Can Social Business solve the moral crisis in business?

Business has lost our trust.

Financial firms bundled worthless assets together into CDOs and other financial she'll games. International banks such as Barclays fixed the LIBOR rate, resulting in higher mortgage payments for you. HSBC paid the largest fine in history for money laundering. Cigarette manufacturers added chemicals to make cigarettes more addictive. Walmart bribed Mexican officials to facilitate expansion, then covered up an internal investigation. Robosigning enabled banks to wrongfully foreclose and push families out on the street. Hamburger meat gets sold with pink slime or horse meat. Hundreds of Bangladeshi workers died in a fire at at unsafe factory making clothes for top fashion brands. Plus more.

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These events make headlines, but examples of practices that dilute trust can be seen everyday. Facebook and other firms alter privacy agreement under the cover of digital darkness. Tiny-type software agreements (EULAs) erode consumer rights. Telecommunications firms lock consumers into multi-year agreements while jailbreaks become illegal. Consumer electronics stores push unnecessary high-profit warranties. Pharmaceutical patents are changed ever-so-slightly to keep vital drugs expensive and out of the hands of generic manufacturers who could make drugs cheaper for millions more worldwide. The vast disparity between CEO and worker pay not only far exceeds historical differences but is growing even greater. Plus much more.

Some say that such examples are merely the institutional embarrassments that have long blemished capitalism. But others argue that business is in a crisis of trust, caused by an anything-goes morality that's reflected in greed, lack of social concern and even a lack of embarrassment when caught. No wonder a 2012 Gallup poll indicated that only 21% of respondents trusted big business either a great deal or quite a lot.

The issue is important because capitalism, at it's heart, involves moral issues that religions and societies have debated for centuries. Who reaps the benefits of mutual toil? Societies or individuals? Capitalism triumphed over socialism, communism and fascism partly because capitalism became trusted as the best vehicle for freedom and opportunity. But what happens when trust in capitalism fades because of corporate misdeeds? How much longer can citizens of Spain and other democratic, capitalist countries live with unemployment rates of 25% or higher?

Several solutions are offered to achieve father-of-capitalism Adam Smiths vision of business working for the greater good of society. The first is adding ethics courses to MBA programs, although the efficacy of such courses is justifiably doubted. Another is stricter enforcement. Not a single banker has gone to prison for misdeeds that snowballed into the never-ending financial crisis. The 3BL/TBL triple bottom line movement seeks to add social and environmental performance (e.g., fair trade) to financial performance in corporate evaluations. A final alternative is Social Business.

Social Business is seen as a savior because of the goals it seeks and the processes it incorporates. Social Business defined as social-powered enterprise innovation, collaboration and engagement not only seeks to maximize corporate and customer value but social value as well. Enterprise 2.0 the predecessor of Social Business faded into the background because it focused inward on business efficiencies. It failed to acknowledge that no business can thrive if the society is unhealthy, unable to create the soft and hard infrastructures that firms need. By contrast, Social Business reflects the belief that a firm that incorporates social value into it's DNA will be less likely to embark on activities that benefit short-term corporate good at the expense of long-term common good. Employees will also unite behind a common purpose that does more than just benefit CEOs with golden parachutes.

Another argument for Social Business-based morality involves transparency. A Social Business culture is a collaborative culture. Sharing information and activities ensures transparency, making an unethical executive order harder and whistle-blowing much easier. Transparency leads to accountability about who did what when, and accountability enables responsiveness. Openness also builds trust, among employees, customers and financial markets. Ultimately, argue Don Tapscott and David Ticoll in their book The Naked Corporation, "Firms that exhibit ethical values, openness and candour have discovered that they can better compete and profit. Today's winners increasingly undress for success.

Claims about the ability of Social Business to restore morality and accountability to business sound like ones others have heralded at the Peak of Inflated Expectations in Gartners famed hype cycle. The Trough of Disillusionment may not be long coming. But Social Business can help enable a common culture that puts a higher premium on doing good for the company, customers and society than on doing well for individuals. Capitalism and consumers will be better off when societal good, collaboration and transparency the characteristics of Social Business help business regain our trust.

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Posted in Business Other Post Date 01/09/2015






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