Organizational Symbols and Culture Lecture Notes 2

LEADERSHIP WHAT IS LEADERSHIP? One definition: The process of inspiring others to work hard to accomplish important tasks Some general characteristics: - Related to power: leaders are expected to persuade or inspire rather than to coerce. - Different form authority: Someone who has formal authority/power in the company in not necessary to be the leader. - Authority and leadership are both based on voluntary compliance. Leaders cannot lead without legitimacy. (People choose to obey so long as they believe it is legitimate.) - Most important aspects are not tangible (It exists only in relationships and in the perception) - A person can be a leader without being a manager. Managers focus on execution, leaders on purpose. Good management more related with structural perspective; good leadership with political and symbolic. Characteristics of leaders: • Thinking in the long term (manager thinks in the moment) • Looking outside as well as inside (manager look inside) • Influencing people beyond formal authority • Emphasizing vision • Leaders thrive through the success of others Transactional leaders approach their followers with an eye to trading one thing for another (jobs for votes, subsidies for campaign contributions) Transforming leaders move toward higher and more universal needs and purposes. They are visionary leaders whose leadership is inherently symbolic. TYPES OF LEADERSHIP THEORIES 1. TRAIT THEORIES: - Can be traced back to ancient societies. - Very prominent in the 19th century (Thomas Carlyle and Francis Galton). The 19th century was the main time were this theory was so used. They thought that to be a good leader must have their characteristics, and the leader behavior was hereditary. - Still very important approach nowadays. - Studies have looked at many different types of individual differences. - Some important traits (to be a good leader):  Drive: Someone who has the energy  Honesty and integrity  Ability to create and communicate to do things and fight for them.  Self-confidence vision (trough symbolism)  Creativity  Ability to inspire trust in others  Intelligence  Risk taking  Job-relevant knowledge  Decisiveness  Passion for their job  Interpersonal skills.  Flexibility (to adapt to different situations) 2. BEHAVIOURAL AND STYLE THEORIES: Started with a famous series of experiments by Kurt Lewin and others in 1939 LEWIN’S LEADERSHIP STYLES: 1. Autocratic (or authoritarian). The leader decides what to do. Under authoritarian:  Low creativity  More difficult moving to democratic than the other way  Abuse of this style creates negative feelings 2. Democratic (or participative). He has an interaction with the staff in order to all do what all want. Under participative:  More creativity  Less productivity than authoritarian, much higher quality  More motivation and positive feelings  Classified as the most effective 3. Laissez-fair (or delegative). The leader pretty much does anything, he gives the task to the followers. Under delegative:  Least productive  Low cooperation  Inability to work independently. They were asking all the time what to do.  Low motivation and more negative feelings than democratic MANAGERIAL GRID MODEL After Lewin’s experiments, many studies from the behavioral and style theories point of view “Managerial grid” model (Blake and Mouton, 1964, 1985, because they needed an updated version) Classifies leadership styles on two dimensions: - Concern for production (or task). How much does the leader rely on the structural perspective? - Concern for people (or relationships). How much does the leader rely on the HR perspective? Identifies 5 leadership styles: - Impoverished (indifferent, Minimal management): low concern for task or people. - Country club (accommodating, Indulgent management): The friendly manager who likes people but has less concern for task. - Produce or perish (dictatorial, authoritarian management):The hard - driving taskmaster. - Middle-of-the-road (status quo, compromise management): The compromising manager who tries to split the difference between task and people. - Team (sound/integrative): The ideal manager who integrates task and people and produces outstanding performance. The model has been very criticized for leaving things out, like symbolic and political perspective. 3. CONTINGENCY THEORIES In the 1940s/1950s some researchers started realizing the importance of situational factors in leadership. Two main ideas:  Often, leaders don’t make the situations, but the other way. Sometimes the situation changes, so the style of leadership is suitable.  Different styles of leadership can be appropriate for different circumstances Four main contingency theories: 1. Fiedler’s contingency model Good leadership depends on match between style and situation. Leadership style: “Least preferred co-worker (LPC) scale”. Now reclassify the leadership style. Think about the worst manager that you’ve had and measure them, so a mark will be taken and that’s the style that you follow. Fiedler believes styles come mainly from traits, not from behave. Control depends on three things:  Leader-member relations (good or poor)  Task structure (high or low)  Leader position power (strong or weak) Match between style and situation:  Task-orientation: Situations that are very favorable (high control) or very unfavorable (low control)  Relationship-orientation: Situations of moderate control Improving effectiveness focuses on changing situational control (job restructuring) Manager/leader of a section of a car assembly line, with good relationship with employees (good, high, strong) → A style where the task-orientation is very favorable. Manager/leader of people fighting a natural disaster (bad, low, weak) → The taskorientation is so weak, so disfavor able → Low task structure, when fighting with a natural disaster there's no structure, and the leader position is weak → So it’s necessary to put task-orientation style. Manager/leader of a group of scientists (good, low, weak). Good leader-member relation, low task structure and weak leader position power, so the appropriate style is relationship-orientation. 2. Hersey-Blanchard situational model Also focused on match between style and situation. Style also characterized in terms of task orientation and relationship orientation, but styles come more from behavior. Four categories are identified: - Delegating (low, low). Low in task-orientation and low in relationship-orientation. A leader who doesn’t care about the relations and neither with the structure of the company. Leadership Through Delegation use when followers are “able” and “willing” or “motivated”. - Participating (low, high). Doesn’t give a structure to follow, but only cares about the relationship. Leadership Through Supporting use when followers are “able” but “unwilling” or “insecure” -Telling (high, low). Gives a structure to follow, and doesn’t care about the relationship. Leadership Through Directing use when followers are “unable” and “unwilling” or “insecure” - Selling (high, high). The leader cares about everything. Leadership Through Coaching use when followers are “unable” but “willing” or “motivated”. Situations characterized in terms of maturity of the followers. Specified on two dimensions: Competence (which is about the skills of the workers) and commitment (which is about the motivation of the workers). 4 levels of maturity are identified and are task-specific Match: each style works best with a determinate level of maturity: The authors believe that styles should be adapted as followers change (mature) over time. Little research support. There’s not much reason of this model, so we don’t exactly know how it works. 3. Path-goal theory Effective leaders guide followers to choose good paths to reach their goals Four leadership styles: - Directive: A style where you give people structure but doesn’t care about relationship. - Supportive: The leader cares about the feelings of the workers. - Achievement-oriented: Gives challenging goals to be achieved by the leaders - Participative: Make followers to participate. Leaders should choose a style that contributes things that are missing and doesn’t interfere with things that are present. They should take into account:  Follower contingencies: Ability, Experience, Control  Environmental contingencies: Task structure, Authority system, Structure of the work group. Introduces the notion of substitutes for leadership. Roles and tasks are unclear and work is satisfying Employee confidence is low or the work is stressful Performance incentives are poor and people have high ability Achievement motivations beyond task completion are important and people are skilled (for example, scientists) 4. Vroom-Yetton-Jago decision model The optimal decision-making method to be used by a leader depends on the problem or situation. Three types of decision-making methods: Autocratic (or authoritarian): Without consulting Consultative: Consult with followers before (opinions) Group-based: Decide together with followers Choice of method depends on three rules: Decision quality (Without consulting, how good is a quality?) Decision acceptance (How likely to be accepted without consulting?) Decision time (How long does it take to decide?) Match: - Authoritarian decisions work well when decision quality is high, decision acceptance is high, decision time is low. - Consultative decisions work well when decision quality is lower, decision acceptance is lower or unclear, decision time is higher. - Group-based decisions work well in the same case as consultative, but if decision quality is very low and decision acceptance is very important, group-based decisions might be better. Questions to help in choosing a method: Autocratic may be appropriate if:  you have enough information to make a good decision on your own  Is the problem structured so that it is clearly defined and has clear solutions.  you make this decision yourself, you are sure the group will accept  the group members aligned with the same goals that you are trying to achieve Autocratic may NOT be appropriate if:  the quality of the decision is important  the members of the group have to accept this decision for it to work Group-based may NOT be appropriate if:  disagreement likely among group members in reaching the desired solution DECISION ANALYSIS Field within management Set of quantitative tools/methods to guide decision making. More technical tools that help managers to make the appropriate decision. Usually based on advanced mathematical principles. Can often be implemented using computing software Used to inform some important decisions, used by big companies Simple Multi-Attribute Rating Technique (SMART), Analytic Hierarchy Process (AHP), Aggregated Indices Randomization Method (AIRM) The SMART method 7 stages in the decision analysis (the method helps but you choose the answer, all is subjective) 1. Identify the alternative courses of action 2. Identify the relevant attributes 3. Determine the values of the alternatives on each attribute 4. 5. 6. 7. Determine a weight for each attribute Calculate the overall value of each alternative Reach a decision Perform sensitivity analysis In each step the leader has to talk with the rest of the managers to make the appropriate decision, it use to take companies for weeks. The decision You are the manager/leader of an organization and you find yourself in the following situation: - The organization has too many costs and it would be good to make some cuts - There are several middle managers and you have identified that one of them is not really necessary (the others could do his/her work) - You think that this may be a good place to cut costs, but you are not sure - What should you do? ● Identify alternatives courses of action a) Do nothing b) Reduce the salary of that middle manager c) Fire that middle manager ● Identify relevant attributes a) Economic cost b) Motivation of the middle managers ● Determine values of alternatives of each attribute - The result of this is a table of values - Do all the attributes one by one when making the table. - For each attribute: 1. Obtain objective measures if possible (obtain the economic costs of the 3 alternatives) 2. Rank the options 3. Give subjective values (for example, from 0 to 100) ● You obtain the following tables of values: ● Determine weight for each attribute: Now the values on the different attributes need to be aggregated Simply doing the average is not a good option because the leader can’t give more importance to one aspect or the other aspect. With average we measure them with the same value: You need to assign a weight to each attribute: Steps: 1. Rank attributes based on importance 2. Give the highest a weight of 100 3. Give the rest proportional weights 4. Normalize Motivation more important than costs ● Calculate overall value of alternatives: Based on this, you would reach the decision to choose option c (fire the middle manager) Sensitivity analysis Checks how robust the final decision is to changes in the estimated values. To change the things that you’re not sure about and see now if it has changed, and check if the decision remains the same or not. Play with the weight in both extremes. Possible steps in sensitivity analysis: 1. Calculate overall values for a weight of cost of 0 2. Calculate overall values for a weight of cost of 100 3. Do a graph that shows how the overall values change (mirem fins a quin percentatge ens mourem per canviar la decisió) For example, imagine you are not sure about the weight given to cost in comparison to motivation With the leader’s weight (to cost which is 80%) the decision will be 1,c 2,b 3,a. If the leader moves the weight (example 20%) the first one option is a. If the decision isn’t going to be changed till 20% (and I’m in 80%), I can be sure that we are doing the right option. More complicated example - Imagine you are the leader/manager of a company that has to move from its current location. - You have to decide where to move the company - You do decision analysis and produce the following table: GENDER AND LEADERSHIP Historically, leadership considered a male activity Many leadership studies have focused on male leadership. More recently, much interest in gender differences in leadership There have been a number of successful female leaders (but still far fewer than men). It has been so discussed, because there are so few females in leadership positions and it’s unfair. It’s interesting to see how a suman act in a leadership position. Important questions: Do women lead differently? Much research finds no significant gender differences in leadership styles Differences between male and female leaders don’t seem to be very substantial. But there are some differences:  Women more emphasis on communication  Women more participative management  Men more task-oriented (structural perspective); women more people-oriented (HR perspective) Similar differences hold for perceptions of leadership style Are women perceived differently as leaders? When differences between women and male in comparable positions are detected, they generally show women scoring somewhat higher than men on a variety of measures of leadership and managerial behavior. (en cierto modo puntuan más alto a las mujeres que a los hombres) Helgesen’s web of inclusion. An organization that have a lot of communication, and women in leadership tend to create this type of organizations. - Encourage participation Rosener (what women also do, she proposed some differences) - Share power and information - Enhance the self-worth of others - Energize others Why do only few women reach leadership positions? Women are now largely integrated in the job market. They are a majority among university students. But they are a small percentage of all leaders. Why? Possible contributing factors: Stereotypes (in men and women) associate leadership with males. Women face conflicting expectations: high – level jobs are powerful, but women, in the minds of many people, should not be. According to this set of beliefs, a powerful woman is distasteful, unfeminine, and even ludicrous. A strong woman can make both men and women uncomfortable by challenging the conventional understanding. How could she demonstrate that she was tough enough to be commander -in - chief without seeming too aggressive or angry? How could she show feminine warmth and caring without seeming weak? expressing anger was viewed as a positive for male executives, but a negative for women. Women were attracted to intelligent men, but men tended not to like women who were smarter than they were. Women still encounter discrimination (for example in salaries which are lower or for achieving a job) Women pay a higher price: If women are leaders, more of them doesn’t have children or don’t care much about them. Women may have different preferences (many women don’t want to be leaders) CHANGE IN ORGANIZATIONS Organizations need to adapt to circumstances (internal and external) and the environment. More versatile approaches have a better chance. Difficult and problematic process (about 70% of change initiatives fail) Only 30% success, is a danger process. Planning without broad-based participation guarantees stiff resistance later on. An important aspect is resistance to change, because a lot of people like to remain the same (internal and external). Change intrudes on symbolic forms, traditional ways, and customary behavior. Change alters power relationships and undermines existing agreements and pacts. Organizations spend millions of dollars on change strategies that produce little Improvement or make things worse. What makes organizational change so difficult? CHANGE AT 3M: US multinational company, produces more than 55,000 products (adhesives, passive fire protection, dental products, electronic materials, medical products, car wax). Inventions: Post-it, Thinsulate. Operations in more than 65 countries. Emphasis on research and development (R&D) Six Sigma evolved from a statistical concept to a range of metrics, methods, and management approaches intended to reduce defects and increase quality in products and services. The approach has two components, one emphasizing metrics and control and the other emphasizing systems design. McNerney’s changes: Eliminated 8,000 jobs (11%) Strengthened performance review process Cut spending throughout the company and systematize and streamline all aspects of work. 3M workers were trained to earn the Six Sigma title of “Black Belt.”: boosting the tempo of production by reducing variation and eliminating pointless steps in manufacturing. Applied these measures to R&D (scheduled tasks, set strict deadlines, etc.) In the short run, McNerney’s strategy paid off. Indicators of productivity improved, costs were trimmed, and the stock price soared. Development of new products began to wane. The more you hardwire a company on total quality management, [the more] it is going to hurt breakthrough innovation. The progression of change at 3M reveals a familiar scenario: New CEO introduces modern management techniques and scores a short - term victory; political pressures and cultural resistance start to mount, undermine the heart and soul of a company like 3M. CEO leaves to try again; In short, optimistic beginning, tumultuous middle, and controversial conclusion. CHANGE AT MICROSOFT Changes launched from the top often aim for standardization, measurement, tightening things up, and enhancing profitability. Less often do efforts from below with an aim to loosen things up and emphasize more spiritual concerns. The company’s stock was slipping sideways, products were delayed, and many insiders perceived the company as “flabby, middle - aged and un – hip” Brummel’s changes: Towels in locker rooms Replaced industrial coffeemakers with Starbucks machines Changed competitive performance review process (system that gave managers more discretion and tied raises and bonuses to a combination of pay grade and annual performance) Changed decoration Mobile medical service Brummel’s initiatives raised morale, cut attrition, and, in many instances, one - upped Google. Brummel combined human resource, political, and symbolic ideas as a catalyst for change rather than as a barrier. Instead of taking things away or imposing something unwanted, she gave people things they welcomed. THEORY E AND THEORY O (Beer and Nohria (2000)) Theory E: Change based on economic value and efficiency. Often involves downsizing (cutting things), restructuring, economic incentives (the changes made on Microsoft are based on theory E). Hard, top - down approach that emphasizes shareholder value. Harder. Theory O: Change based on human capabilities and corporate culture. Emphasizes individual and organizational learning. More participative strategy that targets organizational culture. Softer. Authors describe theories on 6 change dimensions: Other important differences: Which one requires more long term commitment? Theory O because you need to take more time and with E if you make cuts it’s quicker. Which one is more visible? Theory E, on the outside of the company it’s more visible than the other, and people inside realize on it but much more. Which one happens more? Theory E, because in the short term it’s quicker. Scott Paper (Al Dunlap, starting 1994). The process to change was based on theory E. In the short term the company did so well but some years ago the company lose value and had to close. Champion International Paper (Andrew Sigler, starting 1981). They used theory O, they had a lot of value but they have to close because they continue having economic problems. Authors say both theories have benefits and costs. Authors say it would be good to combine them. Some companies have tried, but it’s difficult (very opposed in some aspects). One option is to apply the theories sequentially (for example, Jack Welch, GE): Which is the sequence that makes sense? First theory E and then theory O, because E is quicker and when you have the appropriate people, then, motivate them. And it could work to have a CEO that do Theory E and then another to do Theory O, because if not, people is going to hate de CEO. Updated table: The asda case In 1991, CEO Archie Norman took over. He told the employees the reality, what was happening and used both theories at the same time, and made the rest to be involved. Examples of changes:  Laid off employees and sold losing businesses  Built an atmosphere of openness, participation and trust By 1999, Asda had multiplied its shareholder value (which it’s like economic value) by 8 It had also built capabilities that gave it a sustained competitive advantage. The company was bought by Wal-Mart in 1999. But it was not bad because they were doing very well and bought the company with a high price. But they continue having the same name. EVOLUTIONARY THEORY OF ECONOMIC CHANGE Traditional economic (neoclassic) theories understand change in terms of “rational utility maximization” in the face of available options and incentives. Criticized for lack of realism and applicability. Problem of change: rational maximizers will change if their preferences change, or if the environment changes the options and incentives they face. Nelson and Winter (1982) propose an “evolutionary theory of economic change”: Three central concepts:  Routine: a “programmed activity.” A regular and predictable pattern of behavior, a way of doing something that a firm uses repeatedly.  Search: Process of evaluating possible options and finding new routines.  Selection environment: Set of environmental characteristics that affect an organization’s performance. PERSPECTIVES OF CHANGE In biological terms:    Routines are like the genes. Search generates mutations. Selection environment affects the mutations and determines how well they adapt (successful mutations are kept) The frames offer a checklist of issues that change agents must recognize and respond to. But how can they be combined into an integrated model? How does the change process move through time? Kotter has studied both successful and unsuccessful change efforts in organizations. Conclusion: change agents fail when they rely mostly on reason and structure while neglecting human, political, and symbolic elements. Kotter’s in successful change: (don’t have to be consecutive) 1. Creating a sense of urgency 2. Pulling together a guiding team with the needed skills, credibility, connections, and authority to move things along 3. Creating an uplifting vision and strategy 4. Communicating the vision and strategy through deeds, and symbols 5. Removing obstacles, or empowering people to move ahead 6. Producing visible symbols of progress through short - term victories 7. Sticking with the process and refusing to quit when things get difficult 8. Nurturing and shaping a new culture to support the emerging innovative ways THE COCA-COLA CASE 1980s, America’s Cola Wars. Great competition between Coca-Cola and Pepsi. Pepsi Challenge. Started to do blind test to people and people had to say which one has better taste. But as it was done by Pepsi they don’t trust a lot, but a supermarket did another (this supermarket wasn’t influenced) and Pepsi still won. Then Pepsi signed Michael Jackson for a 5,000,000-dollar advertising campaign. Coke was under pressure. Coke struck back with one of the most startling announcements in the company’s ninety - nine - year history: Old Coke would be replaced with New Coke. What led Coke's executives into such a quagmire? Several factors were at work. Pepsi was gaining market share. The new CEO of Coca - Cola, Goizueta was determined to modernize the company. A previous innovation, Diet Coke, had been a huge success. In their zeal to compete with Pepsi, Coke's executives overlooked a central tenet of the symbolic frame. Strangely, Coke's leadership had lost touch with their product's significance to consumers. To many people, Old Coke was a piece of Americana. Coke represented something far deeper than just a soft drink. In introducing New Coke, company executives unintentionally announced the passing of an American symbol. Symbols create meaning, and when one is destroyed or vanishes people experience emotions of a sense of loss. All the controversy, passion, and free publicity stirred up by the New Coke fiasco ultimately helped Coca - Cola regain its dominance in the soft drink industry. ETHICS AND SPIRITS ENRON Was America’s largest pipeline company. It was a solid but pedestrian business. In 1985, Kenneth Lay took over. Did what CEOs are expected to do: look for ways to grow the business and boost the share price. He was successful for more than 15 years. Introduced a new and praised business model for Enron. Lay was an example about how to do things. The company progressively became a trader and deal maker in a variety of energy-related products and services. (They studied to make deals with financial companies and other companies which made them to success and be so known) It also became increasingly aggressive, risky and driven by short-term profits:  Populated by young and aggressive managers. Many of the people who had worked during a lot of years in the company was fired and young managers without experience came.  Spent lots of money in parties, corporate jets, etc. It was part of the culture of the company.  Great pressure to produce short-term profits. Without caring so much of the longterm profits.  Great decrease in control mechanisms. Enron was caught in series of massive frauds that destroyed the company in 2001:  Manipulation of trading practices in energy sector. Inventing company that didn’t exist and have profits.  Financial fraud. (Some accounts didn’t exist)  Accounting Fraud. (fake accounts). Conclusion of business scholars? It was because the culture of the company was about making short-term profits and making frauds without caring a lot of the whole company. Abysmal state of moral lapse, they didn’t care about ethics. MERCK American pharmaceutical company. Initially established in 1891. Merck states its core purpose as preserving and improving human life, above making a profit. Is it reflected in key decisions and everyday behavior? Mostly. “River blindness” case. Merck had to decide whether to develop and distribute a drug for river blindness, an affliction of poor people in many Third World countries. The drug wouldn’t make money. Merck, true to its emphasis on health, developed the drug and then gave it away. Why did the company do this?  Because they care about the people  Because they would have a lot of publicity and at least they would have more profits. Merck scientist Maurice Hilleman is said to have saved more lives than any other scientist in the 20th century. These things are part of the ethical standards and the culture of the organization. SOUL AND SPIRIT IN ORGANIZATIONS Many dispute the notion that organizations possess soul, but there is growing evidence that spirituality is a critical element in long - run success. For an organization, soul is viewed as a resolute sense of character, a deep confidence about who we are, what we care about, and what we deeply believe in. Why should an organization be concerned about soul? central characteristic of corporations succeeding was a core ideology emphasizing “more than profits” and offering “guidance and inspiration to people inside the company”. Efforts to do something about the ethical void in management have flowed:  One proposed remedy is more emphasis on ethics in professional training programs.  A second has sparked a flurry of corporate ethics statements.  A third has pushed for stronger legal and regulatory muscle. CORPORATE SOCIAL RESPONSIBILITY (CSR) Self-regulation of the activities of an organization to take responsibility for, and improve, its impact on society and the environment. The organization cares about the impact that their activities have in society. Came into common use in late 1960s/early 1970s. Linked to the concept of stakeholders but different (Stakeholder: anyone who can be affected by the activities of the company and they can affect the company. People who give economic value to the company) Stakeholders: Suppliers, Costumers (also potential), Employees, Local communities, Government, Trade unions, Shareholders, Lenders, Consultants, Media. Two views of CRS: 1. Classic view: Only responsibility in running a business is to maximize profits. - Main argument: Foundations of market economy. Capitalism theory. - Important proponent: Milton Friedman. - Quote: (they should only care to have profits and that’s all, they don’t care about society) “Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of social responsibility other than to make as much money for their stockholders as possible” - Another important criticism: Motives behind CSR 2. Socieconomic view: The management of an organization must be concerned with broader social welfare issues. To care about society and stakeholders. Main arguments:  Ethical obligation with society,  Sustainability (If you don’t care about people and environment for long sustainability it won’t work)  License to operate (If the company do good things to the society, they can do business, if not, not)  Image/reputation. Important proponent: Paul Samuelson. Quite clear that the public now demands social responsibility. If the company do nothing, people is going to complain. Research linking CSR and economic performance. Enron: Way of doing business by the classical view (but being corrupt is not about classical view) Merck: Way of doing business by the socioeconomic view. INTEGRATING CSR IN BUSINESS PRACTICE (Porter and Kramer (2006)) CSR often perceived as conflict between organization and society. A conflict between caring from the society or for the money. Should follow the principle of “shared value”, which is to do things good for the society and for the company. Social responsibility must be integrated in business strategy. If you do it right, it can be a source of competitive advantage. Most CSR reports still don’t offer a coherent framework. They try to do it right but sometimes it’s not coherent. Steps for successful integration: 1. Identifying the points of intersection: Think of all the things that could not be good for the society and improve them to do it right. A fat society and the company, which introduce health products in order to be visible for consumers, and it’ll be good for society. 2. Choosing which social issues to address (choose only the most important ones) 3. Creating a corporate social agenda (only “you” know what to do, create a plan to show the steps that you’re going to follow) 4. Creating a social dimension to the value proposition (if you do all CSR correct, it’ll have a symbolic component to the society) Propose to change from CSR to Corporate Social Integration (CSI). The word has changed because ethics will be integrated in business, it’s not only a responsibility. ETHICAL BANKING Also known as social, alternative, civic, sustainable Different types, no clear definition. Banking concerned with social and environmental effects of its activities. (Total transparencia de cara a la sociedad. Se seleccionan las inversiones éticamente. Dan crédito a parados de larga duración.) Two main characteristics: 1. Transparency: You can go to the bank and see what they’re doing with your money. 2. They only invest in projects that have social dimensions (to have some benefits to environment or society) Some commercial banks are also investing in some social/environmental projects to improve their image. Important related initiative: Microcredits (a type of credit that have small amount of money and give it to people that really need them and they don’t ask for any guarantee to have this money back)  Triodos Bank, FIARE, Coop57 FORBES LIST (2012) Microsoft, Google, The Walt Disney Company, BMW, Apple, Mercedes-Benz. This list is based on the image people as on the street about the companies. But it’s not so reliable because all the companies on the list are well known and they used to be the first companies that people knows, and they don’t really say them because of their impact on society. SOCIETY AS A BUSINESS ECOSYSTEM Large organizations have great political and social power Of the 100 largest economies, 51 are businesses and 49 countries Wal-Mart is larger than Israel, Poland or Greece, General Motors is larger than Denmark We have some companies that have more economy than countries, and this is getting bigger and bigger, and this is a problem. In 1954 more than 60 companies were needed to equal 20% of USA economy; now only 20. This raises important questions at the level of politics, social well-being, ethics:  Do organizations respond to consumers’ preferences and needs or determine them? (responden a sus necesidades o las crean?) Some companies create the need of using their products for their benefits.  Do they respond to the citizens’ political preferences or do they determine political agendas? Some organizations are so big that have power to influence on politics.  Do they respond to the laws or do they make them change?  Do they respond to ethical principles or do they establish them? Wal-Mart, FedEx, Amazon, Inditex (it has created the way of people buying clothes, the way of dressing, as an example, to change the type of clothes some times per year, as they are old fashionable), etc. (examples of companies that are so big and are able to influence the citizens and the governments). TAXES PAID BY LARGE ORGANIZATIONS Depending on the company and their law, the taxes are bigger or lower. General Electric Google Taxes in 2010: Return of 4100 million Taxes in 2010: 2,4% Information: Former members of the Information: Money in tax government in finance department, heavens subsidies, money in tax heavens. Goldman Sachs Taxes in 2008: 1.1% Amazon Taxes in 2010: 4,3% Bank of America Taxes in 2010: Return of 1900 million Microsoft Taxes in 2010: 11% Exxon Mobil Taxes in 2009: Return of 156 million Information: Money in tax heavens Citigroup Taxes in 2010: 0%