There is a clear intellectual underpinning for the use of a market-based economy: under certain conditions a competitive market system meets the needs of consumers, and does so efficiently. This is not a recent insight: it is the classical insight of Adam Smith and his idea of the invisible hand set out in 1776 in An Enquiry into the Nature and Causes of the Wealth of Nations. In a world where this insight holds, there is no conflict between maximizing shareholder value and maximizing stakeholder or social value: maximizing one attains the other. You do well (financially) by doing good (socially) – or as Smith put it you do good as a by-product of seeking to do well.
In practice it is clear that matters do not always work out like this and that conflicts can arise between maximizing profits and doing what is good for stakeholders and society. Are these first or second-order effects? When do these conflicts arise? How serious are they? How can they be resolved?
This course focuses on these timely and classical issues and looks both at the ideas behind them and cases of companies that have been affected by possible conflicts between shareholder and stakeholder values, and at how they have managed these conflicts. Overall I take an optimistic position: in more cases than not, you can do well by doing good – but this may require some innovative thinking. We will see some examples of such innovative thinking.
Topic I: How does business affect society and the environment?
Topic II: The actors – governments and NGOs
Topic III: The social responsibility of business
Topic IV: Socially responsible investing
Topic V: How does the environment affect business?
Topic VI: Wrap up