Nobel Hart Prize: “Social benefits only if firms produce responsibly”

the main points

  • Small and medium businesses are more virtuous
  • Those who produce far from where they sell are less
  • “Volume” and “Exit” two control modes

Yes, progress has been made. Corporate social responsibility is a complex issue and there is still a long way to go. The Nobel Prize in Economics, Oliver de Hart, speaking at the Trento Economics Festival, gave a strong signal: If companies listen to the most responsible shareholders rather than just maximizing profits, there will be great advantages from a social view point of view.
Difficulties do not decrease, small and medium enterprises are more virtuous, and those who produce far from where they are sold less. The meeting, “Socially Responsible Choices for Firms: The Role of Shareholders and Consumers,” shows different faces of a perspective representing economic interests that are not always convergent. On the other hand, we can certainly note that social costs are always high when CSR guidelines are not adhered to. Eleonora Procardo, Professor in the Department of Economics and Management at the University of Trento and Sarah Farreto, Sky journalist, participated in the meeting.

SMEs are the most socially virtuous

The idea of ​​obligating companies to adopt more virtuous attitudes has been adopted for some time, both in the United States and Europe, with mixed results. Among the small and medium-sized companies, which are more deeply rooted in the region, it is easiest to find a responsible attitude and a convergence of interests with users. who demand more attention along the entire production chain. On the other hand, those who produce and pollute, far from where they are sold, are less controllable. The results here are more modest.

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sound in and out

Broccardo explains two methods, ‘audio’ and ‘exit’. The first means voting at the shareholder meeting and pushing managers to choose cleaner investments. Second, boycott a product or clean up your stock portfolio. The ‘Voice’ option may be stronger than ‘Exit’, but not always. In fact, “the departure of socially responsible shareholders is – according to Hart – not always positive, because hedge funds or irresponsible shareholders always buy shares of profitable companies. The ‘voice’ mechanism is more effective because, with all shareholders giving up a few cents earmarked for responsible options, the ‘voice’ mechanism is more effective,” Hart explained. , “can lead to significant social gains.” The comforting factor is that society’s sensitivity increases dramatically from a comparison of data between 2016 and 2021: Faced with a crossroads between choosing a long-term social interest and a short-term personal interest, society’s consciousness increases in favor of the good. social.

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