Ethical Performance
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review

Corporations and the public interest: guiding the invisible hand

December 2005

Steven Lydenberg. Berrett-Koehle Publishers. 170 pages. £16.99 hardback

This is a timely publication about moving socially responsible investment on to the next level. The goal, according to Lydenberg, is to shift business thinking and practice towards the creation of long-term wealth, which he defines as creating value for stockholders, employees, customers and communities. He claims the means to this noble end is to improve the quantity and quality of corporate social and environmental data, thereby allowing the market to take externalities into account.

The heavyweight emphasis (one might even say silver-bullet status) given to data-oriented reforms clearly reflects the author’s personal career: Lydenberg was one of the founders of US-based socially responsible investment research company KLD Research & Analytics and is the chief investment officer for Domini Social Investments. Perhaps this also explains the implicit optimism in the book about this single-strategy solution.

Disappointingly, however, some of the more fundamental dilemmas about the market-based approach are not seriously addressed. For example, does improved data really change the short-termism driven by discounted cashflow models and speculative trading? And how does increasing the supply of information reconcile with already lacklustre demand among analysts and other stakeholders? What about the cumulative impact of all the companies that are not large, high profile multinationals and therefore fall outside the SRI data net?

Despite leaving critical questions such as these unanswered, Corporations and the public interest still offers a highly readable account of some of the progress that has been made in the socially responsible investment field, as well as the challenges that remain if we hope to make companies more responsive to their stakeholders and accountable for their impacts on society and the environment.       

Wayne Visser


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