Net Impact Faculty Case Competition Weighs Shareholder Profits vs. Social Responsibility
The tone of the debate was lighthearted, but the topic was worthy of serious consideration for Carlson School Full-Time MBA students:
Should companies (beyond just benefit corporations) be allowed to prioritize impact-investing initiatives with lower return in order to make positive social/environmental change with long-term benefit, or should they always prioritize investing in the highest net present value (NPV) projects that maximize shareholder profits?
That was the question posed by the Carlson School’s annual Net Impact Faculty Case Competition, which pitted two pairs of experts against each other, as judged by the group of pizza-fed students occupying the 3M Auditorium over the lunch hour on March 23.
Susanna Gibbons, program director of the Fixed Income Fund in the Carlson Funds Enterprise, and Seth Werner, senior lecturer of marketing, argued for prioritizing social responsibility, while Gordon Burtch, assistant professor of information and decision sciences, and Aks Zaheer, professor and Curtis L. Carlson Chair in Strategic Management, took up the counter argument.
In between some friendly jabs—Werner proclaimed Burtch and Zaheer were “against the environment,” while Zaheer likened Werner to an aging hippy—the two sides actually found some common ground in asserting that corporations should focus on long-term NPV when considering socially responsible initiatives.
Gibbons said environmental and social risks should be included in all NPV assessments, and Werner cited Newman’s Own, which donates all of its after-tax profits to its nonprofit foundation for philanthropic distribution, as a success story.
Burtch argued the government is responsible for safeguarding public interest, noting “at the end of the day, corporations are not answerable to the citizenry” and pointing out that companies often use their efforts at social responsibility merely as damage control for other problematic behavior. If firms opt to pursue a socially responsible agenda, Zaheer said, they should focus narrowly on actions that align with their core competencies, as companies such as Patagonia have done.
Students were asked to abandon their preconceptions and personal opinions and instead focus on the merits of each side’s points in declaring a winner. In the end, Burtch and Zaheer took home the trophy by virtue of having bettered their pre-debate support: 44 percent of students sided with them in the end, compared to 39 percent beforehand.
“To be honest, we don’t like to embarrass our opponents, but that’s the job,” said Burtch, summing up his side’s win in an appropriately playful fashion.