CSR Not Always Easy to Accomplish

University of Michigan researchers break down the corporate social responsibility efforts of public vs. private companies.

When companies make public declarations of social responsibility, it can be hard to tell whether they actually change practices or if they exaggerate the impact — a practice known as greenwashing.

Most of the attention has focused on company financial effects and stock price reaction of corporate social responsibility initiatives. But new research by professors Jun Li and Andrew Wu examine the social outcome of corporate social responsibility efforts.

They found a striking difference between public and private companies’ behavior after signing onto the United Nations Global Compact program. Their analysis shows private companies are significantly more likely to follow through on their promises than public companies.

“There do seem to be conflicts for public companies when it comes to corporate social responsibility,” says Li, professor of technology and operations. “They are constrained by shareholders and by law to maximize profits. If the CEO of Patagonia wants to buy organic cotton, he can make it happen even if it means lower margins. A public company has to justify that to shareholders.”

Li and Wu developed a novel method to find a common corporate social responsibility proxy and track the outcomes. They examined the 6,420 companies that signed onto the United Nations Global Compact (UNGC) between 2007 and 2016. It covers a broad array of responsibility goals — such as labor standards, environmental, and corporate governance — and it’s a unified set of standards.

They then matched those companies with reports from RepRisk, a third-party firm that screens more than 80,000 media, regulatory and commercial documents in 15 languages each day for negative events regarding company-level environmental, social and governance events.

Li and Wu found that private companies that signed onto the UNGC reduced their negative impacts, as reported by RepRisk, by 6.3 percent per month. There was no change for public companies, though in some cases the negative impacts increased slightly.

“If you think about corporate social responsibility, it’s mostly a diversion of resources,” says Wu, professor of technology and operations and professor of finance. “Not only from company shareholders to other stakeholders, but also from short-term to long-term. But public company managers tend to focus more on the short term and are incentivized as such.”

The exceptions they found among public companies were ones that own customer-facing brands. In those cases the value of corporate social responsibility is aligned with shareholders, since consumers often punish companies for irresponsible behavior.

What Motivates the Workplace Cheater?

A University of Michigan business professor explores cheating in the workplace. He says pay disparity among lower-income may be a key factor in unethical behavior.

A summary of his commentary:

People are more likely to cheat when the potential rewards are high — that’s a well-known axiom. But new research by Scott Rick of the Ross School for Business shows there’s potential for cheating even when the rewards are low.

A series of experiments in his new paper suggests that dishonesty among low-paid workers increases if they find out others are getting paid more for the same work. Low pay rates alone aren’t enough to trigger cheating, Rick says. It’s the upward comparison that makes it more likely low-paid employees might cheat.

The finding has important implications for managers, since low-stakes cheating creates billions in annual losses for businesses. Rick’s paper, “Cheating More for Less: Upward Social Comparisons Motivate the Poorly Compensated to Cheat” was co-authored with Leslie K. John of Harvard Business School and George Loewenstein of Carnegie Mellon University, and is scheduled to appear in the journal Organizational Behavior and Human Decision Processes.

“We all know that economic gain is an important driver for unethical behavior,” says Rick, assistant professor of marketing. “We wanted to look at psychological motivations that may be at odds with basic cost/benefit reasoning. We know people can become out of sorts about salary differences, especially if they seem unjustified. But nobody had experimentally examined whether that could lead to misbehavior.”

Rick and his co-authors ran two experiments to probe that open question. In the first, subjects received either 5 cents or 25 cents for each self-reported correct response on a list of questions. Some participants knew about the different pay rates while others did not.

When pay rates were public, those paid 5 cents per correct answer cheated more often than those paid 25 cents, despite the lower economic incentive. When the pay disparity was kept private, those paid 25 cents cheated slightly more.

Another experiment created two groups — one where low-paid subjects were told there were others in the room earning more, and one where low-paid subjects were told there was a higher pay rate, but that everyone in their session would be paid the same.

Cheating was higher in the group where low-paid subjects were in the same room as higher-paid ones. There was little cheating among the lower-paid subjects when they were told everyone in the room was being paid the same lower rate.

“A low wage, in and of itself, doesn’t stimulate cheating,” Rick says. “However, awareness that others around you are earning more for the same work does encourage cheating. These upward social comparisons matter in a way that standard economic theory would not predict. But the psychology of workplace motivation is much richer than simply what you yourself earn.”

Rick says companies should consider managing differences in wages for similar work or, when possible, trying to keep the information private.

“It’s hard to say what the optimal balance is, because flat salaries will make it difficult to attract and retain the very best employees. But there are ways to compensate people privately, which don’t show up in a base salary, such as incentive bonuses,” says Rick.

The research also may explain why wealthy people cheat for seemingly trivial gains. When the wealthy can easily compare themselves to other similar people who earn even more, they also may be more prone to cheating.

Research Says Emotions Have Role in Decision Making

Emotions have no place in critical business decisions. You have to stick with the facts and put the feelings aside. Maybe not, according to some research from the Ross School of Business at the University of Michigan.

A few highlights from an interesting read:

A series of studies by Professor Jeffrey Sanchez-Burks, PhD student Laura Rees, Professor Reuven Lehavy, and Naomi B. Rothman of Lehigh University examined how people performed when feeling positive, negative, and when feeling both emotions. Their work is outlined in an article, "The Ambivalent Mind Can Be a Wise Mind: Emotional Ambivalence Increases Judgment Accuracy," published in the Journal of Experimental Social Psychology.

For decades, economists, behavioral scientists, and business leaders have considered an emotional decision maker an unwise one. Elated investors inflate the market with irrational exuberance, while grumpy sales forecasters create product shortages by being overly pessimistic.

The consensus has been that the ideal is an emotionless state of mind.

But the new research shows that people who feel both positive and negative emotions — a state known as emotional ambivalence — produce more accurate forecasts and predictions than people who feel strongly good or bad. That's because people are more likely to accept diverse perspectives when emotionally ambivalent than when feeling one dominant emotion.

"We found that emotions can indeed narrow people's thinking, particularly when people are experiencing either a positive or negative emotion," said Sanchez-Burks, Michael R. and Mary Kay Hallman Fellow and associate professor of management and organizations. "However, we found that when people are put into a state of mind where they feel two conflicting emotions, they become more receptive to more diverse pieces of information. This broadened perspective enables them to form more accurate forecasts and make more informative decisions."

Says Rees: "People who have mixed emotions often get the short end of the stick in the workplace. It's often seen as incompetence. But we find it can be very valuable."

A series of experiments induced emotional states in people — either through writing about a life experience or watching movie scenes — and recorded their accuracy in making predictions and forecasts.

The people induced into a state of emotional ambivalence consistently outperformed the other groups in the forecasting tasks.

The results have practical implications for people leading organizations.

"Leaders struggle with how to get their teams to make more accurate forecasts and judgments," Sanchez-Burks said. "Sometimes, a leader will give the team a pep talk. Others try to scare people into taking it seriously. Our research suggests leaders may be better off not messing with people's emotions. Both the approaches I mentioned homogenize a group's emotions. If you allow a natural diversity of moods, you'll likely get more accurate information."



Michigan Trying to Build Its Tech Talent

Technology transfer is a challenge in all but a few locales. New strategies are commonplace. Here’s one from Michigan — a state that I believe will rebound from its historic struggles of recent years.

The $2.4 million Tech Transfer Talent Network includes seven universities and regions with strong research-based technology opportunities or clusters of talent, and in some cases, both. In addition to the University of Michigan (U-M), members are: Wayne State University, Michigan State University, Michigan Technological University, Western Michigan University, Grand Valley State University and Oakland University. Each university is also collaborating with its regional economic development organization to promote increased access to mentors and partnering businesses.

The primary goal of the Tech Transfer Talent Network is to increase the supply of seasoned entrepreneurs and innovators who can lend their expertise to university tech transfer offices. These connections will serve as important bridges to launch technology-based startups or license university inventions to established companies. The program will allow other state universities in the network to share and benefit from the tech transfer resources developed at U-M.

U-M, which had 101 licensing agreements and spun out 11 startups in 2011, consistently ranks in the top 10 U.S. universities in tech transfer performance. In the past decade, the Tech Transfer office has helped launch 92 startups from research that originated in faculty labs, and three-quarters of those are located in Michigan.

To enhance its capabilities, U-M has put in place several talent-related initiatives during the past few years. Through the network, U-M will help other universities implement some of these strategies, including:

  • The Catalyst database, which identifies and tracks experienced entrepreneurs who are willing to serve as experts, mentors, consultants or even co-founders.

  • Mentors-in-Residence, experienced entrepreneurs who work within Tech Transfer for 12- to 18-month rotations, helping to assess new opportunities and mentor new start-up ventures.

  • Tech Transfer Fellows, a program that employs graduate students or other qualified personnel to help assess technology and analyze markets for tech transfer opportunities.

  • A postdoctoral fellowship program to support graduate students and postdoctoral researchers to encourage them to continue within a newly licensed business or a new startup venture.

Optimism From the Job Cut King

Forgive the poor E.F. Hutton pun, but when John Challenger talks, people generally pay attention. The Chicago-based Challenger, Gray & Christmas firm is viewed as the guru of job market reports and trends — and John Challenger is its leader.

Usually quick to report on employment cuts and leadership exits, Challenger is out with an analysis that says the economic recovery is no longer "jobless." Here’s some of what he offered:

“The pessimism about the job market is evidenced in latest readings on consumer confidence by the Conference Board and the University of Michigan, both of which declined in March. However, while some might perceive that the job market is standing still, it has actually made significant strides since the end of the recession in several areas, including planned layoffs, private-sector payrolls, unemployment and hiring,” noted Challenger.

In the Challenger analysis of government data it found that, much like the previous two recessions, private-sector payrolls continued to contract following the declared end of the recession. From July 2009 through February 2010, private payrolls experienced a net decline of nearly 1.2 million jobs, according to the latest figures from the Bureau of Labor Statistics’ survey of employers. Since February 2010, however, private sector employment has seen net job gains for 13 consecutive months, adding a total of 1.8 million jobs. As of March, there were approximately 108.6 million Americans on private sector payrolls, which is about 93 percent of the pre-recession high of 115.6 million.

Employment is also growing in the Bureau of Labor Statistics’ household survey, which is used to establish the unemployment rate.  Similar to private payrolls, overall employment continued to decline during the six-month period following the end of the recession. However, over the past 15 months, there have been 10 months of gains for a net increase of 1.9 million newly employed Americans.

Meanwhile, the unemployment rate, which initially continued to rise for four months following the June 2009 end of the recession to a high of 10.1 percent in October 2009, fell to a 24-month low of 8.8 percent in March.  By contrast, unemployment peaked 19 months after the end of the 2001 recession and, following the recession that ended in March 1991, unemployment continued to rise for 15 months.

“There is no reason to think that these positive trends will not continue, even with the threat of higher fuel costs. Based on our tracking of planned job-cut announcements, which tend to be a forward-looking indicator of how employers see future business conditions, there are no signs of sudden reversal of fortune,” said Challenger.

Monthly job-cut announcements are at their lowest levels since the late 1990s.  In fact, the 130,749 job cuts announced between January and March represents the lowest first-quarter total since 1995.

At the same time, planned hiring announced in the first quarter totaled 112,942, which is more than double the 53,675 planned hires announced during the same period a year ago. 

More Campuses Just Saying No to Smokers

In 2007, about 60 colleges and universities had enacted a smoke-free policy. That number has grown to nearly 400.

There has been some external push. Clean air laws in Illinois, New Jersey and Wisconsin require smoke-free university housing. Smoking is prohibited on all public campuses in Arkansas and at every school (public and private) in Iowa. A couple of big players soon join the list, with no smoking at the University of Florida this fall or at any of the three University of Michigan campuses starting in 2011.

For those that still allow lighting up, more have policies that restrict the number of areas and move smokers away from building entrances. What have student reactions been? According to a CongressDaily story:

A Student Tobacco-Free Task Force was created when the University of Denver went smoke-free in January. Similar associations have been created at other colleges to help enforce the policy and support the change.

However, students who oppose the ban on smoking cigarettes outdoors have not remained silent. Groups of students held daily "smoke-ins" in protest when the University of Pennsylvania attempted to ban smoking at all 14 of its campuses in 2008.

The University of Denver found that about two-thirds of the student population was in favor of banning tobacco. "Interestingly, these divisions were not necessarily based on one’s personal use of tobacco," said Katie Dunker, the assistant director of health promotions at the school. "We had students who use tobacco who were for it and students who didn’t who were against it."

A list from the American Nonsmokers’ Rights Foundation puts campuses of 15 Indiana colleges and universities in the total smoke-free category. There are another nine Hoosier campuses rated smoke-free with the exception of some remote outdoor areas.