Tag Archives: This Is Our Dance

Whats social about CSR?

4 Mar

This is about the Corporate Social Responsibility (CSR) that Management takes up and the its issues with Corporate Governance. The funds expended on CSR are coming from the returns to the shareholders, and its in direct conflict with their interests of maximizing returns

Unless a CSR’s ulterior motives are to maximize returns to its share holders in the long-term (there is historical evidence that markets like long-term planning) they shouldn’t even set on that path, it’s a path to the sunken millions(read $’s). But there in lies the dilemma? Do CSR for CSR’s sake or do it for real returns, where does one make the distinction, and more precisely who makes the decision?

3M wordmark

Image via Wikipedia

There are examples of CSR’s which according to me works wonderfully, examples that come to mind are

  • Patagonia Apparel’s – recycle the threads program,
  • 3M’s recycle of used bottles in their products.
  • Calpers investing in badly run companies and bring them inline (there is bad social things in finance that need cleaning up too!)

In these cases the CSR could be woven right into the product itself and the results were inline with what they were doing, there was an item at hand which has its CSR

In other cases like the Coke case and the BP case we discussed tonight, the CSR’s were way orthogonal to what they did in their day-to-day, so why even embark on such an attempt, dump so much cash into it and get a bad rep as a result?

My question is this, did the Management see this fiasco coming in the near future? what made them take that dive into things like this?

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Notes on Forecasting

4 Mar

Yesterday’s class on prediction was very interesting. I agree some form of prediction is inevitable and necessary after all, one of the expectation from any kind of an expert is some form of prediction. But the prediction game is played by mostly those who are least quipped or trained on it, most of those prediction are just few points ahead of chance (50%) and in most conditions that would just be fine, when the outcomes are binary in nature like games, but recently that was also proven wrong by black swan events like Jeremy Lin and the NY Nicks :). But in the business parlance such binary situations will be rarely found.

To give some real world examples, I came across this Freakonomics episode that Dr. Steven Levitt of ChicagoU and Robert Dubner of NPR put together http://www.freakonomics.com/2011/06/30/freakonomics-radio-hour-long-episode-4-%E2%80%9Cthe-folly-of-prediction%E2%80%9D-2/ (skip to section on USDA‘s crop prediction markets, Time Westergren’s Pandora online radio, and Robin Hanson of GeorgeMasonU and business of prediction markets)

I am in no way supporting not predicting the future, but predicting the right kind of future, that is why i made the comment on the insurance sector which spends a lot of time and energy figuring and factoring in possible events to make precise prediction of a group of things rather than any particular event. This concept is very beautifully described by Dr. Niall Fergusson of HarvardU in his book/video named ‘Ascent of Money‘, http://video.pbs.org/video/1173188365/ (skip to 12min for the topic under discussion, other chapters are equally interesting)

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