CSR and Partnerships

partnership agreement

partnership agreement (Photo credit: o5com)

One of the more resent developments within the field of CSR has been the emergence of strategic partnerships. Ever since the start of business there have been different forms of partnerships from small business franchises to large-scale outsourcing. In the last decade there have been an emergence of other forms of partnerships such as business and governmental institutions and in the last few years between Business and NGOs. While the first form of partnership is relative unproblematic as it is assumed that both parties have similar end goals in their efforts to maximize return on investment it is another case for the two last forms of partnership.

Business and Governmental partnerships have been seen in areas were both parties could see synergies. This could be in cases were companies wanted to explore markets in developing countries but needed support in-order to get a foothold in the market. In both Sweden and Denmark business partnerships are promoted by governmental development agencies like SIDA Business-4-Devlopment and DANIDA Business-2-Business programs (SIDA, 2012, DANIDA, 2012).

Denmark is becoming a safe harbour for finance

Who would have thought that Denmark would become a safe harbour for scared investors? This country that has one of the highest tax in the world is now viewed as a safe place to store money. With an inflation rate of just 2,7%, which is significantly under the EU and US average of around 3,3% it would seem that the financial situation here is much better. So why is Denmark such a good place to keep your money safe?

In Denmark the tax on business is 25% and on average personal tax is around 48% ranging from 36% to around 60%. For decades the Danish tax, have been under attack from just about everyone because it was thought that it was a burden on growth, innovation and entrepreneurship. But while these things in theory might be true it would seem that hard-core capitalists now think that Denmark is one of the best places to put money.

In a resent auction of Danish state bonds an all time record of 1,36% for a one-year convertible loan in real estate while a 5-year loan was only slightly higher. (For a 1-year loan you need to renegotiate every year while for a 5-year loan you get a lightly higher rate but only need to negotiate every 5 years). For homeowners this is truly good news as the economy is tight and the job situation is somewhat shaky the extra money will be handy. All this is something we can thank investors in Danish real-estate bonds for who apparently regard 1,36% as a good investment even though inflation will properly eat up any profits that they might make in the process.

So why is Danish bonds suddenly becoming so attractive? It would seem that big-government is on the offensive (big as in influence not necessary in size). That all the things we learned in business school about large scale privatisation, low tax and minimum government intervention in markets, were not as true as they seemed at the time.

Now we see that the Danish government that have “robed” the taxpayers and businesses for decades are the only ones that have the capability to save the economy. Several times big-government have been the only buffer between large-scale bankruptcy in the financial sector and massive runs on banks. Only the Danish government have forced bankers to sit together made them solve the problems that they have caused the problems in the first place. With a resent Keynesian undertaking the big-government have proclaimed massive spending on education, infrastructure and social services in order to boost the economy and mind you doing so within a reasonable balanced budget. Something that the governments in the UK and US would only dream of.

Now it seems that only big-government is able to ride of the storm on the financial markets by providing a safe harbour for investors who have capsized in the troubled waters of European economy. I would not make the claim that our financial theory is wrong and should be rewritten but it seems that new stories of how to achieve sustainable economics is being written as we speak.

Hunger in the US and Europe – the fuel for social unrest

Illustration of starvation in northern Sweden

Starvation in Sweden

The contradiction between between the have and the have-nots is becoming increasingly salient worldwide. The UN commitment to end poverty and the millennium goals have been in place for the last eleven years and with only four years to go it does not seem to be going in the right direction.

While we normally associate poverty and hunger with countries outside the western world we have a growing number of people who experience starvation. At the same time we se a similar increase in people who are obese and suffer from malnutrition.

The worldwide nearly doubled between 1980 and 2008. According to country estimates for 2008, over 50% of both men and women in the WHO European Region were overweight, and roughly 23% of women and 20% of men were obese.

The Estimated number of overweight infants and children in the WHO European Region rose steadily from 1990 to 2008. Over 60% of children who are overweight before puberty will be overweight in early adulthood.

While the numbers for starving people in Europe is hard come by there are a growing concern that real starvation will occur on a growing scale especially in relation to the weak economies in the euro and the countries that stand outside the EU.

If one looks at the capacity of a country to cope with these kind of stains one can just look at the US were. There has been a similar trend over the past 20 years, have been a dramatic increase in obesity. In 2010, not a single state had a prevalence of obesity less than 20%. Thirty-six states had a prevalence of 25% or more; 12 of these states (Alabama, Arkansas, Kentucky, Louisiana, Michigan, Mississippi, Missouri, Oklahoma, South Carolina, Tennessee, Texas, and West Virginia) had a prevalence of 30% or more.

In contrast to these numbers there were in 2010, 85.5 percent of U.S. households that were food secure throughout the entire year meaning that they had a steady supply of food. The remaining 14.5 percent were food insecure at least some time during that year. This meant that around 45 million US citizens did not have a steady inflow of food over the year.

In 2010, 5.4 percent of households experienced food insecurity in the more severe range, described as very low food security.

There is no doubt that there are real issues to be handled but it does not seem like it is a matter of supply as we have seen elsewhere in the world. Rather it is a problem of distribution and nutrition, which from a societal point of view is much worse as it threatens the ability of a community to keep its structural integrity. As we see uprisings in London, Madrid, Athens and the central issue is the uneven distribution of resources and while the central theme seems to be around monetary funds it would seem that the availability of food might be the next big thing to fight over.

Socialist government will tax multinationals – Nestle is next

Creating Shared Value Forum 2010

Image by Nestlé via Flickr

The new socialist minister of Tax Thor Möger Pedersen will upgrade the Danish treasury organisation with an extra 160 employees in order to investigate international companies on their tax books.

“It is high time to intervene. The Government will increase the transparency of companies’ payment of corporation tax. All the promise and all must contribute to the Danish economy back on its feet – even the multinationals’ he says

In practice this will mean that multinationals tax information will be posted on the treasuries website and their books will looked into. The claim is that these companies even during the good times up to 2008 (or 2007) did not pay their fair share and now that things are bad they claim even higher tax reductions.

One of the companies that are being named is Nestle a company that have been under scrutiny in several countries around the world for their ability to pay very low taxes. They even have tax manager positions that make around 100’000 Euro with the purpose of reducing the tax paid by the company.

With the prospect of being named and shamed the company is threatening to move their Nordic headquarter to Sweden. Which is strange is this country is even higher taxed than Denmark but I guess they had not really thought the idea fully through. As the Danish CEO of Nestle Fred Holm puts it.

“We have our Nordic headquarters in Denmark, but if we are to be exhibited in this way, then we might as well move to Sweden. Then there is no reason to be in Copenhagen. We want to be here, but we will not be shown, when we just follow the rules, “says Fred Holm, who says that Nestslé has 230 men employed in Denmark.

To be honest I find the idea appealing. What could our society do if we all contributed to the same pot? Some of these companies have made billions of Euros on operating in these countries and have not paid their fair share of tax for several decades. Their ability to hide and shuffle their money around has been remarkable and clever. While I do not think they have done anything illegal they could at least be challenged on their morals and ethics.

On the Nestle website the company proclaims that they are all for share value e.g. the Kramer and Port kind I would guess, but in the interpretation it means that

Creating Shared Value is a fundamental part of Nestlé’s way of doing business that focuses on specific areas of the Company’s core business activities – namely water, nutrition, and rural development – where value can best be created both for society and shareholders.”

So according the Nestle interpretation of CSV it does not include tax so one could hardly claim that they are unethical on that point on the other hand leaving it out does say something about the company mind-set and approach to the societies it operate in.

If a link between profit and society can’t be established it is not in Nestle mind CSR and therefor is tax not included.

I for one will be looking forward to what the Danish government will do and how they will go around the business of making multinationals pay more back to the society that they operate in. One must not forget that there are companies that do pay their fair share and that they are put at a disadvantage by companies that have the ability to shuffle money around. It could actually be a competitive advantage that tax paying companies can utilize in the Danish market as tax evaders leave and create new market opportunities which were out of reach before.

The 99% of Denmark

You would be blind if you had not noticed the spreading of the “anti-capitalist” movement in the US also know as the 99% or Occupy Wall Street. And while the do have big issues there is no place were the fall from being the world leading economic superpower and the mall of the world to real tangible poverty have been greater then in here. In Denmark we have seen the first Facebook groups being formed and some of the first attempts to form demonstrations by ordinary people.

So how does the 99% compare between the US and Denmark and does the Danes really have anything to complain about?

Business insider has featured a number of interesting statistics about the situation in the US and I have tried through the Danish statistical office to replicate some of the same charts just in a local Danish context.

For one thing is the unemployment rate around 9% or around 14 million people in the US while it in is 4,2% or around 110 thousand people. While the numbers have been increasing from around 2% in 2008 and more people have lost their jobs the impact is still manageable. And we have yet to see real poverty on a large scale and fall in living standard among the middleclass. Also is the time from the loss of job to the time when people get another place of employment not as long as we have seen it elsewhere.

Another interesting thing is that corporate executives pay continue to rise both in the US and in Denmark. As one of the leading Danish corporate Asger Aamund said, “The Danes better get used to higher corporate payrolls” in spite the fact that the economy is a recession or as close to one as it can possible get. And as unemployment continue to grow and more and more people have to live for less it is no wonder people start o get upset.

One of the most discussed political and economical subjects discussed in Denmark is the growing inequality or the gap between the relative poor and the relative rich. According to the CIA (yes, it is the CIA you are thinking of) is Denmark number 17 on the list on the US is number 93!  Located in between Bulgaria and Camaroon. According to the survey are the most unequal country being Nambia and the most equal country being Sweden. One might argue that equality is not a goal in it self but it is shown that the level of inequality and social stability is to a large extend co-constructive. This means that countries where the economic differences are small will have a larger degree of political stability.

In both the US and Denmark was the pre crisis proportion of rich people around 2% and the poor 30% so when the number of poor gets higher it is no wonder that people start to make noise when they are asked to pay the bill. While we are far from some of the countries in the developing world we the propositions are not shifting in a more equal direction.

Do the Danes have a cause for alarm and a reason to take to the streets is a question, which is difficult to answer. But there is little doubt that the people who are asked to pay the bill after the relative rich have taken their share are the people with the lowest income. And as people with high incomes again and again are exposed as fraudsters, inside traders, pyramid builders, or just plain greedy the reasons for ordinary people to take to the streets just increase.