An investigative series by the New York Times and a performance piece by Mike Daisey featured on This American Life have put the spotlight on Foxconn, the Taiwanese company whose massive Chinese factories manufacture some of the world's most popular consumer electronics.

As well as working with companies like Dell, Motorola, Nokia and Hewlett-Packard, Foxconn assembles popular Apple products like the iPhone and iPad.

Here's a quick look at what we know about Foxconn. (The company disputes workers' accounts of abusive conditions. In a 2010 company report, Foxconn said it promotes "employee respect, an atmosphere of trust, and personal dignity.")

Working for Foxconn

1.2 million: number of workers employed by Foxconn in China, according to the New York Times.

40: Estimated percent of the world's consumer electronics manufactured by Foxconn.

7: seconds it takes Foxconn's workers to complete a single step of their work, according to a survey cited by the New York Times.

12: Hours in a typical work shift, according to interviews with Foxconn employees.

83.2: Average hours of overtime worked each month, according to a 2010 survey of Foxconn employee.

13: age of a Foxconn employee Mike Daisey interviewed outside the gates of a Foxconn plant in Shenzen.

91: cases of underage labor found by Apple's audits of its suppliers in 2010, the year Daisey visited China.

3,000: number of workers Foxconn could hire overnight, according to Apple's former worldwide supply demand manager.

10-20: percent estimated monthly turnover in Foxconn's workforce.

$7,500: amount founder Terry Gou used to start the anchor company of Foxconn Technology Group in 1974, according to the company website.

$5.7 billion: Terry Gou's estimated net worth as of March 2011.

Living Conditions

230,000: number of workers at "Foxconn City" in Shenzen, according to the New York Times.

13: tons of rice prepared each day at the central kitchen at Foxconn City.

$0.65: meal allowance for dinner at the Foxconn City canteen in 2010.

2: number of free swimming pools there, according to The Telegraph, which noted that the pools "are said to be quite dirty."

70,000: number of workers at Foxconn's Chengdu plant who live in company dorms, according to the New York Times.

20: number of employees sometimes packed into a three-room apartment.

200: Reported number of police officers who responded to a Foxconn dormitory riot.

Deaths

17: Number of reported suicides of Foxconn workers in China between 2007 and February 2011, according to Wired. Eleven workers died after jumping off buildings in the Foxconn Campus in Shenzen, which were then draped with preventive netting. (Wired noted that the rate actually seems to be below China's national averages.)

70: number of psychiatrists employed by Foxconn to prevent suicides, according to a 2010 announcement by CEO Terry Gou.

100: Estimated number of employees at a Foxconn factory in Wuhan who stood on the roof of a factory building this month to protest working conditions and wages. Several threatened to commit suicide, according to the New York Times.

$450: monthly salary a worker involved in that protest said employees had been promised for moving from the Foxconn campus in Shenzen to one in Wuhan.

34: continuous hours a Foxconn employee worked in 2010 before he collapsed and died, according to media reports.

4: workers killed last year by an explosion at a Foxconn factory in Chengdu, China that assembles iPads.

$22: approximate daily salary earned by Lai Xiaodong, a 22-year-old college graduate, working at a Foxconn factory in Chengdu, China, according to the New York Times.

$150,000: approximate amount the company wired Lai's family after he was killed in the aluminum dust explosion.

ProPublica is an independent, non-profit newsroom that produces investigative journalism in the public interest.   This article is republished with permission under a Creative Commons license.

The private equity practice of buying out a firm and restructuring its operations — often involving job layoffs at the target company — has been criticized for its negative effects on human lives and communities but also praised for improving businesses and making them more efficient and profitable. Past research has tried to weigh and assess these dynamics, but it has often been limited by such factors as incomplete data sets and a failure to compare employment changes at comparable firms during that same period, according to researchers at the University of Chicago Booth School of Business, Harvard Business School, the University of Maryland and the U.S. Census Bureau.

Their 2011 study for the National Bureau of Economic Research, “Private Equity and Employment,” uses comprehensive data from the U.S. Census Bureau’s Longitudinal Business Database between 1980 to 2005 to assess the average outcomes of private equity buyouts. The researchers study some 3,200 U.S. companies bought by private equity firms and the effects on 150,000 “establishments” — “specific factories, offices, retail outlets and other distinct physical locations where business takes place.”

The study’s findings include:

-- Relative to comparable businesses in the same industry — and with similar profiles in terms of size, age, and prior growth — establishments bought by a private equity firm will see, on average, a decline of “about 3% of initial employment over two years and 6% over five years.” Moreover, “gross job destruction at these target establishments outpaces destruction at controls [comparable industry businesses] by a cumulative 10 percentage points over five years post buyout.” This means that turnover of workers is indeed accelerated by private equity buyouts.

-- However, many bought-out firms either grow establishments in fresh directions or create new establishments — so-called “greenfield establishments” — in the wake of a private equity sale. Indeed, analysis “reveals that target firms create new jobs in greenfield establishments at a faster pace than control firms.” Taking these total effects into account, the employment growth differential is only about 1% less for bought-out firms compared to similar firms in the first two years.

-- Private equity’s impact on jobs varies widely among industries and by the nature of the buyout; it can indeed be net neutral or positive, depending on the case. The greatest losses are typically evident in the retail sector and for publicly-traded firms that are taken private: “Public-to-private deals, which tend to be highly visible, also involve large employment losses at targets relative to [other comparable firms]. In contrast, independently owned firms exhibit large employment gains relative to controls in the wake of buyouts, mainly due to greater acquisitions.”

-- Overall, “the sum of gross job creation and destruction at target firms exceeds that of controls by 13 percent of employment over two years. In short, private equity buyouts catalyze the creative destruction process in the labor market, with only a modest net impact on employment. The creative destruction response mainly involves a more rapid reallocation of jobs across establishments within target firms.”

Despite the study’s finding of a modest overall impact on employment at firms, the research does support the idea that “pre-existing employment positions are at greater risk of loss in the wake of private equity buyouts.”

John Wihbey is a Policy Journalist and Editor at Journalist's Resource, a project of the Harvard Kennedy School's Shorenstein Center and the Carnegie-Knight Initiative. This article is republished under terms of a Creative Commons license.

The concept of corporate social responsibility (CSR) — the idea that companies directly contribute to the common good — is gaining adherents throughout the business world.  However, what constitutes responsible corporate behavior is open to interpretation by the firms themselves and the larger cultures in which they operate.

A 2011 paper from INSEAD Business School published in the Socio-Economic Review, “The Spirits of Corporate Social Responsibility: Senior Executive Perceptions of the Role of the Firm in Society in Germany, Hong Kong, Japan, South Korea and the USA,” surveyed 73 senior executives of large corporations and asked them to articulate their thoughts relating to corporate responsibility. The researchers focused on distinguishing between two types of corporate charity: implicit (“our goods benefit society”) and explicit (“we contribute to charitable causes.”)

Key study findings include:

- The senior executives of Germany, Japan, South Korea, and the United States espoused an implicit philosophy of charity: “A large majority of executives in each economy agreed on the importance of taking society into account in the running of the firm.” However, there was “no sense that responsibilities towards society represented voluntary corporate action. This suggests that executives in these four societies tended to view their relationships with society as ‘implicit.’ ”

- Hong Kong executives adhered to explicit standards of corporate responsibility, with 60% mentioning “charity” as an obligation of successful corporations. Charitable contributions were seen as supporting Hong Kong’s economic well-being and elevating the status of the contributors; however, charity still remained subordinate to a company’s ability to generate wealth for its stakeholders and create jobs.

- U.S. executives were “unusually clear in assessing societal concerns as secondary, with primacy accorded to shareholder interests,” and society was positioned as a “constraint” to be overcome. Corporate responsibility was seen primarily in relation to job creation and innovation; only 14% of U.S. executives mentioned charity directly. Overall, there was a “strong emphasis on the provision of employment as a contribution to society, a claim that may ring hollow in the aftermath of the U.S. financial crisis but was credible for most of the [2000s].”

- Only 40% of financial sector executives in the U.S. alluded to the importance of society or community: “at the root of the financial crisis may not only have been insufficient regulatory oversight, but also a proliferation of financial executives with possibly deviant value systems.”

- “Germany emerged as a unique case. While the other three societies with implicit CSR tended to focus on one type of stakeholder — the state and society as a whole in Korea, employees in Japan and shareholders in the USA — German executives chose to emphasize the societal value of production in itself. This is consistent with the high rate of engineering doctorates among German executives outside the financial sector, which is likely to condition executives’ views to focus on the productive function of the firm.”

The paper’s authors worried that corporate behaviors may be divorced from broader societal benefits; they call for additional research to refine the evolution of executive values and the link between cultural context and corporate behavior.

Margaret Weigel is Policy Journalist and Editor at Journalist's Resource, a project of the Harvard Kennedy School's Shorenstein Center and the Carnegie-Knight Initiative.

American corporations today are like the great European monarchies of yore: They have the power to control the rules under which they function and to direct the allocation of public resources. This is not a prediction of what’s to come; this is a simple statement of the present state of affairs. Corporations have effectively captured the United States: its judiciary, its political system, and its national wealth, without assuming any of the responsibilities of dominion. Evidence is everywhere.

• The “smoking gun” is CEO pay. Compensation is an expression of concentrated power — of enterprise power concentrated in the chief executive officer and of national power concentrated in corporations. Median US CEO pay for 2010 was up 35 percent in the midst of a lingering recession, while CEO pay over the last decade has doubled as a percentage of pre-tax corporate income. Yet there has been no justification for current levels of CEO pay based on economic value added.

When Lee Raymond retired as CEO of ExxonMobil at the end of 2005, after six years at the helm of the merged firm and another six as head of Exxon before that, he walked away with more than a quarter billion dollars in realizable equity. In his final year alone, Raymond received in excess of $70 million in total compensation — an hourly wage of about $34,500 calculated at 40 hours a week for 50 weeks. No metric can justify such a raid on the corporate treasury and shareholder equity, but Raymond is only a particularly egregious and early example of what has since become common practice. Little wonder that the driving concern of banks receiving TARP “bailout” money was to pay it back so as to escape any restriction on executive pay.

• Retirement risk has been transferred to employees. During the same period that CEOs were doubling their own compensation, the “best” CEOs of the “best” companies abrogated the century-old commitment by employers to provide pensions to their workers. IBM has been the corporate leader in abolishing a “real” pension system for its employees. The 2006 elimination of on-going defined benefit plans will “save [IBM] as much as $3 billion through the next few years and provide it with a more ‘predictable cost structure’,” TK said at the time. Translation: The worker bees are on their own.

This is the essence of “capture” – CEOs are enriched, while all other corporate constituencies, including government, are left with liabilities. A relatively few autocrats have taken control over the policies and wealth allocation of the United States.

• The financial power of American corporations now controls every stage of politics — legislative, executive, and ultimately judicial. With its January 2010 decision in the Citizens United case, the Supreme Court removed all legal restraints on the extent of corporate financial involvement in politics, a grotesque decision that can have only one effect: maximizing corporate – not national — value. Today’s CEOs have been granted the power to direct political payments and organize PAC programs to achieve objectives entirely in their own self-interest, and they have been quick to use it.

More than $300 million was “invested” by corporations in the 2008 Presidential elections. The totals will be vastly higher in 2012 when the full impact of Citizens United is expressed, and the distribution will be politically agnostic. As Bill Moyers recently noted, President Obama “has raised more money from banks, hedge funds and private equity managers than any Republican candidate.”[1]

• Capture has been further implemented through the extensive lobbying power of corporations. Abraham Lincoln’s warning  about “corporations enthroned” and Dwight Eisenhower’s about the “unwarranted influence by the military/industrial complex” have been fully realized in our own time. Reported lobbying expenditures have risen annually, to $3.5 billion in 2010. Half of the Senators and 42 percent of House members who left Congress between 1998 and 2004 became lobbyists, as did 310 former appointees of George W. Bush and 283 of Bill Clinton.

Capture has focused on particular industries. Two powerful Democratic administrations have not been able even to propose a system of “single payer” health insurance.  Meanwhile, business interests have assured that whatever program of “universal coverage” emerges will lock in the interests of the insurance and the pharmaceutical industries.

History has yet to sort out whether the second Iraq War served any national objectives beyond military and industrial ones, but the suspicion that oil interests played a critical role in the rush to battle is enhanced by Vice President Cheney’s refusal to reveal the names of the participants in his energy transition committee. Simultaneously, the inability to force public disclosure of those participants offers a window into how thoroughly the energy industry controls its own agenda, destiny, and information flow. Not only has the industry succeeded in achieving and maintaining special regulatory and tax treatment; in multiple other ways, it functions virtually as an independent state.

• Capture has placed the most powerful CEOs above the reach of the law and beyond its effective enforcement. Extensive evidence of Wall Street’s critical involvement in the financial crisis notwithstanding, not a single senior Wall Street executive has lost his job, and pay levels have been rigorously maintained even when, as noted earlier, TARP payments had to be refinanced in order to remove any possible restrictions.

While several financial firms have paid civil penalties for their abuses, the amounts involved bear little relation to the malfeasance. US District Judge Jed S. Rakoff recently — and rightly — rejected the $285-million settlement agreed to between Citigroup Inc. and the Securities and Exchange Commission as “neither fair, nor reasonable, nor adequate, not in the public interest.”

Worse, such fines as have been imposed on the financial industry are basically being paid by the government itself. At the same time that various regulatory agencies boast of record setting penalties assessed against banks, the Federal Reserve pays banks interest on money that is not being lent, resulting in an “interest margin” realized by U.S. banks in the first six months of this year of $211 billion — more than ample funding for any penalties suffered.

• Finally, capture has been perpetuated through the removal of property “off shore,” where it is neither regulated nor taxed. The social contract between Americans and their corporations was supposed to go roughly as follows: In exchange for limited liability and other privileges, corporations were to be held to a set of obligations that legitimatized the powers they were given. But modern corporations have assumed the right to relocate to different jurisdictions, almost at will, irrespective of where they really do business, and thus avoid the constraints of those obligations.

As Nicholas Shaxson writes in Treasure Islands, “The privileges have been preserved and enhanced, but the obligations have withered.” Meanwhile, the U.S. Treasury is estimated to be losing $100 billion annually from off-shore tax abuses.

Government cannot and will not hold corporations to account. That much is now obvious.  Indeed, the dawning realization of this truth is what has informed the Occupy movement, but only the owners of corporations can create the accountability that will ultimately unwind the knot of government capture.

The essence of the problem is quite straightforward: a failed system of corporate governance. So is the cause: the unwillingness of trustee owners of America’s corporations to assert their responsibility, legal duty, and civic obligation to monitor and oversee the corporations they invest in. Fiduciary institutions own 80 percent of the outstanding shares of corporate America and thus bear at least 80 percent of the responsibility for present circumstances as well as 80 percent of the onus for saving the system itself. And the largest institutional investors — the Bill and Melinda Gates Foundation, Harvard University, and others — must take the lead because (a) they should and (b) all other courses have failed.

Urban park by urban park, campus by campus, the Occupiers are bearing sometimes inchoate witness to America’s capture by corporate interests. Now, men and women of conscience need to reoccupy the boardrooms of America’s corporations. The boardroom is where the takeover began, and it’s where capture can finally be undone and a government of, by, and for the people, not the corporations, restored to the land.

Robert AG Monks is a shareholder activist and corporate governance adviser who has written widely about shareholder rights & responsibility, government capture, corporate impact on society and global corporate issues.

Mr. Monks is an expert on retirement and pension plans and was appointed director of the United States Synthetic Fuels Corporation by President Reagan, who also appointed him one of the founding Trustees of the Federal Employees’ Retirement System.  Mr. Monks served in the Department of Labor as Administrator of the Office of Pension and Welfare Benefit Programs having jurisdiction over the entire U.S. pension system.

Mr. Monks was a founder of Institutional Shareholder Services (ISS), now the leading corporate governance consulting firm.  He also founded Lens Governance Advisers and co-founded The Corporate Library (now Governance Metrics International).  He is a shareholder in and advisor to Trucost, the environmental research company.

The good news is that on-the-job misconduct by American workers may be at an all-time low, and when misconduct is detected it’s likely to be reported by co-workers.

The bad news is that whistle-blowers are being retaliated against for their truth-telling at a “shocking” rate – suggesting a “looming ethics downturn” for U.S. businesses.

Those are the primary conclusions of the seventh National Business Ethics Survey (NBES) conducted by the Ethics Resource Center, a Washington, D.C.-based non-profit organization.  The bi-annual report is based on telephone and web responses from 4,683 employees of for-profit organizations during September 2011.

The percentage of employees who witnessed misconduct at work fell to a new low of 45 percent last year, according to the survey, compared with 49 percent in 2009 and a record high of 55 percent in 2007. The leading types of misconduct cited were misuse of company time (33%), abusive behavior (21%), lying to employees (20%), company resource abuse (20%) and violating company Internet use policies (16%).

And those who reported the bad behavior they saw reached a record high of 65 percent, up from 63 percent two years earlier and 12 percentage points higher than the record low of 53 percent in 2005, according to the survey.

However, while reporting was up, the survey found that retaliation against whistle-blowers hit “alarming levels,” with more than one in five (22 percent) experiencing some form of retaliation in return.  That compares with reported retaliation by 12 percent in 2007and 15 percent in 2009.

According to the survey, these were most common forms of retaliation:

Source: Ethics Resource Center - 2011 National Business Ethics Survey

In addition, the survey found, the percentage of employees “who perceived pressure to compromise standards in order to do their jobs” climbed five points to 13 percent, just shy of the all-time high of 14 percent in 2000.

“While most U.S. workers are currently ‘doing the right thing’ by following company standards and reporting wrongdoing when they see it, we see trouble ahead,” said ERC President Patricia J. Harned, Ph.D. “Retaliation against whistleblowers and pressure on employees to compromise their ethics standards are at or near all-time highs. These are factors that historically indicate that American business may be on the cusp of a large downward shift in ethical conduct.”

“The data make a very clear case that if business leaders will take heed of these findings and make ethics a business priority, they can have a dramatic impact on the conduct of their workforce. Risks noted in this report can be mitigated,” said Dr. Harned and former Congressman Michael Oxley, now chair of the ERC board, in introducing the survey findings.

Economy and Social Media

To help explain the “co-existence of widespread retaliation and pressure with historically low mis­conduct and high reporting,” the NBES cited two factors: the sluggish U.S. economy and employees who use social media while on the job.

“Thirty percent of employees agree that bad actors in their company are laying low because of fears about the recession,” the survey reported. “As the economy gets better – and companies and employees become more optimistic about their financial futures – it seems likely that misconduct will rise and reporting will drop, mirroring the growth in pressure and retaliation that have already taken place and conforming to historic patterns.”

As for social networkers, the Center found that 11% of the respondents identified themselves as “active social networkers”– meaning they spent 30% or more of their workday on social networks, even though that was not part of their job – while another 29% of workers devoted at least 10% to 20% of their workday to social networking. A surprising finding to the survey analysts: more than half (51%) of the social networkers identified themselves as “top or middle management.”

The survey reported: “A surprising and worrisome divide exists within the workplace between employ­ees who spend substantial time on social networks and those who do not. Active social networkers report far more negative experiences in their workplaces. As a group, they are much more likely to experience pressure to compromise ethics standards and to experi­ence retaliation for reporting misconduct than co-workers who are less involved with social networking.”

However, the survey found, active social networkers also “show a higher tolerance for certain activities that could be considered questionable.”  Among active social networkers, for example, 50 percent said it is ac­ceptable to keep copies of confidential work documents in case they need them in their next job, compared to only 15 percent of their colleagues. And 46 percent of social networkers said it is acceptable to take work software home to use on a personal computer, compared to only 7 percent of their colleagues.

When former CEO Don Blankenship left Massey Energy a year ago taking $12 million in severance, a consulting contract for two years, and hefty retirement and pension packages, he also left refusing to participate in federal investigations into his mine’s deadly explosion.

In April 2010, 29 miners died in Massey’s Upper Big Branch (UBB), the worst mining disaster in 40 years. Massey, under Blankenship, never accepted responsibility for the explosion and blamed the federal government.

On December 6, 2011, the U.S. Department of Mine Safety and Health Administration (MSHA) issued a 1,000 page report of its investigation into the UBB tragedy. Alpha Natural Resources, which bought Massey earlier this year, agreed to pay $209 million in penalties (civil, criminal and restitution) for Massey Energy’s role in the explosion. While criminal action won’t be pursued against Alpha, the settlement doesn’t cover Blankenship or other Massey managers.

The settlement agreement with Alpha includes a requirement that $80 million be spent to improve safety and infrastructure in UBB and all underground mines Alpha owns while another $48 million will finance academic research on mine safety.

Also on December 6, MHSA fined Alpha $10.8 million, the largest penalty in agency history, and cited Massey’s corporate culture as the root cause of the tragedy. They issued 369 citations for violations, saying that Massey “promoted and enforced a workplace culture that valued production over safety, and broke the law as they endangered the lives of miners.”

Included in the findings are:

• Examples of systematic, intentional, and aggressive efforts by Massey to avoid compliance with health and safety standards
• Testimony management intimidated miners saying their raising safety issues jeopardized their jobs
• Advance notification to mine personnel of state and federal inspections
• Two sets of books kept regarding safety and health hazards concealing certain hazards
• Failure to perform required mine examinations adequately and remedy known hazards and violations
• Failure to provide adequate training
• Failure to take necessary precautions that would have prevented the April 5, 2010 explosion

Massey’s legacy is that its leadership — Blankenship and the board of directors — failed to follow laws or create a work climate that would have avoided the conditions that led to the explosion and loss of life. Whether or not criminal charges are brought against Blankenship or any members of its previous leadership, the report’s findings indicate Massey was run in a manner that put its employees and shareholders at risk.

In any risk management study its board addressed, culture was apparently overlooked as Massey’s leading vulnerability. Massey became another poster child proving that culture matters; when tone at the top, transparency, integrity, and building trust are subsumed by short-term profits, crisis inevitably ensues.

So, in this case, culture killed.

“The best tribute to the 29 Massey workers” who died, I wrote in an April 2010 column on Blankenship ” is that safety really becomes Massey’s top priority and that going forward, no one should ever be injured or die in a Massey mine from issues the company can prevent. There is no acceptable tolerance level for deaths in the workplace; to operate as if there is constitutes a failure of leadership.”

Small comfort to the 29 families and hundreds of people affected by the UBB tragedy, but it is a start.

Gael O’Brien is a Business Ethics Magazine columnist. Gael is a thought leader on building leadership, trust, and reputation and writes The Week in Ethics, a weekly column where this article was first published.

Can big business do good in the world? Can corporations contribute to a healthier planet while still turning a profit? With each new headline about bad corporate behavior, it would be easy to assume that the answer to both questions is decidedly 'no'.

But in fact, a global army is hard at work every day to answer those questions in the affirmative. They are Corporate Idealists: people who believe that business can make the world a better place and are working from within to put their beliefs into action.

Where are these Corporate Idealists? They're in China's industrial zones, working with factory owners to make sure employees are paid and treated properly. They're in Silicon Valley, collaborating with product developers to protect privacy on the internet. They're in Africa, sitting on dirt floors with village elders to make sure that mining is done without disrupting indigenous traditions. They're in executive suites in London and New York, convincing their colleagues that protecting human rights and the environment is good for business.

Why should we care about them? Corporate Idealists are the change agents we must recognize and support if we are to tackle the biggest challenges facing our world today: climate change, food and water shortages, economic disparity. Big business can either solve or exacerbate those problems; Corporate Idealists are working to make it the former, not the latter.

I know that Corporate Idealists exist because I am one of them. I've been a Corporate Idealist since my first Students for Responsible Business (now Net Impact) conference as an MBA student in 1998. I then joined BP and worked in Indonesia and China for three years, consulting with people living near company sites and setting up social programs to make sure that BP's presence didn't harm local communities.

The Deepwater Horizon disaster last year challenged my belief that companies can be good, as I watched the company I supported for so long wreak havoc on communities around the Gulf of Mexico. But while that tragedy tested my faith, it affirmed to me that we need Corporate Idealists now more than ever: My experience with BP in Asia showed me that a company can do good and operate successfully given the right staff and resources -- but that work then needs to replicated throughout a company, and beyond.

Last year more than 5,500 companies around the world issued sustainability reports, up from about 800 ten years ago. An increasing number of companies are working with nongovernmental organizations to assess their socioeconomic impacts (see Oxfam's assessment of Coca-Cola and SABMiller, done in partnership with those companies) and to tackle particular issues, from supporting factory workers to protecting free expression and privacy on the internet.

The real question is this: How do we get the efforts of individual Corporate Idealists to add up to more than the sum of their parts? In other words, how can the work of committed individuals amount to the sweeping changes that we need?

To start, we need to state our shared values. We need a Manifesto for the Corporate Idealist: an outline of the principles and actions that will help us better align the interests of business and society.

Here's my proposed starting point for such a manifesto, based on my ten-plus years working in and with big business and the experience of other Corporate Idealists I've gotten to know over the years:

1. Renounce the carbon offset model. If a company doesn't pay a decent wage and refrain from polluting, it can't redeem itself by sponsoring youth soccer teams or museum exhibits -- or even by creating beautiful, innovative products. (Apple, I'm talking to you.)

2. Learn and improve the tools of business. I didn't need the finance or accounting I learned in business school to speak with those villagers in Indonesia, but I did need those skills to translate their needs into actions for the company. We also need better models of calculating risks, costs, and benefits, that take externalities into account.

3. Listen. Perhaps it's so obvious that a company should listen to its stakeholders that executives assume someone else is doing it. When I started working for BP in China in 2002, local staff were still calling the company by its former name -- British Petroleum -- because "B" in Mandarin can sound like slang for "vagina", and "P" for "fart". Perhaps a trivial (if memorable) example, but if a company fails to heed its own employees' warnings on something as basic as the company name, will it hear concerns about human rights and the environment?

4. Build community. If you're the only one in a company fighting for better practices, it can be a lonely job. Initiatives like the Global Business Initiative on Human Rights bring together Corporate Idealists from different companies to develop tools to support their work and connect with others facing similar challenges.

5. Share stories. Spreadsheets are important, but at the end of the day we're talking about people, not numbers. We have to keep reminding ourselves that every decision we make affects a worldwide supply chain of real human beings.

To be sure, simply following these five steps won't solve the world's problems: Regulators, consumers, and investors need to demand better company behavior. But we need Corporate Idealists and we need to help them succeed. Consider this Manifesto for the Corporate Idealist the beginning of a conversation we must all have, about how to align the needs of business with the needs of society.

Are you a Corporate Idealist? What's your Manifesto? Tell Christine Bader on Twitter: @christinebader.

Christine Bader is a Nonresident Senior Fellow at The Kenan Institute for Ethics, Duke University.  This article was first published on The Huffington Post and is republished with permission.

Watch Christine's TEDx talk, Manifesto for the Corporate Idealist.

Dear EarthTalk: I've heard of the slow food movement, but what is “slow money” all about?
-- Phil Nimkoff, New York, NY

“Slow Money” is the name for a movement started by socially conscious investing pioneer and author, Woody Tasch, who essentially borrowed the conceptual framework of “Slow Food”—whereby participants eschew convenience-oriented “fast” foods, instead filling up their plates with traditional, unprocessed and, ideally, locally produced foods—and applied it to personal finance and investing. As such, Slow Money is dedicated to connecting investors to their local economies by marshaling financial resources to invest in small food enterprises and local food systems.

Woody Tasch

Tasch’s vision for Slow Money, now not just a concept but also a non-profit organization, seeks nothing less than a complete overhaul of the way we think about and spend our money, channeling much more of it into producing healthy local food, strengthening local communities instead of multinational corporations, and restoring our flagging economy in the process. Instead of venture capital bankrolling far flung high tech start-ups, Tasch hopes to see “nurture capital” funding local merchants and producers who, in turn, plug half of their profits back into their communities, ensuring one small local virtuous circle that values soil fertility, carrying capacity, a sense of place, care of the commons, diversity, nonviolence, and cultural, ecological and economic health as much as financial return. Tasch hopes to get there by persuading a million Americans to invest at least one percent of their assets in local food systems by 2020.

Tasch started Slow Money in November 2008 after the publication of his book, Inquiries into the Nature of Slow Money: Investing as if Food, Farms and Fertility Mattered. Hitting the road to promote the book and the nascent movement in 2009, he was able to attract 450 intrigued investors, farmers and other entrepreneurs to Santa Fe, New Mexico to trade ideas at a three-day gathering. “We just wanted to see who would show up, but four of the small food enterprises that presented raised an aggregate of $260,000,” says Tasch. Tasch then organized another event for some 600 attendees the following June in Shelburne, Vermont. Investors there poured $4.2 million into 12 more producers, and that’s when Tasch knew he was really on to something. More than 1,000 people converged in San Francisco for the third event in October 2011, and Tasch expects untold amounts of “slow capital” to be changing hands for the better as a result.

Whether or not you have money to invest in Slow Money’s virtuous circles, you can show your support by visiting the group’s website and electronically signing the organization’s Principles, a list of six core beliefs shared by the Slow Money community. Or if you have just $25, you could park it with the organization’s Soil Trust, which will seed small food enterprises that promote soil fertility in locales from coast to coast. Tasch sees the Soil Trust as key to opening up the Slow Money concept to all of us and achieving the group’s goal of getting a million Americans involved in the movement over the next decade.

Another key to achieving Tasch’s goal is growth of leadership at the local level. To that end, a dozen autonomous local chapters have sprung up nationwide, with more sure to come as word gets out. The local groups have already gifted or lent hundreds of thousands of dollars to entities working to improve their own community “foodsheds.” Now we all have a way to truly put our money where our mouths are.

EarthTalk® is written and edited by Roddy Scheer and Doug Moss and is a registered trademark of E - The Environmental Magazine (www.emagazine.com). Send questions to: earthtalk@emagazine.com. Subscribe: www.emagazine.com/subscribe. Free Trial Issue: www.emagazine.com/trial.

A new study by analysts at J.P. Morgan concludes that “impact investing” – which is intended to generate social good as well as financial return – could represent a highly-profitable trillion dollar market over the next decade.

Women at water pump in Mozambique

“The market opportunity for investment is vast,” the study (PDF) says, “As this movement gathers steam, we recognize the potential for impact investments to attract a larger portion of mainstream private capital and anticipate that more investors will seek to generate positive social and/or environmental impact when making investment decisions. In fact, we believe that impact investing will reveal itself to be one of the most powerful changes within the asset management industry in the years to come.”

Impact investing, according to the study, can target and benefit different populations: the so-called “base of the pyramid” (BoP), which has been defined by the World Resources Institute as people in emerging markets earning less than $3,000 a year; a broader “base of the pyramid” which includes low-income populations in developed markets; and the broadest group, “which can include those impacted by income-independent factors such as climate change.”

Applying its methodology only to the first of those groups - the BoP population in emerging markets – the study identifies five business sectors - housing, rural water delivery, maternal health, primary education and financial services – with potential over the next 10 years for total invested capital of $400 billion to $1 trillion and profit of $183 billion to $667 billion.

The BoP market opportunity exists, the study says, because ““markets at the base of the economic pyramid are typically under-served by traditional business, which may exclude this population from being considered part of its potential customer base.”

Impact investing is attracting a wide variety of investors “including development finance institutions, foundations, private wealth managers, commercial banks, pension fund managers, boutique investment funds, companies and community development finance institutions,” according to the study.

While these investors have varied expectations regarding financial returns, the study says, increasingly “entrants to the impact investment market believe they need not sacrifice financial return in exchange for social impact. Indeed, many have a regulated, fiduciary duty to generate risk adjusted returns that compete with traditional investments.”

The report notes that J.P. Morgan is a co-founder – along with the Rockefeller Foundation and the U.S. Agency for International Development – of the Global Impact Investing Network, which aims “to accelerate the development of an effective impact investing industry.”

Among other signs of growth, the study says, “large-scale financial institutions such as J.P. Morgan, Citigroup, Prudential and Africa’s Standard Bank are positioning themselves to grow impact investing businesses beyond their minimal regulatory obligations.”

Photo: World Bank

On October 9, 2011, California Governor Jerry Brown signed into law competing bills that create two new corporate forms in California — a “flexible purpose corporation” and a “benefit corporation” — intended to allow entrepreneurs and investors the choice of organizing companies that can pursue both economic and social objectives. The new corporate forms differ from traditional for-profit corporations that are organized to pursue profit (and not social purposes) and non-profit corporations that must be used solely to promote social benefits. These laws will take effect on January 1, 2012.

The flexible purpose corporation is created by California Senate Bill 201 (“SB 201″), which adds Division 1.5 to Title 1 of the California Corporations Code (the “Code”) and amends other related sections of the Code, and the benefit corporation is created by California Assembly Bill 361 (“AB 361″), which adds Part 13 to Division 3 of Title 1 of the Code. State Senator Mark DeSaulnier authored SB 201, and a full copy is available here. AB 361 was authored by Assemblyman Jared Huffman, and a full copy is available here. Both new laws take effect January 1, 2012.

Background

The new laws offer two versions of a solution to an identified gap in the Code and the corporate laws of many states. Existing law in California permits formation of for-profit corporations that operate within a construct that places interests of shareholders, and specifically return to shareholders, as the primary, if not sole, objective of the corporation and its various agents. A corporation might engage in philanthropy, act in an environmentally conscious manner and promote employee- or community-friendly policies, to name a few, but such pursuits ultimately are rationalized in the corporate governance context as being acts taken to promote long-term value growth for shareholders, and directors of a corporation could face exposure if they lean too far in favor of social objectives at the expense of shareholder returns. In contrast, a non-profit corporation in California is mandated to serve public interests and is specifically prohibited from pursuing private gain. A non-profit corporation that strays too far toward profit-producing activities risks action by the State Attorney General and loss of tax-exempt status (if applicable). This has left a gap for some entrepreneurs and investors that desire a business vehicle which can pursue both profits and social objectives.

SB 201 and AB 361 are the result of efforts by two groups working over the last two years to introduce a new “hybrid” corporate form in California. SB 201 originally was written by a group of corporate attorneys from major law firms in California, including this firm, who sought to create a new “flexible” form of corporation in California that would allow shareholders to devise their own mix of economic and social corporate objectives, ensure that future investors would have adequate notice of the purposes pursued, and provide protections to ensure that the new corporate form is not easily foisted upon shareholders of traditional corporations. AB 361 resulted from efforts of B Lab, a non-profit organization that offers certification of corporations as “B corporations” (which B Lab describes as “a new type of corporation which uses the power of business to solve social and environmental purposes”) and promotes adoption of benefit corporation legislation in states across the country. Enactment of AB 361 follows the adoption of similar benefit corporation legislation in Hawaii, Maryland, New Jersey, Vermont and Virginia. The fact that both SB 201 and AB 361 were enacted is likely to create confusion going forward among entrepreneurs, investors and lawyers as they try to understand differences among the new entities and traditional for-profit and non-profit corporations (as well as limited liability companies and limited partnerships). Both of the new entities will be taxed the same as for-profit corporations under current tax law.

Flexible Purpose Corporations

A flexible purpose corporation will be set up much like a traditional for-profit corporation, with shareholders and a board of directors, but its articles of incorporation and share certificates must state that it is organized as a flexible purpose corporation, and its articles must identify a “special purpose” from the following list:

(1) One or more charitable or public purpose activities that a nonprofit public benefit corporation is authorized to carry out; or

(2) The purpose of promoting positive short-term or long-term effects of, or minimizing adverse short-term or long-term effects of, the flexible purpose corporation’s activities upon any of the following:

(a) The flexible purpose corporation’s employees, suppliers, customers, and creditors;
(b) The community and society; or
(c) The environment.

The obvious breadth of potential purposes was intended by the drafters of SB 201 — to allow shareholders to define their desired special purposes without regard to what third parties might deem to be valid or desirable societal objectives.

A flexible purpose corporation can amend its “special purpose” by amending its articles of incorporation. If the amendment would materially alter any special purpose stated in the articles, such amendment must be approved by the affirmative vote of at least two-thirds of the outstanding shares of each class of the corporation’s stock, or a greater vote if required in the articles, regardless of whether a class is entitled to vote, and a majority of the outstanding shares of all classes entitled to vote. A similar vote is required for a flexible purpose corporation to amend its articles to convert into a traditional California corporation (which can be done by amending the articles to eliminate the special purpose provisions). A unanimous vote of all shareholders, regardless of whether shares are entitled to vote, is required to amend a flexible purpose corporation’s articles to convert it into a non-profit corporation.

In discharging his or her duties, a director of a flexible purpose corporation “may consider those factors, and give weight to those factors, as the director deems relevant, including the short-term and long-term prospects of the flexible purpose corporation, the best interests of the flexible purpose corporation and its shareholders, and the purposes of the flexible purpose corporation as set forth in its articles.” SB 201 specifically states that there shall be no private right of action created for members of the public to sue a flexible purpose corporation for failure to pursue or achieve its special purposes, and directors are not responsible to any parties other than the flexible purpose corporation and its shareholders.

A flexible purpose corporation’s board of directors is required to send an annual report to shareholders each year that includes a management discussion and analysis (MD&A) concerning the short-term and long-term objectives of the entity relating to its special purpose or purposes, the material actions taken during such year to achieve such objectives, the impact of such actions, and the causal relationships between the actions and outcomes, future material actions expected to be taken in the short-term and long-term to achieve the entity’s special purpose objectives, the measures used to evaluate the entity’s performance in achieving its special purpose objectives, and any expenditures incurred in achieving these objectives. The entity’s board of directors also must make the annual flexible purpose MD&A publicly available by posting it on the entity’s website or providing it through similar electronic means. Flexible purpose corporations also must send to shareholders and make publicly available current reports summarizing (i) any expenditure or group of expenditures that are likely to have a material adverse impact on the entity’s results of operations or financial condition for a quarterly or annual fiscal period or (ii) any decision by the board or action by management to (a) withhold expenditures that were to have been made in furtherance of the entity’s special purpose where the planned expenditures were likely to have a material positive impact on the entity’s impact in furtherance of its special purpose objectives or (b) determine that the special purpose has been satisfied or should no longer be pursued. The shareholders of a flexible purpose corporation with fewer than 100 shareholders can elect to waive the requirement for the entity to send and publish annual and current reports, and the disclosure requirements are deemed satisfied for any corporation with securities registered under Section 12 of the Securities Exchange Act of 1934 if the corporation includes the required disclosure in its periodic reports.

A flexible purpose corporation can merge with any other California or non-California entity in the same manner as for-profit corporations, except that if the disappearing corporation in a merger is a flexible purpose corporation and the surviving corporation is not, or the surviving corporation in a merger is a flexible purpose corporation with materially different special purposes than a disappearing flexible purpose corporation, then in addition to other approvals typically required the merger must be approved by the affirmative vote of at least two-thirds of the outstanding shares of each class of stock of the disappearing flexible purpose corporation, or a greater vote if required in the articles, regardless of whether a class is entitled to vote. If the disappearing corporation in a merger is a California for-profit corporation and the surviving corporation is a flexible purpose corporation, the merger must be approved by at least two-thirds of the outstanding shares of each class of stock of the disappearing corporation, or a greater vote if required in the articles, and all shareholders of the disappearing corporation not voting in favor of the merger must be afforded the opportunity to sell their shares to the surviving corporation for cash at their fair market value (i.e., exercise dissenters’ rights). Essentially the same requirements apply if a California for-profit corporation chooses to convert to a flexible purpose corporation. If a flexible purpose corporation merges with a non-profit corporation and the surviving entity in the merger is the non-profit corporation, the merger must be approved by all shareholders of the disappearing flexible purpose corporation, regardless of whether shares are entitled to vote.

Benefit Corporations

A benefit corporation also will be set up much like a traditional for-profit corporation, but its articles of incorporation must state that it is a “benefit corporation” and it must be organized to pursue a “general public benefit” and, if it chooses, one or more other “specific public benefits.” A general public benefit is defined as a “material positive impact on society and the environment, taken as a whole, as assessed against a third-party standard.” The optional specific public benefits can include any of the following:

(1) Providing low-income or underserved individuals or communities with beneficial products or services.
(2) Promoting economic opportunity for individuals or communities beyond the creation of jobs in the ordinary course of business.
(3) Preserving the environment.
(4) Improving human health.
(5) Promoting the arts, sciences, or advancement of knowledge.
(6) Increasing the flow of capital to entities with a public benefit purpose.
(7) The accomplishment of any other particular benefit for society or the environment.

The “third-party standard” utilized by a benefit corporation refers to a “standard for defining, reporting, and assessing overall corporate social and environmental performance to which all” of a long list of requirements apply. B Lab, the original proponent of AB 361, reportedly has developed such a standard and offers its certification services at fees ranging up to $25,000 per corporation per year.

Any traditional for-profit corporation can become a benefit corporation simply by amending its articles to state that the entity is a benefit corporation, and likewise a benefit corporation can terminate its status as a benefit corporation simply by amending its articles to delete such statement. In either case, the amendment requires approval of at least two-thirds of the outstanding shares of each class or series of stock of the corporation, regardless of any limitation stated in the articles or bylaws on the voting rights of any class or series. In addition, the corporation changing its status must provide dissenters’ rights to all shareholders not voting in favor of the proposed change. A benefit corporation may amend, add or delete any additional, specific public benefits identified in its articles by amending its articles with approval of at least two-thirds of the outstanding shares of each class or series of its stock (or higher threshold if specified in its articles).

In discharging their respective duties, the board of directors, committees of the board and individual directors of a benefit corporation are required to “consider the impacts of any action or proposed action upon all of the following”:

(1) The shareholders of the benefit corporation;
(2) The employees and workforce of the benefit corporation and its subsidiaries and suppliers;
(3) The interests of customers of the benefit corporation as beneficiaries of the general or specific public benefit purposes of the benefit corporation;
(4) Community and societal considerations, including those of any community in which offices or facilities of the benefit corporation or its subsidiaries or suppliers are located;
(5) The local and global environment;
(6) The short-term and long-term interests of the benefit corporation, including benefits that may accrue to the benefit corporation from its long-term plans and the possibility that these interests may be best served by retaining control of the benefit corporation rather than selling or transferring control to another entity; and
(7) The ability of the benefit corporation to accomplish its general, and any specific, public benefit purpose.

Having to consider all these factors for every issue that comes before a board of directors may be a tall order. AB 361 specifically provides that directors are not required to give particular weight to these specific factors or interests unless the corporation’s articles of incorporation state a preference for particular factors or interests. While this approach provides much flexibility, the new law does not make clear what standards directors should follow in making decisions, resulting in some commentators expressing concern that directors of benefit corporations may have too much discretion and lack accountability to shareholders.

AB 361 limits directors’ liability for monetary damages for failure of a benefit corporation to create a general or specific public benefit and states that directors shall owe no fiduciary duties to beneficiaries of the benefit corporation’s general or specific public benefit purposes. Nevertheless, AB 361 expressly contemplates that a “benefit enforcement proceeding” may be brought against a benefit corporation or its directors or officers by the corporation itself or derivatively by shareholders, directors, persons who hold more than 5% of the equity of a parent entity or other persons specified in the articles or bylaws of the corporation. AB 361 also specifically requires an officer of a benefit corporation to consider the same interests and factors that board members must consider (as described above) whenever an officer has discretion to act and an action may materially impact such interests or factors, and the officer shall be deemed not to have violated his duties when he or she so acts.

Similar to the reporting regime required for flexible purpose corporations, a benefit corporation is required to deliver to each shareholder and make publicly available on its website (if it has one) an annual benefit report that (i) details for the applicable year the process and rationale for selecting a third-party standard used to prepare the report, the ways in which it pursued a general public benefit and any specific public benefits and any circumstances that have hindered the creation of such public benefit purposes, (ii) assesses the social and environmental performance of the benefit corporation according to the third-party standard, (iii) identifies any person that owns five percent or more of the corporation, (iv) includes a statement of the corporation’s board of directors regarding whether the corporation failed to pursue its public benefit purposes in all material respects during such year, and (v) identifies any connections between the corporation (or its directors, officers or material owners) and the entity (or its directors, officers or material owners) that created the third-party standard used by the corporation to assess its pursuit of its benefit purposes, in any case that might “materially affect the credibility of the objective assessment of the third-party standard.” There is no mechanism for a benefit corporation or its shareholders to opt out of these annual reporting and disclosure requirements.

Anticipated Usage

It remains to be seen whether entrepreneurs and investors will embrace these new forms of corporate entity in California. Organizing a flexible purpose corporation or benefit corporation will require more initial thought and work than forming a traditional for-profit corporation, particularly in 2012 as practitioners come up to speed on the requirements for the new entities. As between the two forms, the flexible purpose corporation offers greater flexibility in terms of defining the special purposes to be pursued by the corporation and less onerous governance requirements, while the benefit corporation offers the advantage of being used and recognized in a handful of other states.

David Hernand, Stewart McDowell and Colin Richard are attorneys with the law firm of Gibson, Dunn & Crutcher LLP.