[Part 1 includes links to President Clinton's comments on a number of topics; Part 2 was focused on his comments on Greece, the Euro and the financial crisis in Europe; Part 2A and Part 2B were focused on food security - the role of commodity market speculation & corn-ethanol conversion on food prices and sustainable agriculture]
The focus of this post is President Clinton's observations on the role of shared value vs. shareholder value when it comes to corporations, their impact on society and job creation.
The key takeaways from this post are the following:
a) President Clinton strongly endorsed the need for U.S. businesses to focus on shared value as opposed to merely shareholder value, in order to be successful in the long-term and create more jobs in the US. According to Michael Porter and Mark Kramer, the "principle of shared value...involves creating economic value in a way that also creates value for society by addressing its needs and challenges." [Section 1]
b) Shared value does not refer to "corporate social responsibility" but a very different way to shape and run a business which recognizes that societal and environmental impact should not be viewed as externalities for firms but rather as key factors that shape business strategy and practices. As Porter and Kramer have illustrated with examples, if this is done correctly, perceived "harms and constraints [do] not necessarily raise costs for firms, because they can innovate through using new technologies, operating methods, and management approaches—and as a result, increase their productivity and expand their markets." [Section 2]
c) There are many examples of firms that are achieving great success by focusing first on key stakeholders other than shareholders, e.g., Apple, which has become one of the most successful companies in the world with a focus first on customers, rather than shareholders. [Section 2]
d) There is growing recognition, as was particularly evident from some of the CGI panel discussions [Section 3], that:
- Corporations should focus on creating shared value and be given the legal flexibility to operate as such - e.g., via the creation of a new corporate legal entity called a benefit corporation
- A pure focus on profit is not necessarily likely to lead to long-term success or profitability - e.g., the massive collapse of financial companies worldwide recently, given financial companies perhaps more than any other class of companies, are ostensibly focused solely on financial profitability
- Free market principles by themselves do not allow for optimal outcomes at the level of individual countries; country-level strategies require the cooperation of public, private and non-profit entities.
In the following sections, I'll explore the above points in greater detail.