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Class 5

Addiopizzo

Dealing with complex and corrupted environments: there


are no places/companies/countries immune to corruption. So,
moving from corrupted environments based on the hope of find
uncorrupted environment it is just an illusion. This is not the
solution.

How to understand corruption? Very pragmatic topic!


Corruption: it is the abuse of entrusted power for private gain. It
hurts everyone who depends on the integrity of people in a
position of authority/power. The most famous ones are: Bribery,
extortion and embezzlement.
Cost of Corruption
- It destroys trust and legality
- It introduces a lack of transparency in the market
o Government official accepts money to speed up the
issuing of licenses its economic cost is 3% to 5%
premium above licensing fee passed on to consumer.
o Organized crime controls the marketplace Its
economic cost is 15% to 20% extra cost on consumers.
o Government official overpays in exchange for a
kickback its economic cost is that public goods and
services are priced 20% to 100% higher than necessary.
o Underreported taxes for a bribe Its economic cost
is that income tax revenue can be reduced by up to
50%.
- There
is
a
strong
correlation
between
underdevelopment/poverty and corruption.
Types of corruption:
o Bribery: An action in which someone gives cash, a gift
or some other benefit such as an emolument or
privilege, to alter the behaviours of the recipients to
obtain an unjust advantage (an unjust judgment, a vote
or some type of behaviours) by someone in a position of
trust.
Those who receive a bribe take advantage of their
position of power for personal benefit and act against
the duties of their position.
How to recognize bribery?
a) Intention of the gift-giver: is the intention to gain
an additional advantage or is this just a way to
maintain good business relationship?
b) Impact on the receiver: is the evaluation
influenced by the gift? Is the gift causing unfair
competition?

c) Perception of others: how would competitors and


other players interpret the gift?
We have to recognize the cultural, and context of the
specific situation; but we cannot believe in good
intentions and we have to consider the basic ethical
standards
The ultimate question: Am I acting in the best
interest of my company?
o

Extortion: It takes place when someone (the


extortionist) demands money or some other gift to which
he or she is not entitled, through intimidation or undue
exercise of authority.
It comes from those with decision-making power over
something that affects the victim of the extortion.

Extortion vs. Bribery


Offering a bribe is ALWAYS illicit as:
- It involves inducing someone to perform a disloyal and unjust act
Accepting a bribe is ALWAYS a moral illicit action as:
-It is an action of disloyalty
-It is an action of injustice as the recipients are not entitled to the
remuneration they receive
-It causes unfair competition
-It contributes to the spreading of a culture of corruption
Extortion vs. Bribery
Extortion is ALWAYS illicit as:
-It causes disloyalty and injustice against the organization to which one
belongs
-Injustice is done to the person from whom money are extorted
-Injustice may be done to third parties
-It could also give raise to a scandal insofar
-It may encourage others to do likewise thus reducing the sense of solidarity
in society
For the morality of giving in to extortion a DISTINCTION should be drawn!
-Under certain conditions it may be licit to give in to extortion in order to
obtain a right
When:
-There are NO viable alternatives
- One truly behaves with rectitude
-Third parties are not involved
-There is a moral reason (e.g. continuity of employment) proportional to the
indirect negative effects caused by the extortionists action
- Moral scandal is avoided
Example: After Addiopizzo it is not more moral acceptable (dependent on
the reasons)

How to fight against corrupted environments: traditional


approaches
- Professional and moral competencies
- Organizational policies and code of conducts
- Run away
- Regulation
- External institutional help
Show the payoff of not being corrupted
o

Simbolic and Substancial Actions:

Symbolic
actions
are
not
enough > we need to send very clear message in order to make clear that
we are doing something to change this environment > we could use
symbolic and substantial action not only to change our actions but also to
influence the overall actions of society and this was what Addiopizzo was
capable to do
o

Social Enterprise: Hybrid organizations


First definition: Are organizations that combine aspects of
nonprofits and for-profits by primarily pursuing a social mission
relying substantially on commercial revenue to sustain operations
(Battilana and Lee, 2012)
Second definition: Business with primarily social objectives whose
surpluses are principally reinvested for that purpose in the business
or in the community rather than being driven by the need to
maximize profit for shareholders and owners (DTI, 2002)
SYNTHESIS.
Organizations that adopt commercial ventures to achieve
social purposes
Blurring the boundaries between nonprofit and for profit.
Social enterprises and socially responsible organizations

Case Study Analysis

Why have all the attempts to defeat Mafia before


Addiopizzo failed?
-

Mafia's power:
1. Fear: Mafias intimidating power is very high, so it is difficult to avoid
them
2. Cultural issue: Culturally accepted in Sicily, so it is hard to get rid of
Mafia and the attempts failed. (The most difficult obstacle to

overcome is the cultural acceptance of Mafia as a legitimate entity in


the country/city.
Accepted by society
Government corrupted: Mafias social ties with high positions in
different positions and influence on political power and on the
police as well.
Lack sense of community > very important driver
Law and academic sectors were also corrupted
3. Economic influence: economic incentives - the economic power is
also very high, they have 7% of Italys GDP and 80-90% of people
would pay the Pizzo.
-

That is why corruption it is so dangerous and at the same time so difficult


to contradict > this kind of drivers can also explain why people alone
won't be able to change this situation.

Before Addiopizzo the individuals were completely alone and no option to


not pay the pizzo and that it is why it was moral acceptable to pay it.
Institutions, public opinion did not help the sole person fighting the Mafia
so he was naturally killed with very few reprisals for the mobs.

Why has Addiopizzo succeed?


Mix between:
1. Lucky enough to be at the right place and at the right time:
Environmental factors that help him to get this change: capable

to leverage opportunities as financial crisis;


2. But not just lucky > Resources:

Leverage resources in order to fight against the mafia

Cultural Fit: Murders 1990s


Opportunities: Financial crisis

As much as 80% of Sicilian businesses paid a pizzo, with payments ranging


from 250 euros a month for smaller businesses to 30,000 euros a month for
bigger firms, according to government officials.
However, things have changed during the current financial crisis.
The reasons: Some businesses closed and others were struggling to pay
their own bills and debts, let alone protection money.
- Resources: How does Addiopizzo move within the difficult Sicilian
environment to engage people and convince them to take action?
Communications with sceptical Stakeholder:
1. Very specific points of discussion
2. Simplicity vs. Transparency

3. Show the payoff

Steps:

Pizzini:

Target: all society

Message (Symbolic):
The target of posters is to enhance the
passiveness of society and they are to blame
for Mafia having so much power.
Dignity is the keyword: is one of the most
important values in Sicily, so this had a cultural
impact. This first action was a symbolic one.
Objective: Communicate to everyone who pays
pizzi that it is not just a problem of specific group
(Shopkeepers) of stakeholders, but a problem of
society/all community

But specially in Sicilia it was a value very


important and say to someone that they are not dignity
it is very offensive > so he has very cleaver using this as
the first approach

Letter(Symbolic):
Addressing society but also business owners to fight
back. There is a sense of dignity again and there is a
common responsibility for all the actions.

Consumers: The act of pay the pizzi it is not just a


problem of shopkeepers, and consumers should be also
liable, because they are subsidizing the mafia paying
more for the product. Afterwards, the pizza is payed
through the increased prices supported by the final
consumer.

Banner(Symbolic)

All the people - population

Website(Substantial): was very important because it


had a lot of visibility, courage and was against a previous probanner aid.

Meeting (Substantial) :
The first contact with the real situation; where they understood the
real need to act.
First step when they did something real and concrete what motivate
the internal team as well; they really understood which kind of
strategy they should develop
It was fundamental to create a network of business
owners and the community in general to fight organized
the Mafia structure.
Here it starts the economic impact, always having the
cultural one present.

Strategy (Subs/symbolic): Anti-mafia certification After the anti-racket certificate came, where the target is the
consumers (in order for them to protect the anti-Mafia
businesses) and this is a substantive action. Mafia did not
retaliate against Addiopizzo because the Secret Services were
protecting them.

Symbolic actions would not be enough, they had to send very clear message
in order to make clear that we are doing something to change this
environment. All these steps developed by Addiopizzo based on symbolic
and substantial action had the capability to change individual and the
overall actions of society as well.

Economic Support
Cultural Change > Dignity
Protection > Reliability
Ethical
Consumption
>
Justice

Became Mafia a marginal


stakeholder

What are the critical


stakeholders hooked by
Addiopizzo?

Shopkeepers
Consumers: are the most critical stakeholder.
Media: ability to affect the other people
Students
Potential entrepreneurs
Police

What is their role in supporting Addiopizzos fight against the


Mafia?
Need of points of contact
Here we are not talking management stakeholders, we are talking about a
social movement and non- profitable organization that are trying to keep the
other stakeholders to help the shopkeeper in order to change a cultural and
social intrinsic mind-set of corruption.
Mafia now is a marginal stakeholder and shopkeepers are not alone
anymore.
Addiopizzo had very cleaver vision, because it was really difficult to
destroyed a huge and powerful network as mafia in Sicilia

Addiopizzo Today
-

826 entrepreneurs pizzo free


10450 consumers explicitly supporting Addiopizzo and Pizzo free
entrepreneurs
37 local institutions involved in the project
176 schools involved in the project
3585 sent to from all over the world to sustain the project
A social enterprise, called Addiopizzo Travel leveraging business
opportunities that lie behind ethical tourism in Sicily:
o Social enterprise promoting sustainable tourism in Sicily:
o ECONOMIC SUSTAINABILITY, it is a business organization 100%
pizzo-free
o ENVIRONMENTAL SUSTAINABILITY: it promotes the valorization and
protection of local natural and cultural resources

SOCIAL SUSTAINABILITY: it introduces in the tourism sector culture


of legality and provide clean job opportunities

Take Away
-

Importance of civil society and social movements:


o Leverage cultural fit, opportunities and resources to drive a
change
o Civil society: Included organizational actors that are neither
businesses nor governmental institutions, and which are involved
in the promotion of societal issues, causes, goals

Ethical consumption: the conscious and deliberate decision to make


certain consumption choices due to personal moral beliefs and values >
Willingness to spend more on products from socially responsible
companies

Strategies for social change


Ethics to boost social (and economic) changes
Some entrepreneurs can be driven by ethical motivations
An increasing number of consumers is driven by ethical motivations
It is possible to educate consumers to reward ethically oriented
initiatives
Social change is possible (also) through bottom-up and multistakeholder initiatives

Summary:
Theory:
Corruption: definition
The moral case for bribery and extortions
From social movements to social enterprises
Social enterprises vs. socially responsible organizations
Addiopizzo case study:
Strategies for social change
Ethical consumption
Role of values in corrupted environments

Class 6
Timberland

From CSR to CSV

CSR values are doing well and then doing good; it is linked to
citizenship and philanthropy; discretionary or in response to external
pressure; separate from profit maximization; agenda determined by external
reporting & personal preferences; impact limited by corporate footprint &
CSR budget.
CSV Values are doing well & doing good; joint social and company
value; integral to competing; integral to profit maximization; Agenda is
company specific; realigns the entire company budget.
Share value concept: not only an economic value but also a social
value is needed to create share value. This concept it is very
concrete and really help organizational managers to create value
for society.
Example:
Coca-cola are using CSR just to react to the Society's
Expectations of Business Ethics: to avoid moral scandals; as a
marketing strategy. They are not really investing in order to have a
real impact in society;
CSV: change from a point of view where CSR is cost; more as a view of
shared value
VS
Traditional way: react to the external pressure and society
expectations and in a very standardized way.
You really have to create value for society and economy: it is not about
having a department that have some casual activities - not just the CSR
department and a budget for it, but define one strategy and have this
into account.
Example: MARS
They have been capable to really develop and identify a very precise
niche and develop the corporate engagement and their strategy in
order to create better conditions for local farmers; have been
collaborating with other organizations as NGO and Government (it is a
very good way in order to understand more issues)
Stakeholders communications: be capable to communicate
it to them and to other stakeholders.
o

How can we create shared value?


Reconceiving products and markets
1. Answer the question: are we really addressing (all our
potential) customers needs?
2. Evaluate bottom of the pyramid markets
3. Provide appropriate services to lower income and
disadvantaged consumers/people.
Redefining productivity in value chain:
1. Answer the question: how can we scale the economic
value created in our value chain by leveraging societal
weaknesses?
2. Assess economic risks cause by societal/environmental
issues.
3. Identify possible partnerships throughout the value
chain.

Example: The Coca-Cola Company >Partnership with


WWF to reduce water consumption. This strategy has
enabled Coca-Cola to obtain a 16% reduction of water
usage since 2004 and save more than $ 5 million

Building supportive clusters


1. Answer the question: how can we build clusters to
improve company productivity in developing countries
2. Build open and transparent market
3. Provide partners with skills and capabilities to support
their efficiency and high quality production.
Example: Nestl > Objective: double the amount of
coffee bought directly from farmers (organized in social
enterprises).
Value for Nestl: more secure supply and better quality
raw materials; consumer preferences for Nestl
products, lower procurement costs
Value for farmers: advice and technical assistance (from
Nestle and Rainforest Alliance), increased income,
employment and long term safe partnership
The four cornerstones of shared value
Corporate engagement
Collaborative co-creation (partnerships)
Stakeholder communication
Clear purpose (mission & values)

What is employee Volunteerism?

Corporations support communities and non-profit organizations by


establishing systems that facilitate and encourage their employees to
volunteer (employer driven and employee-driven).
In either case, a corporation is donating its employees time and labor
to a particular cause. Today more than 90% of fortune 500 companies have
employee volunteer programs to leverage the power of service and
volunteering in the corporate sector.

Benefits of Corporate Volunteering


For company Corporate branding; encourage teamwork;
employees branding; employees commitment.
For employee Professional and personal development; leadership
and work skills; sense of community; cross-organizational operation
For NGO/society Competences acquisition; scale social impact;
acquisition of entrepreneurial capabilities.

o
-

Stakeholder Communication

Social accounting is the voluntary process concerned with assessing


and communicating organizational activities and impacts on social,
ethical and environmental issues to relevant stakeholders. Good social
accounting is (in 3 factors):

o
o
o
-

Comparable
Reflect the view and account of all principal stakeholders
Based on measurable objectives

Accountability: the obligation of an individual or organization to accept


responsibilities for its activities and disclose the results in a transparent
manner.
The challenge of measuring social/environmental impact:
o Input: all resources, whether capital or human, invested in the
activities of the organization/project
o

Activities: the concrete actions, tasks and work carried out by the
organization to create its outputs and outcomes and achieve its
objectives

Outputs: the tangible products and services that results from the
organizations activities

Outcomes: the changes, benefits, learning and other effects that


result from the organizations activities

Impact: the contribution of the organizations activities to broader


and longer term outcomes

Case Analysis
How have Timberlands alliances with NGOs evolved over time?
It started with a donation and a strong commitment of CEO, then a team
culture was developed and finally the strong integration (headquarters
close) and members of top manager of City Year in the Timberland Board
and Timberland president had participation in City Year board too.
Types of partnerships
Donation
Sharing information
Formal partnership
Joint Venture
Evolution over time
1. Step 1
City year requested a donation from Timberland of 50 pars of boots
Philanthropic alliances
Donation evolved to low level of engineering, peripheral
organizational strategies, fiscal/legitimacy, and low mission alignment

2. Step 2
Community service for Timberlands employees > Path Service (Not
only volunteering hours, but also training, teamwork, share services
and space work)
Transactional alliances
Specific activities: Compartmentalized engagement; peripheral to
organizational strategies; cause marketing; high but
compartmentalized mission alignment.

What is employee Volunteerism? Corporations support


communities and non-profit organizations by establishing systems
that facilitate and encourage their employees to volunteer (employer
driven and employee-driven).
In either case, a corporation is donating its employees time and labor to
a particular cause. Today more than 90% of fortune 500 companies have
employee volunteer programs to leverage the power of service and
volunteering in the corporate sector.

Benefits of Corporate Volunteering


-

For company Corporate branding; encourage teamwork; employees


branding; employees commitment.
For employee Professional and personal development; leadership and
work skills; sense of community; cross-organizational operation
For NGO/society Competences acquisition; scale social impact;
acquisition of entrepreneurial capabilities.
Win-win:

Knowledge for Timberland from the NGO: they have to develop important
skills to understand the environmental and social issues;
Path of services increase the commitment of the employees, more
ethical values within the organization
Volunteer activities:
Philanthropic Responsibilities > more than what the company
need to do in a legal and social responsibility perspective >
transformation level (they are philanthropic activities with a
transformational level)
3. Step 3
Schwarz chair of City Year Board, Casey director of Timberland SE
joint program > Director of City Year seating in the board of
Timberland
Integrative alliances

Strategic alliance Integration of core competences; central to


organizational activities; organizational culture; strong mission
alignment.
This organizations are working together in order to achieve
common goals > at the end of the process City Year was seating at
the board of Timberland;

Which are the main characteristics of Timberlands Commerce


and Justice Strategy?
They want to be a company that it is an employees first choice
(humanity and excellence core values) as well as a socially accountable
organization (core value of integrity and humility). On the other hand, they
want to create/set an ethical standard for the sector, wanting to be the best
in their market. Finally, they want to satisfy customers and shareholders
aligned with a social responsibility (last strategy feature more aligned with
excellence value).

Consistency of ethical values:


o
Strong Leadership
o
Mission of organization: commerce (economic mission) and
justice (social mission)
o
Values:

Integrity

Humanity

Excellence

Humility
o
Objectives:

Top 10 for employee choice > Employees > Integrity;


humanity; excellence;

Financial return for shareholders > Shareholders

Reference brand for CSR > Clients and Suppliers >


Integrity;

High quality products > Economic and Ethical values >


Customer > humanity; excellence

Mission and Value


You need to have committed leaders, in order for them to support
the organizational values by developing strategies aligned with the
organization mission.
Mission of Timberland: Doing well and Doing Good connects
commerce and justice.
Values of Timberland 4 core values: Humanity, humility,
integrity, excellence.
Excellence high quality shoes, very good in advertisement and
distribution.

Core values are strongly aligned with the mission of Timberland and
social activities they are undertaking.
Obviously the leader is completely committed to the social enterprise
and mission views.

Corporate engagement: business organizations as community of


person
-

Governance model: Organizational structure


Formalized code of conduct: CSR planning
Human resource management: Stakeholder engagement

Governance: CEO and City group:


o Marketing department > social ent. Department > Miss
Casey from city year > H.R.D; volunteer attitudes; alliances
with NGOs
o Supply Chain > Environmental Affairs > Mr. Kellog > decrease
pollution; minimize environmental impact; Brand/reputation; (8
steps > sustainable report)
o Legal department > Global Business Alliance > Manage
supply chain; global standards labor; code of conduct.

What recommendations would you make to the management for


strengthening the companys strategy and operations?
-

Structure: Social enterprise department (marketing division, why not in


Human Resources Management); environmental affair department
(supply chain division); Global Business Alliance (Legal Department).

Timberland Today: Commerce and Justice


-

Climate: very clear environmental objectives, environmental minded.


Factories: giving conditions to factories to be social responsible and
support according to ethical standards in each country (to cope with
cultural differences).
Service: multiply the service and increasing its target.
Product: they are using organic materials and use them as marketing
tool (show social impact).

Summary