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Public Management Program

 

Public Management Initiative (PMI)

The Double Bottom Line: Promoting Profits and Public Service (2001-2)

What is the "Double Bottom Line"?

Global markets have become more pervasive, and new technologies are disrupting traditional economies. As a consequence, business leaders must increasingly respond to, and contend with, the actions of governments, international institutions, and non-governmental organizations. In this environment, business leaders must often consider more than simply profits—the "bottom line." Indeed, the public increasingly looks to business leaders as promoters of the public good- community service, public service, philanthropy, and charity. At the same time, businesses themselves are increasingly being judged on both fiscal and social metrics.

What is driving this evolution in expectations? One factor is the recognition of the public sector's limitations in addressing social problems, and the corresponding need for business leaders to mobilize the resources of the private sector—and human capital—the cause of what Andrew Carnegie once described as "helping people help themselves." At the same time, there is increasing transparency and accountability in business operations. Consumers are more interested and educated on the record of corporations, especially on environmental issues and labor practices. Finally, the economic expansion of the past two decades has generated unprecedented levels of wealth, which has enabled individuals and businesses to have an even greater impact on society.

There are also numerous examples of businesses taking the lead and proactively pursuing a Double Bottom Line. For example, Walmart Stores Inc. has made its health insurance plan open to nearly all its workers—those who punch in for only a few hours a week. Cisco Systems, a company known for innovative labor practices, recently offered laid off employees the option of receiving a third of their salary if they work for a nonprofit organization for one year. British Petroleum is investing heavily in solar energy, and CEO Sir John Browne has become a spokesperson for environmentally sustainable oil and gas exploration. Over the past few years, Bill Gates has turned a sizable portion of his Microsoft fortune over to a private grant-making foundation.

At the same time, there continues to be considerable innovation in social entreprenuership—creation of business models with a social purpose. There has also been considerable effort in recent years to bring the venture capital model of for-profit investing to "non-profit" sector. A younger generation of philanthropists is employing New Economy business practices—accountability, quicker results, and a more practical focus to their philanthropy. Indeed, "social enterprise" and "community development" venture capital funds are emerging, to provide start-up funding to new for-profit businesses that are equally committed to making money and making a difference in disadvantaged communities. Moreover, non-profits are increasingly funding "for-profit' initiatives as "program-related investments", reaping the gains if the investment succeeds, and treating the investment as a "charitable gift" if the investment fails.

Issue Areas to Explore

Within the broad topic of business' Double Bottom Line, this year's PMI will focus on three issue areas:

Should businesses pursue Double Bottom Lines?

Most for-profit organizations view their primary responsibility as creating shareholder value, and many persuasive arguments can be made that this alone is sufficient. The economist Milton Friedman has long argued that maximizing shareholder value should, in fact, be a corporation's singular objective. By doing so, businesses create jobs, raise standards of living, discover scientific and medical advances, generate tax revenues, and create the wealth that, in turn, funds science, health, and education. However, many believe that wealth creation is too narrow a goal for the modern company. They ask whether businesses have any broader responsibilities. What obligation, if any, do businesses have to the communities in which they operate? To the welfare of their employees? To preserving the environment? To improving the level of education? To improving access to jobs, affordable housing, and health care?

The PMI will provide a forum for public discussion and debate of these questions. We do not expect to reach a single, definitive answer, but rather to engage the GSB community in a thoughtful debate about what the role of business should be.

How are businesses and business leaders pursuing Double Bottom Lines?

The heart of the PMI will explore the different ways in which businesses are pursuing Double Bottom Lines. Many businesses concern themselves solely with creating shareholder value, leaving shareholders themselves to decide how best to direct surplus wealth to charitable and social causes. Others infuse the cause of social responsibility and charity throughout their entire organization, making it an integral component of corporate strategy, decision making and day-to-day operations. Others make substantial philanthropic contributions to community groups, cultural institutions, and charities.

The PMI will study the various models for businesses to promote profits and public service. To this end, the Initiative will ask a number of questions, including: What are the pros and cons of the different approaches to promoting social progress? On an individual level, how can business leaders advance the double bottom line as managers and CEOs? On the public policy front, what government policies help or hinder business' pursuit of social goals? The PMI explore these questions and more through a series of case studies, public speakers, and small group discussions. Selected businesses will be culled from a broad and diverse range of fields—consumer products, health care, high technology, and financial services.

What key challenges and differences exist in the international context?

Pursuing a Double Bottom Line in an international context raises even more complex issues. What challenges and obligations do multinational companies face in promoting profits and public service, particularly when their operations span both developed and developing countries? Does Nike have a responsibility to provide the same working conditions in the US and in Southeast Asia? Does it make sense to talk about a Double Bottom Line for companies in developing countries with explosive population growth, less extensive environmental and labor regulations, and greater political and social instability? Given the context in which they are operating, to what extent do these companies have the incentive and ability to pursue social goals? How do companies in Western Europe, a region with a history of extensive government regulation in social policy, pursue double bottom lines?

Methods of Exploration

The PMI will engage and educate the GSB community on these issues through a variety of means, including public speakers and presentations from prominent business leaders, brown bag lunches with faculty and alumni, published articles and opinion pieces, study trips, and independent research (e.g., class projects and 390s), and culminating with a final report and presentation in Spring 2002.