Posts Tagged ‘Business Ethics’

Fast Company: ‘How an economist’s cry for ethical capitalism was heard’

Not long ago, economist Noreena Hertz lived at the lefty margins of her field. But her (widely ignored) prediction of the credit crisis and her call for a more evolved form of capitalism have suddenly put her at the center of the universe.

By Danielle Sacks
Published: November 1, 2009

Noreena Hertz had to seduce Bono. The Cambridge University economist was writing a book on the developing world, and Bono’s personal saga of getting the U.S. government to cancel more than $400 million of debt was just the pop-culture bridge she needed to move her ideas beyond the wonkish corridors of academia. After all, Hertz’s motive for The Debt Threat — a deep dive into the debt trap that, she argued, would have global consequences for all — was to juice the campaign that had been building slowly in activist ranks. The book itself would be a battle cry (a postcard inside made it easy for U.K. readers to urge the prime minister to cancel billions owed by the world’s poorest countries), and its release was pegged to hit before the 2005 G8 meeting. Hertz sent Bono an email, unsure if it would find him. To her astonishment, it did: “I’m so glad you got in touch,” read the rock star’s reply. “I’m a real fan of your work. Bono.”

Few academics have leaped from the critical fringes to the role of prophet as adroitly as Hertz. Wielding her contrarian message — that markets need to serve the interests of people as much as they serve companies or shareholders — Hertz has been campaigning for the past decade against the mantras of mainstream economists, urging a more ethical form of capitalism. But her message isn’t some yoga-infused spiritual quest. As she explained in her 2001 European best seller, The Silent Takeover, it is about the unsustainability — environmentally, socially, and economically — of laissez-faire capitalism and the idea that markets are stable. If the surge of corporate power was going to leave governments relatively impotent, Hertz argued, then those corporations themselves needed to fill the void. “She moved the conversation from what corporations can do to be socially responsible to a much more profound examination of the boundaries of corporate behavior and public behavior and where they have failed,” says Debora Spar, who was a dean at Harvard Business School for nearly two decades and is now president of Barnard. “She’s much more radical.”

Read the rest of this profile on the Fast Company website

Hertz – From Gucci to Co-op Capitalism

February 23rd, 2009 by admin

The Daily Beast: ‘The New Co-op Capitalism’

The first full crisis of globalization means the start of a kinder, more selfless economic system.

By Noreena Hertz
Published: 23rd February 2009

There are some who say this current global financial recession, this recession/depression that is being felt in London and New York, in Shanghai and Sao Paolo, will not have an impact on the nature of capitalism. That five years from now, well, capitalism will basically look like it did six months ago.

I understand this caution about predicting anything new, a reluctance to call the past era one of capitalism’s demise. But I do not agree with it. I believe the conditions are in place for a markedly different economic model to emerge from the carnage this economic crisis has wrought.

For what we are seeing today is not just a variant of the Russian crisis, the dot-com crisis, the Japanese crisis. This first full crisis of globalization, this first collective lose-lose, this first blue- and white- and multicolor-collared recession is so profound, is going to negatively affect so many people all over the world, is so obviously a manifestation of what happens when private institutions are allowed to put their profits before all else, and is so obviously linked to the flawed doctrine of the past 30 years, that to navigate it successfully will, I believe, demand a different operating environment.

I have named the past era of capitalism, Gucci Capitalism. It was an ideology born in the mid-1980s—the love child of Ronald Reagan and Margaret Thatcher, with Milton Friedman its fairy godfather and Bernard Madoff its poster boy. An era whose fundamental assumptions were markets should be left to self-regulate, governments should be laissez-faire, and human beings are nothing more than rational utility maximizers. A time when a conspiracy of marketers, credit-card companies, banks, and advertisers fueled a particular narrative—that it was less shameful to be in debt than not to have the latest pair of Nike sneakers or Gucci handbag.

Read the rest of the article on the Daily Beast website

The New Statesman: ‘Doing the right thing is good for business’

By Noreena Hertz
Published: 4th September 2006

Back in the 1970s, Kodak tried to give $25m to a black civil rights organisation in Rochester, New York. The company’s shareholders rose up in arms: making this politically charged offering wasn’t the reason they had entrusted Kodak with their money. The donation was withdrawn.

Fast-forward to the past 12 months. The Norwegian Petroleum Fund, the world’s largest institutional investor, has hired an ethical phil osopher to determine what it should and should not invest in: it sells its shares in Wal-Mart allegedly because of its serious and systematic vio- lation of human and labour rights. A group of 17 leading US pension funds and investors controlling $658bn in assets have pushed for face- to-face meetings with the Exxon Mobil board of directors to discuss the company’s persistent lack of acknowledgement of climate change. In Britain alone, socially responsible investments have increased by 31 per cent.

Today, an increasing number of shareholders are not only not objecting to radical behaviour on the part of the companies they invest in, but they are actually demanding it of them. And this trend is going to accelerate.

I make this claim for the following reasons. First, radical businesses are valuable: witness Cadbury’s glee in acquiring the organic chocolate company Green & Black; ditto ‘Oréal’s acquisition of the Body Shop and Ford’s recent decision to invest one billion dollars in envir onmentally sound cars. Second, it is no longer simply fringe groups that care about these issues, but, increasingly, mainstream pension funds and charities looking to invest in companies whose values are aligned to those they represent. Many young internet and high-tech magnates (the new coterie of high-net-worth individuals) are also keen to put their investment dollars in environmentally and ethically sound companies. Third, because of a legal opinion issued a few months ago by Freshfields.

The renowned international law firm was asked by the United Nations Environment Program to check whether pension funds, public and private insurance companies and mutual funds could incorporate environmental, social and governance issues into their investment decisions. The opinion Freshfields came back with in October 2005 was startling. Not only could they do so, but they have an active duty to have regard to these issues in every single decision they make.

It’s not, to quote Milton Friedman, that the business of business is no longer business. Of course, it is. Nor is it the case that investors are no longer mandated to realise maximum profits for those who entrust their money to them. Of course, they are. It’s just that, as society evolves, the nature of what will ensure the greatest profitability evolves too.

Read the rest of the article on the New Statesman website

As anti-globaliszation protests are held ahead of the G8 summit, Cambridge economist Professor Noreena Hertz and Sir Mark Moody-Stuart, Chair of G8 Business Action for Africa, discuss whether business will aid or hinder Africa.

Listen to the full interview on the BBC Radio website