I spoke this morning with three experts to get their views of the story: Matthew Bishop, author of “The Road from Ruin” and “Philanthrocapitalism,” also USA editor of the Economist; Rakesh Khurana, professor at Harvard Business School; and Steve Fludder, GE’s VP of Ecomagination. Here are their views.

Bishop told me that Karnani’s characterization of the world of business falling into two states, either perfectly aligned or not aligned with public interest, is utter fantasy. As he wrote in his blog post, “Markets and their relation to public interests are constantly evolving – and the actions of companies play a crucial role in whether they evolve in a direction that serves the public interest.” He told me that the best people will want to work for a company they believe in. “How can you win the battle for talent in a world where workers are increasingly choosy about the ethics and mission of the firm they work for?” He argues passionately that smart companies are focused on long term shareholder value, not short term earnings. “The current economic crisis was caused not least by endemic short-termism in capitalism.” He jokes at the end of his blog post, “Anything but capitalism red in tooth and claw is a perversion of the true faith.”

Khurana noted that the Karnani model “has no application to the rest of the world, beyond a mile square radius from the University of Chicago campus that housed Milton Friedman. In Europe or in China or in India, a company would not have the license to operate this way.” He added that there “is a group of persistent rationalizers who change the facts instead of changing their theory, offering old wine not even in new bottles.” He insisted that companies change tastes and evolve markets, “because vanguard firms capture the lead in business.” He sent me a brilliant white paper that he co-authored with Professor Rosabeth Kanter, titled “Advanced Leadership Note: An Institutional Perspective and Framework for Managing and Leading.” In this paper, the professors contend, “In addition to economic performance as determined by economic outcomes, organizational decisions are also judged by the criteria of legitimacy…A legitimate organization is one that is perceived as pursuing social acceptable goals in a socially acceptable manner….in some cases the social logic of values is linked to an economic logic of resource maximization, but in other cases these can be in tension, which means that effective societal outcomes cannot be left to the invisible hand of unregulated or unguided markets.”

Fludder (disclosure: a client) pointed out that GE is in the business to make money, “not for altruism.” He added, “We see this evolution as a market opportunity, but one that also serves society. These tough environmental challenges are addressable through technologies we can implement.” He suggested that companies attempt to shape the future, “leading by example….with innovative products….reinventing the category.” But Fludder provided great advice, “Try to influence the regulatory environment. Show the government through demonstration projects that you can remediate a problem.”

We are at a very important moment in the relationship between business and society. The catastrophic economic events of September 2008 undermined the confidence in the private sector’s ability to self-regulate. Bankruptcies of centerpiece companies in the global economy, such as GM, plus reputation issues for leaders in finance (Goldman Sachs), energy (BP) and transport (Toyota) have called into question the values of corporate leaders. In the race for public credibility, it is fortunate for business that its prime regulator, government, is not seen as a worthy replacement as the leader in the dance.

The role of the PR person is to advocate for a stakeholder approach, to engage with non-traditional partners (such as NGOs) and to enable solutions that serve private and public interests. Then the PR person should communicate differently by engaging employees first, being completely transparent on the timeline, reporting progress on corporate commitments, and not just communicating to consumers about responsibility and sustainability – but engaging with them to join the journey.

Here are four examples of client work:

GE spent considerable time engaging business unit leaders and initiating a new conversation internally among employees on Ecomagination before it went public. GE employees are now at the forefront of driving its commitment to address the world’s environmental challenges.

Clorox Brita’s FilterForGood campaign inspires consumers – and communities – to take a personal pledge and even engage in (planet) healthy competition with others to reduce their bottled-water use, as well as informs them about other environmentally-friendly decisions that each can personally make.

Unilever’s Omo Detergent adopted the “Dirt is Good” campaign - aligning with the brand’s business proposition by asserting that “every child has the right” to be a child and get dirty. After fielding new academic research highlighting the importance of outside play for the physical and social development of children and engaging parents, governments and NGOs to take action, the campaign triggered real social change – Vietnamese schools agree to assess national provisions for school recess while the brand commits to build 100 playgrounds over three years.

The Pepsi Refresh Project, partnering with NGOs and experts, is directly crowdsourcing ideas from consumers to foster innovation in social good – awarding more than $20 million this year to fund local community initiatives and ideas that refresh the world.

These companies demonstrate that contrary to Karnani’s assertion, the decision isn’t whether to run an effective, “smart” business or a socially responsible, engaged one. Performance with purpose (a term used by PepsiCo CEO Indra Nooyi) is not an either/or proposition.

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August 20, 2010

Vacation Reveries

I have been out of the office for the past two weeks. The break was overdue—I was getting groggy in the afternoon, relying on a Diet Pepsi for energy to get through the day. I can always tell when it is time to go back to work. My right arm and back ache from too much tennis and I bounce out of bed at 7 am. Here are a few observations from my time off:

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August 12, 2010

The Man Who Sold America

I am on vacation for this week and the next. My days include going to the grocery store, playing tennis, riding my bike, going to the beach with my kids and picking tomatoes. But above all, I love to sit on the back porch, reading books that will entertain and inform me. I have just finished The Man Who Sold America, a new biography of Albert Lasker, legendary advertising man, by Jeff Cruikshank and Arthur W. Schultz (former CEO of Foote, Cone & Belding, successor firm to Lord & Thomas, which was headed by Lasker).

1. Van Camp’s Evaporated Milk—Make the “scalded taste” a comparative advantage by asking consumers to look for the almond flavor, “turning vice to virtue”


2. Schlitz Beer—Pure beer must be filtered then sterilized in the bottle, making it healthful. The Schlitz brewery in Milwaukee had plate glass windows to give visitors a clean view of the process


3. Quaker Puffed Rice Cereal—Tag line was “Food Shot from a Gun”. The firm invented a personality, Professor Anderson, to explain the process as “personalities appeal, soulless companies don’t”


4. Goodyear Tires—Moving the brand from “Straight-Cut” to “All Weather” allowed it to become the #1 in category


5. Sunkist Oranges—A combined ad and PR campaign for Orange Week in Iowa in March, 1908, with fruit shipped in special bannered trains and ads touting “Oranges for Health, California for Wealth”, yielding a 50% jump in sales


6. Kotex—Going direct to consumer with sanitary napkins was considered heresy. Lasker developed a “trained nurses recommend” campaign, then worked with the client to develop a plain white box with a blue ribbon that was available on store shelves without asking the pharmacist.


7. Lucky Strike cigarettes—Lasker suggested that the client stop supporting its nearly 50 brands and concentrate spending on Luckies. He linked the “toasting” process of Luckies to “reduced acidity on the throat that “protected the voice.” He recruited Metropolitan Opera star sopranos to give advertising testimonials and did not even have to pay them—they just wanted the publicity associated with the endorsements. He later initiated a campaign that suggested a weight loss regimen via smoking, “Reach for a Lucky instead of a sweet.”