The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research

George  Serafeim

Working Paper | HBS Working Paper Series | 2014

The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research

Abstract

A long-standing ideology in business education has been that a corporation is run for the sole interest of its shareholders. I present an alternative view where increasing concentration of economic activity and power in the world's largest corporations, the Global 1000, has opened the way for managers to consider the interests of a broader set of stakeholders rather than only shareholders. Having documented that this alternative view better fits actual corporate conduct, I discuss opportunities for future research. Specifically, I call for research on the materiality of environmental and social issues for the future financial performance of corporations, the design of incentive and control systems to guide strategy execution, corporate reporting, and the role of investors in this new paradigm.

Keywords: corporate accountability; corporate social responsibility; corporate social responsibility and impact; corporate governance; environment; environmental and social sustainability; sustainability; sustainability reporting; Sustainability Research; sustainability targets; Corporate performance; Corporate Accountability; Corporate Social Responsibility and Impact;

Language: English

Format: Print

28 pages

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Citation:

Serafeim, George. "The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research." Harvard Business School Working Paper, No. 14-110, May 2014.

As sustainability issues, also labelled environmental, social and governance (ESG) issues, become financially material, companies, investors and regulators are designing strategies and policies to improve sustainability disclosure and performance. In this paper, we outline a framework of how sustainability issues become financially material arguing that materiality is not a “state of being” but a “process of becoming.” Our framework could assist companies and investors to make resource allocation decisions based on expectations about future materiality, social entrepreneurs and NGOs to develop their theories of social change, and policy makers to design disclosure regulations. Moreover, our framework generates predictions about the conditions under which sustainability issues become financially material that could be empirically tested in the future.

Working Paper | HBS Working Paper Series | 2019

Intelligent Design of Inclusive Growth Strategies

Robert S. Kaplan, George Serafeim and Eduardo Tugendhat

Improving corporate engagement with society, as advocated in the Business Roundtable’s 2019 statement, should not be viewed as a zero-sum proposition where attention to new stakeholders detracts from delivering shareholder value. Corporate programs for sustainable and ethical sourcing practices, however, have fallen far short of solving the underlying causes of extreme poverty, extensive use of child labor, and threats to the environment and human health. We identify several causes to explain this disappointing shortfall in societal performance, including traditional company policies and incentives that inhibit the implementation of innovative, inclusive growth strategies. We propose the role for a new actor, a catalyst, to help companies forge new relationships with external funders, local intermediary companies, NGOs, and community leaders. The catalyst aligns the multiple stakeholders from multiple sectors into enduring, mutually- beneficial relationships that produce more value than that currently produced when stakeholders connect only by transactional relationships. The catalyst attracts funding from public and private sources to invest in the new ecosystem, which can generate attractive financial returns while alleviating poverty and environmental degradation. Finally, the catalyst engages the multiple participants to collectively co-create explicit strategies and scorecards of metrics, which serve to motivate, create accountability, and enable an enduring governance model for a multi-stakeholder ecosystem.

Citation:

Kaplan, Robert S., George Serafeim, and Eduardo Tugendhat. "Intelligent Design of Inclusive Growth Strategies." Harvard Business School Working Paper, No. 20-050, October 2019. View Details

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Jarrid Tingle and Henri Pierre-Jacques had spent the summer between their first and second years of their Harvard Business School MBA program fund raising for their start-up Venture Capital (VC) firm, Harlem Capital Partners. Harlem Capital was founded upon the principle that addressing the VC funding gap for minorities and women – who received only 3 percent of total VC funding – could produce superior returns. Tingle and Pierre-Jacques were passionate about the mission of Harlem Capital to change the face of entrepreneurship. However, despite generating significant media attention, Harlem Capital had only raised a few million dollars over the summer, not nearly enough for the fund to be financially viable as a career path for Tingle and Pierre-Jacques. Should Tingle and Pierre-Jacques commit to Harlem Capital despite the serious roadblocks on their path? Or should they capitalize on their pre-MBA Private Equity experience and attempt to be impactful through a more traditional career post-MBA graduation?

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The Role of the Corporation in Society: An Alternative View and Opportunities for Future Research

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