ECONOMIC SUSTAINABILITY, it is a business organization 100% pizzo-free ENVIRONMENTAL SUSTAINABILITY: it promotes the valorization and protection of local natural and cultural resources SOCIAL SUSTAINABILITY: it introduces in the tourism sector culture of legality and provide clean job opportunities Take Away Importance of civil society and social movements: Leverage cultural fit, opportunities and resources to drive a change Civil society: Included organizational actors that are neither businesses nor governmental institutions, and which are involved in the promotion of societal issues, causes, goals
Ethical consumption: the conscious and deliberate decision to make certain consumption choices due to personal moral beliefs and values > Willingness to spend more on products from socially responsible companies
Strategies for social changeEthics to boost social (and economic) changes Some entrepreneurs can be driven by ethical motivations An increasing number of consumers is driven by ethical motivations It is possible to educate consumers to reward ethically oriented initiatives Social change is possible (also) through bottom-up and multi-stakeholder initiatives
Summary:Theory: Corruption: definition The moral case for bribery and extortions From social movements to social enterprises Social enterprises vs. socially responsible organizations Addiopizzo case study: Strategies for social change Ethical consumption Role of values in corrupted environments
Class 6Timberland
From CSR to CSVCSR values are doing well and then doing good; it is linked to citizenship and philanthropy; discretionary or in response to external pressure; separate from profit maximization; agenda determined by external reporting & personal preferences; impact limited by corporate footprint & CSR budget.CSV Values are doing well & doing good; joint social and company value; integral to competing; integral to profit maximization; Agenda is company specific; realigns the entire company budget. Share value concept: not only an economic value but also a social value is needed to create share value. This concept it is very concrete and really help organizational managers to create value for society. Example:Coca-cola are using CSR just to react to the Society's Expectations of Business Ethics: to avoid moral scandals; as a marketing strategy. They are not really investing in order to have a real impact in society;
CSV: change from a point of view where CSR is cost; more as a view of shared valueVSTraditional way: react to the external pressure and society expectations and in a very standardized way.
You really have to create value for society and economy: it is not about having a department that have some casual activities - not just the CSR department and a budget for it, but define one strategy and have this into account. Example: MARSThey have been capable to really develop and identify a very precise niche and develop the corporate engagement and their strategy in order to create better conditions for local farmers; have been collaborating with other organizations as NGO and Government (it is a very good way in order to understand more issues)Stakeholders communications: be capable to communicate it to them and to other stakeholders.
How can we create shared value? Reconceiving products and markets1. Answer the question: are we really addressing (all our potential) customers needs?2. Evaluate bottom of the pyramid markets3. Provide appropriate services to lower income and disadvantaged consumers/people. Redefining productivity in value chain:1. Answer the question: how can we scale the economic value created in our value chain by leveraging societal weaknesses?2. Assess economic risks cause by societal/environmental issues.3. Identify possible partnerships throughout the value chain. Example: The Coca-Cola Company >Partnership with WWF to reduce water consumption. This strategy has enabled Coca-Cola to obtain a 16% reduction of water usage since 2004 and save more than $ 5 million Building supportive clusters1. Answer the question: how can we build clusters to improve company productivity in developing countries2. Build open and transparent market3. Provide partners with skills and capabilities to support their efficiency and high quality production. Example: Nestl > Objective: double the amount of coffee bought directly from farmers (organized in social enterprises). Value for Nestl: more secure supply and better quality raw materials; consumer preferences for Nestl products, lower procurement costs Value for farmers: advice and technical assistance (from Nestle and Rainforest Alliance), increased income, employment and long term safe partnership The four cornerstones of shared value Corporate engagement Collaborative co-creation (partnerships) Stakeholder communication Clear purpose (mission & values)
What is employee Volunteerism?Corporations support communities and non-profit organizations by establishing systems that facilitate and encourage their employees to volunteer (employer driven and employee-driven).In either case, a corporation is donating its employees time and labor to a particular cause. Today more than 90% of fortune 500 companies have employee volunteer programs to leverage the power of service and volunteering in the corporate sector.
Benefits of Corporate VolunteeringFor company Corporate branding; encourage teamwork; employees branding; employees commitment.For employee Professional and personal development; leadership and work skills; sense of community; cross-organizational operationFor NGO/society Competences acquisition; scale social impact; acquisition of entrepreneurial capabilities.
Stakeholder Communication
Social accounting is the voluntary process concerned with assessing and communicating organizational activities and impacts on social, ethical and environmental issues to relevant stakeholders. Good social accounting is (in 3 factors): Comparable Reflect the view and account of all principal stakeholders Based on measurable objectives
Accountability: the obligation of an individual or organization to accept responsibilities for its activities and disclose the results in a transparent manner. The challenge of measuring social/environmental impact: Input: all resources, whether capital or human, invested in the activities of the organization/project Activities: the concrete actions, tasks and work carried out by the organization to create its outputs and outcomes and achieve its objectives Outputs: the tangible products and services that results from the organizations activities Outcomes: the changes, benefits, learning and other effects that result from the organizations activities Impact: the contribution of the organizations activities to broader and longer term outcomes
Case Analysis How have Timberlands alliances with NGOs evolved over time?It started with a donation and a strong commitment of CEO, then a team culture was developed and finally the strong integration (headquarters close) and members of top manager of City Year in the Timberland Board and Timberland president had participation in City Year board too. Types of partnershipsDonationSharing informationFormal partnershipJoint VentureEvolution over time1. Step 1City year requested a donation from Timberland of 50 pars of bootsPhilanthropic alliances Donation evolved to low level of engineering, peripheral organizational strategies, fiscal/legitimacy, and low mission alignment 2. Step 2Community service for Timberlands employees > Path Service (Not only volunteering hours, but also training, teamwork, share services and space work)Transactional alliancesSpecific activities: Compartmentalized engagement; peripheral to organizational strategies; cause marketing; high but compartmentalized mission alignment.
What is employee Volunteerism? Corporations support communities and non-profit organizations by establishing systems that facilitate and encourage their employees to volunteer (employer driven and employee-driven).
In either case, a corporation is donating its employees time and labor to a particular cause. Today more than 90% of fortune 500 companies have employee volunteer programs to leverage the power of service and volunteering in the corporate sector.
Benefits of Corporate Volunteering For company Corporate branding; encourage teamwork; employees branding; employees commitment. For employee Professional and personal development; leadership and work skills; sense of community; cross-organizational operation For NGO/society Competences acquisition; scale social impact; acquisition of entrepreneurial capabilities.
Win-win: Knowledge for Timberland from the NGO: they have to develop important skills to understand the environmental and social issues; Path of services increase the commitment of the employees, more ethical values within the organization
Volunteer activities:Philanthropic Responsibilities > more than what the company need to do in a legal and social responsibility perspective > transformation level (they are philanthropic activities with a transformational level)
3. Step 3Schwarz chair of City Year Board, Casey director of Timberland SE joint program > Director of City Year seating in the board of TimberlandIntegrative alliancesStrategic alliance Integration of core competences; central to organizational activities; organizational culture; strong mission alignment. This organizations are working together in order to achieve common goals > at the end of the process City Year was seating at the board of Timberland;
Which are the main characteristics of Timberlands Commerce and Justice Strategy?
They want to be a company that it is an employees first choice (humanity and excellence core values) as well as a socially accountable organization (core value of integrity and humility). On the other hand, they want to create/set an ethical standard for the sector, wanting to be the best in their market. Finally, they want to satisfy customers and shareholders aligned with a social responsibility (last strategy feature more aligned with excellence value).
Consistency of ethical values: Strong Leadership Mission of organization: commerce (economic mission) and justice (social mission) Values: Integrity Humanity Excellence Humility Objectives: Top 10 for employee choice > Employees > Integrity; humanity; excellence; Financial return for shareholders > Shareholders Reference brand for CSR > Clients and Suppliers > Integrity; High quality products > Economic and Ethical values > Customer > humanity; excellence
Mission and ValueYou need to have committed leaders, in order for them to support the organizational values by developing strategies aligned with the organization mission.Mission of Timberland: Doing well and Doing Good connects commerce and justice. Values of Timberland 4 core values: Humanity, humility, integrity, excellence. Excellence high quality shoes, very good in advertisement and distribution.
Core values are strongly aligned with the mission of Timberland and social activities they are undertaking. Obviously the leader is completely committed to the social enterprise and mission views.
Corporate engagement: business organizations as community of person Governance model: Organizational structure Formalized code of conduct: CSR planning Human resource management: Stakeholder engagement Governance: CEO and City group: Marketing department > social ent. Department > Miss Casey from city year > H.R.D; volunteer attitudes; alliances with NGOs Supply Chain > Environmental Affairs > Mr. Kellog > decrease pollution; minimize environmental impact; Brand/reputation; (8 steps > sustainable report) Legal department > Global Business Alliance > Manage supply chain; global standards labor; code of conduct.
What recommendations would you make to the management for strengthening the companys strategy and operations? Structure: Social enterprise department (marketing division, why not in Human Resources Management); environmental affair department (supply chain division); Global Business Alliance (Legal Department).
Timberland Today: Commerce and Justice Climate: very clear environmental objectives, environmental minded. Factories: giving conditions to factories to be social responsible and support according to ethical standards in each country (to cope with cultural differences). Service: multiply the service and increasing its target. Product: they are using organic materials and use them as marketing tool (show social impact).
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