Our expedition together is nearing its end. So let's reflect a bit on some of the key lessons we have drawn. These are my personal takeaways from our explorations. Well, you of course will have drawn your own unique lessons. Business is incredibly influential in our lives. I'm speaking more specifically now about the modern day corporation. A corporation is a very young institution in the scheme of human civilization, but has rapidly become, arguably, the most powerful institution in the world, influencing all of us on a daily basis. Perhaps even more than nation states. The very purpose of the corporation is debatable. And given their incredible influence, it's probably in all of our collected best interest to thoughtfully engage in this debate. Milton Friedman argued that business, and by extension of that we could say corporations, exist solely to pursue profits. That is their purpose. Freeman justifified this view by pointing to the proverbial butcher, brewer and baker of Adam Smith's 1776 wealth of nations and envoked the now infamous line from that text quote, it is not from the benevolence of the butcher, the brewer, the baker that we expect our dinner but from their regard to their own interest, end quote. We thought about that a bit, and came to critique this view, as a butcher, brewer and baker of Smith's time were individual people, embedded within their communities. And this is quite different than a modern day corporation. The baker who lives in his community is going to pursue profits for his bakery, while closely taking into account the well-being of his fellow community members. The baker's personal reputation would suffer as his business, if he was not perceived as contributing to the betterment of the community or was seen as taking part in unscrupulous practices. And because a baker sees the faces of his many stakeholders, his customers, suppliers, and employees, he's very likely in tune with how they feel and what impact he may have, positive or negative on them. And if the baker is like 99% of us who aren't psychopaths, he has empathy for stakeholders just by virtue of seeing their faces. Empathy is this wonderful human emotion that helps to connect us better in our line of interest. So the baker pursuing his self interest of profits is really influenced by being embedded within his community. Now, by virtue of its success, the modern corporation has grown to colossal proportions. It's in no way like the small butcher, baker, brewer of Smith's time. So, justifying that the corporations should only care about maximizing profits by invoking Smith's butcher, brewer, baker quote is simply not appropriate. But here, let me interject a point of support for Milton Friedman. He's often teed up as the whipping boy for business ethics or corporate social responsibility courses, and I think often times unfairly, as it's sometimes argued Freedman was advocating unethical practices. I would argue Freedman was attempting to make what the philosophers would call a utilitarian argument for the corporate purpose of maximizing profits. Friedman was contending that when corporations focus solely on pursuing profits. The greatest good occurs for the greatest number of people will be the byproduct. Through profits going to shareholders, employment, tax revenues to governments and goods and services get produced. If one makes utilitarian argument however, one needs to back it up with evidence that the greatest good for the greatest number of people is actually the result. And here is where Milton Friedman is justifiably critiqued. We face growing inequalities in this world where the profits to shareholders do not necessarily mean that many people are benefiting. We are experiencing questionable tax avoidance practices by corporations. And we face concerns about the health and usefulness of all the stuff that's being produced for consumption. As we discussed, the public is increasingly sceptical of large corporations as being in it solely for themselves. In other words many people are beginning to ask if cooperations serve the interests of the society or if society is serving the interests of cooperations. Here we began to consider that the concepts of sustainability in cooperate social responsibility. Which we used almost interchangeably in our time together, can serve as a form of swords for us to discuss and obey these important issues. But nevertheless, Michael Porter picked up on Freedman's prescription for profit maximization and operationalized it for managerial application through the concept of achieving a competitive advantage and it's associated with five forces model. Through this, Porter, helped to engender the field of strategic management to be focused squarely on competition. In which the company is positioned at the center of the war with all the stakeholders. Including its industry peers, suppliers, and customers. And throughout our discussions we consider how well this mindset of focusing squarely on competition works. Is competition the best framework on which to consider business? We came to find much greater attention to cooperation than the prescriptions and practices of Scandinavian firms. And where this cooperation can often involve engagement with stakeholders who are often times critical of the corporation. And who have not traditionally engaged with corporations. It's going to be stakeholders like the NGOs Amnesty International, Save the Children, and WWF. And the governmental organization UNICEF. We heard the important lessons and mutual benefit that can come when critical voices are sought out, engaged with, and cooperative efforts are formed. We heard of the importance of leadership in management, approaches to engender the sort of cooperation. And where leadership was about encouraging participation, building consensus and seeking out the critical voices. This is a humble brand of leadership. The one that may fly in the face of the traditional views of leadership popularized elsewhere in the world where the leader is an individual hero a John Wayne macho type of individual who comes in and takes command and is celebrated as setting everything straight. In contrast what we so embraced in Scandinavia is a much more nurturing figure. For me exemplifies this approach to leadership. It's not hard to see how this sort of leadership maybe more likely to bring stakeholders to the table for more effective and on going cooperation. And how that in turn may lead to more effective long term approaches, for addressing some of the greatest sustainability in CSR related challenges we face. So evidence that this sort of cooperative approach actually works. And by anyway you may choose to measure Scandinavian firms like Nortis are global sustainability leaders. In addition to Scandinavian cultural factors that influence sustainability in CSR practices at Scandinavian firms, we also considered some institutional factors. Those things that can have something to do with regulations within Scandinavian countries. And we focused our attention on corporate governance practices in Scandinavia. Came to realize there some very unique attributes that are encouraging of strong sustainability and CSR considerations. This includes a unique structure where by law, employees are represented on the boards of directors of companies. When one considers the average share of the company has held something less in six months. But the average employee desires to stay at his or her company for presumably longer than that. This alone may shift some attention to the longer term. We also touched upon a unique law that can be found in Scandinavia, Norway more specifically, mandating gender equality on boards of directors. Now while we didn't exactly dig into this one too much, I should note there's some evidence out there that women tend to embrace and encourage sustainability in CSR agendas more than men. Where one may consider how such a move to have greater representation of women on boards of directors as potentially impacting the attention towards sustainability in CSR at companies and subsequently their performances. But the big corporate governance issue upon which we focus was that of much greater consolidation of share ownership found in Scandinavia than for example, in the US. Where shareholders are typically anonymous entities dispersed throughout the planet. And where these consolidated share ownership in Scandinavia is often the result of these things called industrial foundations like the Noble foundation that hold a majority of voting shares. We learn the shares for these companies are still traded in public markets. So, capital can be readily raised like any other publicly traded corporation. But where the shares are divided as A and B shares, A shares have greater voting rights, and they're typically held in perpetuity by the industrial foundations and the B shares have reduced voting rights but equal claims to dividends. This is a very unique model that has encouraged companies to have longer term horizons because of certain protections against short term-ism by shares getting dumped. Now add to this effect that industrial foundations tend to have a mission statement involving some societal objective and one can see a different set of incentives arising for these Scandinavian firms. In which long term-ism and betterment of society are very much at the core. One can see how this can be encouraging of strong sustainability performances. And we also discussed how Michael Porter is now actively working to shift attention in the field of strategic management away from its traditional focus on profit maximization and towards something he and co-author, Mark Kramer, refer to as creating shared value. Porter and Kramer goes so far as to say a change in corporate purpose is needed, away from Friedman's call for profit maximization, and now instead put the interest to society as the corporate purpose mode alongside pursuit of profit. We applauded the shift and highlighted that Michael Porter must have discovered how business has been done in Scandinavia. Novo Nordisk has long exemplified an approach that's more recently being referred to as creating shared value. Okay, before I conclude here, I'd like to take us back to Smith's baker, butcher, and brewer. We have discussed how the modern corporation is not embedded within our communities like the baker, butcher, and brewer of Smith's time. But may be our criticisms are not entirely true. Maybe by virtue of such factors as culture, institutional frameworks and relatively small size where people like still feel embedded within their communities. Maybe these Scandinavian corporations still behave more or less, like Smith's bakers, butcher and brewer. These Scandinavian corporations are indeed pursuing profits but like Smith's baker, butcher and brewer. They're doing it within the context of being embedded within the communities. Where stakeholders are better known and engaged. And self-interest pursuit is better aligned with the well-being of society. That's something for us to reflect upon.
