The civil economy strategy against marginalization: theory, practice and policy suggestions

Professor Leonardo Becchetti
University of Rome Tor Vergata

As long as the problems of the poor are not radically resolved by rejecting the absolute autonomy of markets and financial speculation and by attacking the structural causes of inequality, no solution will be found for the world’s problems or, for that matter, to any problems. Inequality is the root of social ills.

Pope Francis, Evangelii Gaudium, n. 202

Niuno consiglio è mai del fine, ma in che modo et con che mezzi al fine si possa venire, onde i medici non consigliano della sanità, ma in che modo faccino sano; nella repubblica non consiglia della pace, ma con che mezzi si abbia la pace; nell’arti minori il calzolaio non delle scarpette, ma con che et come le faccia”.

(“Advice is never about the goal, but on how and with what means it is possible to achieve it. So that doctors do not advise about health but on how patients can be healthy; no one in the republic gives advice on peace, but on how to achieve it; in the lower arts the shoemaker does not give advice on shoes but on how they can be made and what with”.)

Antonio Genovesi in Bruni L. – Zamagni S., Economia civile. Efficienza, equità, felicità pubblica, Il Mulino, Bologna, 2004, p. 80.


1. Introduction[1]

The standard “Ptolemaic” economic paradigm hinges on the idea that a multiplicity of monadic individuals and a multiplicity of firms maximise their self-interested goals while the titanic work of two dei ex machina (the invisible hand of the market and the visible hand of benevolent and fully informed institutions, strong enough to avoid regulatory capture) transform this multiplicity of self-interested actions into a socially optimal outcome.

The same old-fashioned economic paradigm has been forced to admit that the two-handed system fails to deliver what it promises. The invisible hand is far from being perfect and competition is a delicate equilibrium requiring a sophisticated system of antitrust rules that regulators must have the power to enforce to contrast the collusive, oligopolistic and monopolistic instincts of corporations. As far as the second visible hand is concerned, the “triple dead jump” assumption on the quality of institutions is quite distant from reality. Institutions are far from being benevolent (as the political business cycle theory[2] clearly documented), cannot be perfectly informed and most often risk being captured by regulators (especially after globalisation modified scale and bargaining power in favour of the regulated large transnational corporations).

The failure of the two-handed system is best documented by a recent contribution of Bonica et al. (2013) with its illuminating title (“Why Hasn't Democracy Slowed Rising Inequality?”). Why, in other terms, do we witness growing inequality (with the number of richest individuals summing up to the same wealth of the poorer half of the planet which has fallen dramatically over the last decade)[3] if the small number of the richest represents a negligible minority of voters at elections? Bonica’s answer is that the top rich accounted for 40% of electoral funds at US Federal elections in 2012, up from around 15% in 1980. This finding implies that we cannot just rely on representative democracy (and on the second visible hand of institutions) for the solution of the problem of marginalisation and social/environmental sustainability, and that grassroot participation cannot be limited to the electoral vote if it aims to be effective. These considerations help to understand the urgent need of the development of a four-handed system where active citizens (the third hand) discover the immense power they have when voting everyday with their consumption and saving choices (beyond many other forms of participation not involving the vote-with-the-wallet) and responsible corporations (the fourth hand) supported by the vote with the wallet make social and environmental responsibility a new competitive dimension. The civil economy paradigm has deep roots in Christian Social Doctrine. To document this point we present some of the most relevant implicit references to it in the most recent Encyclical letters and Pontifical documents in our Appendix.

The fourhanded economic system going beyond the three (anthropological, corporate and value) reductionisms using the lever of the vote with the wallet is not just theory, it is already in action. Some qualifying examples.

The 2014 KPMG world report on globally conscious consumers registers, vis-à-vis the 2011 report, an increase of 10% of respondents willing to pay more for products of socially and environmentally responsible companies (with a share ranging from 40 to 64% around the different continents).

In May 2016 the network of world fairtrade organisations organized the World Fairtrade Challenge asking consumers around the world to buy fairtrade coffee using the web. The result was the equivalent of 1.8 million coffee cups consumed between 15 and 17 May.[4]

The Italian Slotmob movement originated from the decision to contrast the diffusion of slot machines in cafeterias. In the last two years the movement has gathered more than 100 organisations and around 10,000 people who participated in more than 200 slotmobs around Italy. Slotmobs are public demonstrations where groups of supporters gather at local cafeterias to buy products there in order to reward the owners for their decision not to host slot machines inside. The Slotmob movement had a relevant political impact in Italy contributing to the decision of several local administrations and regions to limit the diffusion of slot machines with proper regulation. At a national level the bottom-up pressure of the Slotmob movement contributed to the issue of a law banning advertising on gambling in all-round TV channels.

The most successful contemporary example of vote with the wallet is probably occurring in finance in the field of investment funds where a coalition of funds (totalling in July 2016 around 10 billion dollars of managed assets) signed the Montreal’s pledge in September 2014.[5] Signers of the agreement committed to measure the carbon footprint of their portfolios with the goal of progressively reducing it. The move has increased economic convenience and pressure on the energy industry and on all other industries to move toward environmental sustainability.

The above-mentioned facts are examples of fourhanded civil economy in action where the engagement and bottom-up pressure of civil society helps create consensus for social and environmental sustainability. The civil economy approach, by emphasizing the role of the two additional hands does not want to neglect or minimize the traditional role of markets and institutions. Its starting point is that in the global economic system the two hands cannot work without proper support from the other two, and that, enunciating what is good or demanding that human or constitutional rights be respected, is absolutely insufficient to solve a problem (the quote at the beginning of this introduction is enlightening on this point view). The probability of creation of a good law strictly depends on the social consensus created around it and, even if a good law is created, its probability of survival, enforcement and execution depends on proximity and consistence between the legal norm and social and moral norms. Seen in this perspective civil economy aims to work on the creation of sound and adequate social norms that can support the creation of good laws.

The paper that follows explains how, on these premises, the civil economy paradigm can solve the marginalization problem. It is divided into six sections. In the second section we elaborate and discuss two definitions of civil economy. In the third section we illustrate the path of progress in theoretical and empirical research along the directions indicated by civil economy definitions (behavioural economics against anthropological reductionism, corporate responsibility against corporate reductionism and objective and subjective wellbeing indicators beyond GDP against value reductionism). In the fourth section we illustrate characteristics, potential and limits of the vote with the wallet as a crucial tool of fourhanded civil economy allowing the hands of responsible citizens and corporations to complement the work of the two traditional hands of markets and institutions. In the fifth section we illustrate the most promising policy measures and directions of progress that may help civil economy to solve the problem of marginalization. The sixth section concludes.

2. Two definitions of civil economy (and how civil economy is crucial to overcome marginalisation)

Based on what we anticipated in the introduction the civil economy paradigm can be better understood with the two definitions that follow.

According to the first definition, civil economy is a paradigm that aims at broadening our perspective by going beyond three (anthropological, corporate and value) reductionisms.

For anthropological reductionism we mean the approach that models the human being as homo economicus, that is, as a purely (and myopically) self-regarding individual whose utility/happiness can grow only if his own disposal of goods and monetary endowments grow. It is important to emphasize that going beyond anthropological reductionism does not mean abandoning the rationality paradigm that ensures consistence between means and ends (and, with it, the utility maximisation approach that implies the best use of means in order to reach ends). The alternative proposal of the civil economy paradigm states that the human being is not just animated by myopic self-interest but by longsighted self-interest as well (where happiness of other human beings is essential for my happiness) and a mix of other-regarding preferences such as reciprocity, altruism, inequity aversion whose existence has been widely demonstrated by experimental evidence behavioural economics.[6]

For corporate reductionism we mean the approach that models corporations as pursuing the goal of maximising profits, that is, prioritising hierarchically the interest of one stakeholder (the shareholder) over those of the other stakeholders (workers, consumers, suppliers, local communities). The alternative proposal of the civil economy paradigm is that companies should be socially and environmentally responsible shifting their goal from profit maximisation to the satisfaction of the interest of a wider set of stakeholders. This does not mean that profit is not valuable (being essential to accumulate internal resources for investment), but just that it is not the value to which all other goals and interests (human rights, workers’ dignity, environmental sustainability) can be sacrificed.

For value reductionism we mean the approach by which the pursuit of wellbeing coincides with GDP growth (under the implicit assumption that GDP growth is a sufficient indicator in capturing subjective wellbeing). The alternative proposal of the civil economy paradigm is that community wellbeing does not coincide with the flow of goods and services produced in the geographical area where its members live, whereas wellbeing is the stock of spiritual, relational, environmental, economic and social goods that the community can dispose of and enjoy in a given geographical area. This broadened concept of wellbeing does not limit itself to GDP but does not exclude it from its wider circle.

According to the second definition civil economy is the move from an old-fashioned two-handed to a novel fourhanded paradigm. In the two-handed approach the invisible hand of the market and the visible hand of institutions (where the latter possess the three properties of being benevolent, fully informed and so strong not to be captured by regulators) are enough to reconcile the self-interested pursuit of homines economici and profit-maximising corporations with the common good. In the fourhanded approach of the civil economy paradigm the two (visible and invisible) hands of markets and institution fail to reconcile private and social optimum if acting alone. In order to work properly they need the complementary action of two additional hands. The third hand is the hand of other-regarding citizens acting as responsible consumers and investors with the vote with the wallet (see section 4) or playing various roles of active citizenship. The fourth hand is the hand of companies that depart from the reductionist profit maximisation goal to satisfy the interests of a wider set of stakeholders.

As it is clear from the above the two definitions are strictly connected. Without departure from corporate and anthropological reductionism there is no action of the third and fourth hand and no move from the two-handed to the fourhanded system which is characteristic of the civil economy paradigm.

The civil economy paradigm performs much better than the traditional paradigm in overcoming marginalisation.

In the standard paradigm anthropological and corporate reductionisms prevent human beings and companies from caring about the wellbeing of the marginalised (unless this coincides with their myopically self-regarding interest). The two hands of the market and institutions are not strong enough to solve in favour of the marginalised the problem of the negative social and environmental externalities that can be generated by the reductionist behavior of corporations and human beings. The invisible hand of the market (competition), when it works, acts only in favour of consumers endowed with sufficient purchasing power by raising their surplus with lower prices. It does not ensure per se that, beyond the low price, the dignity of workers is respected and, by doing so, it neither covers nor cares about the wellbeing of this fundamental stakeholder. The distribution problem left aside by the market should obviously be tackled by the second visible hand of institutions. The problem here is that institutions are often neither benevolent, nor fully informed and so strong not to be captured by the regulated. In addition to it, as shown in the introduction, their action is too influenced by the interest of the top 1% class that has a dominant power in determining political and cultural outcomes and does not generally care about redistribution and policies for the marginalised (Bonica et al., 2013). In other cases, such as those of the provision of global public goods (i.e. contrast to climate change and global warming) the visible hand of institutions is too complex to be activated since decision makers are sovereign states and there is often no enforcement power over them for the violation of collective agreements and international treaties. It is from the observation of so many institutional failures that the need for the fourhanded solution proposed by the civil economy paradigm originates.

3. Scientific pathways of progress for civil economy

As it is clear from what we have discussed above, the first definition of civil economy opens the way to three important directions of research. The three sections that follow will summarise what thinking and modelling the human being, corporations and wellbeing in a broadened non-reductionist perspective means, and testing empirically whether human beings go beyond the homo economicus paradigm, companies go beyond the profit maximisation paradigm and whether it makes sense to conceive wellbeing beyond the GDP paradigm (sections 3-1-3.3). In the other sections that follow (4-4.8) we will operationally explain how we can move toward the civil economy paradigm and which policy measures may help us to reach the goal that will allow us to exploit the three broader perspectives in order to fight successfully marginalisation.

3.1 Beyond value reductionism

The main interest in pursuing this important field of theoretical and empirical investigation that aims to overcome value reductionism in the direction of the civil economy comes from the same politicians. When they became aware with the Easterlin paradox and several other historical episodes of the decoupling of GDP and subjective wellbeing[7] they understood that the former could not be a synthetic indicator of voters’ satisfaction helping to predict the probability of their re-election.[8] This awareness paves the way for research on objective and subjective wellbeing indicators beyond GDP. It is not our goal to survey this immense branch of the literature.[9] What is important here is that the Easterlin paradox and the debate that followed can be viewed as symbolic thresholds marking the beginning of a new and promising field of research.

The crucial issue in this literature (and in its practical consequences) is in moving from a single indicator (GDP) to a set of indicators with the implied problems of selection and weighting of different components and aggregation into a synthetic measure (see among others Munda and Nardo, 2003; Massoli et al., 2014 and Zhou et al., 2006). In order to achieve this goal the two main paths are the statistical and the expert weight approach. The statistical approach uses methodologies such as principal component analysis to eliminate statistical redundancy. The expert weight approach uses the subjective evaluation of a group of experts (or of a representative sample of citizens) to define proper weights.

Another crucial issue in this field of research is the distinction between subjective and objective indicators. Both of them have critiques. The first are subject to Sen’s “happy slave” critique[10] since the poor can lack confidence in the possibility of improving their conditions so that the absence of a gap between their expectations and realisation yields good subjective wellbeing in spite of dismal objective conditions. On the other hand, objective indicators (and GDP as well) are all subject to the paternalistic critique since it is a group of experts that decide by setting wellbeing standards what is good and what are the wellbeing goals to achieve for the overall population. In this respect, the process of construction of the set of BES (Benessere Equo e Sostenibile or sustainable and equitable wellbeing) indicators in Italy is an example of how these critiques can be overcome. The three-step process started with a consultation of different representative members of interest groups of the Italian society that defined 12 wellbeing domains. Groups of experts worked in each domain to produce a mix of subjective and objective indicators. The indicators were validated by the representatives of the Italian society in a third step.

The most important finding of this approach is that, even though wellbeing indicators have methodological limits, they perform better in predicting citizens’ satisfaction than GDP. Becchetti et al. (2016) show on this point that synthetic BES measures perform much better than GDP at regional level in predicting regional life satisfaction. This finding implies that, in spite of the methodological difficulties, this field of research beyond value reductionism is promising and urgently needs to be further developed.

3.2 Beyond corporate reductionism

Profit maximisation has been and was so much the norm in the Ptolemaic two-handed economic paradigm that alternative ways of modelling the corporate constrained maximisation problem have been conceived and tolerated as rare exceptions. The reconciliation of corporate private optimum with social optimum was granted by the two-handed paradigm. The invisible hand of the market transformed a sum of self-interested corporate goals of profit maximisation into the social goal of low prices and high consumer surplus through market competition. The invisible hand of the market was so far from a laissez faire mechanism that its functioning had to be granted by the existence of antitrust authorities and articulated regulation. The “visible” hand of institutions addressed the remaining market failures (negative externalities) by intervening with proper taxes and regulation. The Pigou tax[11] raising the marginal cost of pollution in order to bridge the gap between its social and private cost was a classical example of this approach.

The open-economy globalised scenario however creates a new framework in which the two-handed paradigm cannot work. Consider again a carbon tax à la Pigou that raises the private (corporate) cost of producing with negative pollution externalities and therefore the cost of producing domestically. The effect of a Pigou tax in only one country is that of increasing the corporate cost differential across countries and triggering delocalisation thus creating a trade-off between environmental sustainability and domestic economic development. The only way to avoid a race to the bottom on environmental and labour costs is a world Pigou tax that is far from looming ot the horizon given the difficulty of creating international agreements among sovereign states or international institutions on such rule and on its enforcement and application.

This is one of the main reasons why corporate social responsibility has emerged in the last decades as a departure from the profit maximisation approach: concerned individuals realized the limits of world rules in this direction and increasingly started to demand transnational corporations behave responsibly.

However, the rationale for going beyond corporate reductionism is not just that of amending some market failures that the invisible hand of competition and the visible hand of institutions cannot solve. If this were the case we would validate the view of Ward (1958) and Furubotn and Pejovich (1970), among others, arguing that non profit-maximising companies (i.e. cooperatives in their specific reflection) find just temporary reasons for existence since they are asked to solve some temporary pitfalls of the two-handed system (i.e. efficient provision of public goods and services through the market) until markets and rules are perfect. In this perspective, the existence of non profit-maximising corporations will not be justified anymore and the latter should disappear when such perfection is achieved (even though there are solid grounds to believe that this day will never arrive). The already mentioned KPMG survey shows, however, that this is probably not going to happen for an additional reason if 67% of the individuals interviewed in the five continents say that their aspiration is to work in a socially responsible company. Hence non profit-maximising corporations find a more profound ground for existence than the one mentioned above as they are designed to fulfil the ideals and aspirations of those who want to work in them. And such aspirations are linked to the social impact of corporate action. If this were the case the Ward (1958) position could be reversed. Profit-maximising corporations (and not non profit-maximising corporations) are intermediate and imperfect stages of realisation of human aspirations that could give way once efficient enough non-profit maximising companies will appear on the market. The recent development of a new vintage of “more ambitious” entrepreneurs prioritising impact over profits and the rise of B-corporations (Clark et al. 2013) pursuing the same goal seems a promising move in this direction.

Meanwhile, one of the main objects of analysis in this specific field of research beyond corporate reductionism is the comparison of the relative performance of conventional versus CSR companies. This is because CSR companies can survive and prosper only if they prove to be competitive with traditional companies. The well-established synthesis of findings here is that corporate social responsibility entails some costs related to the satisfaction of stakeholders’ interest (i.e. better working conditions, respect for human rights along the value chain, introduction of environmentally sustainable goods and/or productive processes). Such costs can be offset by potential benefits such as the reduction of the risk of conflicts with stakeholders, higher intrinsic motivations for workers who respond with higher productivity, increase in the value of the intangible of corporate reputation, innovation through environmentally sustainable and/or energy saving product/processes that may improve corporate productivity.[12] Last but not least, CSR oriented companies may enjoy the vote with the wallet of responsible consumers (see section 4 hereunder). The economic benefits related to these factors are obviously not time invariant and depend also on the institutional rules of the game and on the degree of sensitiveness of consumers/investors to vote with the wallet issues. This is why the dispute on the relatively higher competitiveness and productivity of conventional versus socially responsible firms cannot, by definition, be definitely solved.

3.3 Beyond anthropological reductionism

One of the main claims of the civil economy paradigm is the urgent need to go beyond anthropological reductionism. The homo economicus paradigm states that human beings are individuals whose utility/happiness depends solely on the growth of their money holdings and/or the set of goods and services of which they dispose. It does not matter that the two-handed economic paradigm claims “not to be committed to any particular view of how human minds work” and “remains the same whether [players in game theory] are Attila the Hun or St. Francis of Assisi” (Binmore and Shaked, 2010). The reality and practice of the vast majority of economic models (and almost all that is taught in Economics and in business schools) closely reflects the homo economicus paradigm without considering the introduction of other-regarding preferences.

In its narrower, purely self-regarding version the homo economicus, is sad, minority and socially harmful.

He is sad because life satisfaction studies document in various ways that materialist views are negatively correlated with subjective wellbeing and that hedonic adaptation makes the enjoyment of additional amounts of money a short-term phenomenon (Kasser, 2002).

He is minority since a well-known meta-paper of Engels (2010) elaborating on data from 328 different Dictator game experiments around the world (20,813 observations) finds that the homo economicus conduct is followed only in one-third of cases and concludes that “While normally a sizeable fraction of participants does indeed give nothing, as predicted by the payoff maximisation hypothesis, only very rarely this has been the majority choice. It is by now undisputed that human populations are systematically more benevolent than homo oeconomicus”.

He is socially harmful, technically a “social idiot” in Amarthya Sen’s definition, since he is unable to solve social dilemmas that are the basic condition of human and economic interactions. Game theory literature has modelled such dilemmas in several ways (prisoner’s dilemmas, trust investment games, traveller’s games, etc.). Without going into technical details, some of the essential features of these dilemmas are synthetically described in this well known Hume aphorism:

«Your corn is ripe to-day; mine will be so tomorrow. It is profitable for us both, that I should labour with you to-day, and that you should aid me to-morrow. I have no kindness for you, and know you have as little for me. I will not, therefore, take any pains upon your account; and should I labour with you upon my own account, in expectation of a return, I know I should be disappointed, and that I should in vain depend upon your gratitude. Here then I leave you to labour alone: You treat me in the same manner. The seasons change; and both of us lose our harvests for want of mutual confidence and security» (Hume, Treatise on Human Nature, 1740, book III).

The main features of social dilemmas are that most social and economic endeavours are collective realisations where there is a cooperative equilibrium that would yield the best outcome to both players. Such equilibrium is however often not attained due to lack of trust and the result is a suboptimal non-cooperative solution.[13] Even though trust may just be strategic and unrelated to other-regarding preference it is however well known that altruism may significantly contribute to it solving the social dilemma.

The obsessive focus on the homo economicus model also prevented the economic discipline from discovering the existence and potential of the “electron” of relational goods that are a crucial factor for satisfaction and fulfilment in our lives. Technically speaking, relational goods consist in the enjoyment produced by consumption, production and investment in activities that cannot be carried out alone (i.e. club or association membership, friendship or love relationship, participation in team sports, etc.). Relational goods are local public goods that are antirivalrous and (locally) non excludable. It has been shown in many recent empirical contributions how relational goods play a crucial role for life satisfaction and how relational good shocks are among the most important causes of the insurgence of pathological illness among elders (Becchetti et al., 2008). If economic discipline falls behind in understanding the importance of relational goods, the latter is absolutely clear to entrepreneurs since social networks (which sell the opportunity to cultivate relational goods at a distance) have proven to be among the most profitable enterprises in the last years. Relational goods may also be crucial in solving the above-described social dilemmas: trust and cooperation are much more natural and easily achievable in warm relational contexts where their violation entails high relational costs to participants.

4. A crucial tool of the civil economy strategy against marginalisation: the vote with the wallet

The crucial lever to move from the two-handed to the fourhanded system with its much higher potential to fight marginalisation is the vote with the wallet.

By vote with the wallet we mean the power that any citizen has as consumer or investor of voting for (choosing) the company that is at vanguard in the three-sided efficiency that consists of creating economic value in a socially and environmentally responsible way. As mentioned in the introduction, democracies fail to address the main market failures (related social and environmental sustainability) if citizens’ participation is limited to the electoral vote. The vote with the wallet is much more powerful than the electoral vote since even small shares of consumers/investors changing their vote may affect corporate conduct significantly, given that entrepreneurial success also depends on tiny changes in market share in highly competitive global markets.

The vote with the wallet has three main properties: it is pragmatic, an act of (long-sighted) self-interest and highly contagious. It is pragmatic since it is not wishful thinking, a utopic conception of an ideal world that is far from the reality and out of reach. This is because, with the vote with the wallet, consumers/investors award with their choices an existing top-ranked company that is at the forefront in the capacity to create sustainable value and has demonstrated to be able to do it today while surviving and being competitive on global markets.

The vote with the wallet is an act of longsighted self-interest. It is in the ultimate interest of consumers/investors to award environmentally sustainable companies so that green and healthier products can win on the market thereby improving their own life in terms of pollution reduction, and successful challenge to climate change and health. It is also in the ultimate interest of consumers/investors to award socially sustainable companies that give dignity to human labour since the consumers/investors are also generally workers and their interest is in having a market where corporations give dignity to workers. Last but not least, it is in the ultimate interest of consumers/investors to reward fiscally sustainable companies so that the market winners are companies that avoid tax dodging practices and finance local welfare with their taxes.

The vote with the wallet is highly contagious since small shares of citizens voting with the wallet may trigger changes toward corporate social, environmental, fiscal sustainability. Several papers in the literature have demonstrated this point theoretically in duopolies or oligopolies where product differentiation is modelled along the two coordinates of prices and social responsibility. In most of these models the entry of a responsible pioneer triggers imitation in responsibility as the best competitive reaction of the incumbent under reasonable parametric conditions (Becchetti and Solferino, 2011).

Based on these characteristics the vote with the wallet has in principle the property of being a solution to the problem of marginalisation and of social and environmental sustainability: if today all consumers/investors understand that it is in their longsighted self-interest to vote with the wallet and act accordingly, corporations are forced to be responsible and the world is changed today.

What are the obstacles that prevent this from occurring in the current economic reality?

In order to understand it we must write and discuss the following inequality modelling the utility differential arising from voting versus non voting with the wallet. In its simplest perfect information/no search cost version the formula tells us that consumers/investors will vote with the wallet if the inequality is positive or

πβ+α-c>0                                                                                            (1)

There are four crucial elements in the formula[14]: i) c is the price differential between the responsible and the conventional product and is generally higher than zero, taking into account that sustainable products may and often cost more than conventional products (i.e. electric cars versus traditional cars, fair trade coffee vs traditional coffee, etc.); ii) α is a nonnegative nonmonetary argument in the utility function measuring the utility related to the choice of the responsible product. α is assumed to be nonzero and positive if the individual has some kind of other regarding preferences (i.e. inequity aversion, altruism, taste for environmental responsibility) such that the purchase of the responsible product gives her/him a form of satisfaction;[15] iii) β is the public good created by the act of voting with the wallet. This public good may be composed of two elements, the first being the public good incorporated into the responsible product (i.e. by buying an electric car I reduce pollution), the second being the impact that the action has on the behaviour of corporations competing with the responsible firm inducing them to more responsible behavior; iv) π (ranging between zero and one) is the share of consumers voting with the wallet. This fourth parameter is multiplicative in β since the public good effect of β depends on the share of consumers voting with the wallet.

The formula clearly shows that the main problem of the vote with the wallet is a problem of coordination. With π close to one everyone votes with the wallet and the maximum political effect is generated. With π close to zero the vote with the wallet act is politically irrelevant and will be done only if psychological nonmonetary satisfaction is higher than the cost differential. Becchetti and Salustri (2015) demonstrate that, under reasonable parametric conditions, the vote with the wallet is a Prisoner’s dilemma, that is, in the socially optimal equilibrium all players vote with their wallet. This equilibrium Pareto dominates the equilibrium in which all players choose the conventional product, which is unfortunately the Nash equilibrium of the game. They also show that the parametric interval of the Prisoner’s dilemma gets wider as far as the number of players grows as is the case in mass consumer markets. What this means outside the model is that the vote with the wallet must overcome a serious coordination problem. The above quoted Hume paradox applies here: even though the cooperative choice (all players buy the responsible product) would be better for everyone, the suspicion that the other will not cooperate makes the non-cooperation strategy optimal from a homo economicus point of view.[16] In other terms, a joint vote with the wallet action of all the population would change the market but coordination of many individual consumers is very difficult to achieve, even though the internet era makes such coordination technically easier (as shown by the FT Challenge described in section 1).

A more elaborated version of vote-with-the-wallet inequality is the following

πE[β]-γσ2+α-c1-c2>0                                                                                      (2)

where β= β0+ε with ε (0, σ2)

The two (realistic) elements of complexity added here are the uncertainty of risk averse consumers/voters about the responsible characteristics of the products – whose political impact has now a deterministic component β0 and a stochastic zero mean component ε – and the search cost differential (c2) that sums up to the price differential (c1). On the first point, as is well known, we must consider that corporate responsibility is not an experience good (that is, a good whose asymmetric information problem may be overcome by the high frequency of purchasing habits as it can be for the taste of an ice-cream that we have never tried before). The solution to the problem of asymmetric information on the responsibility features of the product is therefore delegated to third parties such as labels, rating agencies, certification entities, whose reputation depends on the reliability of their evaluations. The second element of complexity is related to the fact that responsible products may have worse distribution channels thereby suffering from a positive search cost differential. It is not by chance that the per capita consumption of fair-trade products is higher in Northern European countries where distribution is much more widespread.

The two (simple and augmented) formulas in (1) and (2) clearly illustrate why the enormous potential of the vote with the wallet is still far from being achieved. They indicate as well the directions for future progress. In order to make the vote with the wallet more attractive to the citizen/consumer/investor it is necessary to: i) make public opinion aware of its potential and create coordination mechanisms that can increase π; ii) reduce the cost differential if compatible with the maintenance of the social and environmental responsibility features of the product; iii) reduce distributive problems that create the positive search cost differential; iv) create a better information infrastructure allowing citizens to know corporate performance on social and environmental responsibility.

Some tentative policy measures related to these directions of progress will be discussed in the section that follows.

4. Political pathways of progress for civil economy: 9 directions

In the sections that follow we discuss some potential policy solutions (most of them already activated and representing promising directions for achieving the goal of the common good) that may make the positive outcome of (1) or (2) easier and help to understand how in reality the fourhanded civil economy paradigm going beyond the three reductionisms (anthropological, corporate and value) can help fight marginalisation.

4.1 The role of ethical investment funds and further progress in this direction

A first straightforward solution to inequality that can render the choice of the responsible product more convenient is cutting the cost differential (c). This has obviously to be done without endangering the specificity of the responsible product (i.e. part of the cost differential may be due to the decent pay that preserves the dignity of labour and, as such, cannot be compressed). The field where this is easier is definitely responsible finance. Becchetti et al. (2015) and Nofsinger and Varma (2014) demonstrated that the risk-adjusted returns of ethical investment funds voting with the wallet (i.e. pursuing active portfolio strategies that include in the portfolio only stocks above a given responsibility threshold) are not significantly different than those of conventional funds. More in detail, ethical investment funds face three extra costs in principle: i) acquiring corporate responsibility information from ethical risk agencies; ii) excluding from their portfolios companies that lose the responsibility characteristics even when it might not be profitable to do so; iii) limiting the universe of investable stocks to the subset of companies that overcome the minimal responsibility threshold. It can be demonstrated that the third cost tends to zero when the subset of responsible stock is large enough and that the other two extra costs do not affect fund performance significantly. From an empirical point of view, Nofsinger and Varma (2014) confirm the abovementioned and show that ethical investment funds performed better than conventional funds during the global financial crisis. Based on these considerations we therefore understand why the market share of ethical investment funds out of the total assets under management has grown enormously in the last decade and why the strongest bottom-up vote with the wallet pressure on global markets is actually that of ethical investment funds (see the data on Montreal’s pledge in the introduction). What needs to be done in the future is to strengthen this instrument of action to fight marginality. The most promising directions are the definition of a labour dignity footprint and of a managerial compensation footprint[17] to create in these two specific fields the same successful pressure created in the environmental domain with the carbon footprint. The other crucial issue in this perspective is to bridge the gap between ideals and values of benevolent institutions and their investment decisions. Why don’t institutions such as churches, trade unions, foundations, local administration that have enlightened goals oriented to the global common, labour dignity and fight against marginalization invest their wealth in ethical investment funds using the vote with the wallet approach (provided that there is no loss of returns in doing it)? What sense does it make, for instance, for a trade union that fights for labour dignity, to invest the wealth of their own pension funds into companies that are at the bottom of social responsibility in this specific CSR domain? The historical experience tells us that institutions unfortunately have many more constraints and opportunity costs in making this choice and that the market for ethical finance has mainly developed so far based on the demand of individual responsible investors. The removal of such constraints and opportunity costs will be fundamental in the future for the development of this market and for the fulfillment of the goals of enlightened institutions.

4.2 Strengthening information on corporate social responsibility (compulsory CSR information and corporate advisors)

If we look at the augmented formula (2) of the vote with the wallet we understand that reducing informational asymmetry is a crucial direction of progress. If we reasonably assume that individuals are risk averse, more information on indicators measuring social and environmental sustainability of individual companies could reduce their information risk, thereby raising the share of consumers/investors voting with their wallet. The main policy measure to be supported here is compulsory information on social and environmental indicators in balance sheets. A qualifying example is the Grenelle Law in France, fixing at 500 employees the threshold above which such information is compulsory. Other countries adopting similar laws are India, Indonesia and UK (for carbon emission information only) (KPMG, 2015). The European Union will make the Grenelle Law compulsory for all member countries by the end of 2017.

The goal of the improvement of information infrastructure on CSR can however be achieved more successfully with a combination of public and private initiative. A promising innovation in this direction is the development of the market of collective reputation. In this market, informational asymmetries are bridged by quality scores aggregating evaluations of individual customers (as in TripAdvisor stars). The market for collective reputation has grown considerably in parallel with the sharing economy. In the sharing economy the traditional distinction between suppliers represented by companies with an established reputation and consumers is blurred. The traditional corporate structure is disintegrated and staff workers sell their products/services directly to the web platform, while the distinction of roles between demand and supply fades and many consumers become pro-sumers (that is, they chose whether to be supply or demand according to the circumstances). In these new markets (i.e. car travel services offered by private drivers as in Blablacar, rentals of private houses as in Airbnb, organization of dinners as in Gnammo) the reputation issue of a multiplicity of pro-sumers that want to sell their goods/services without an established background is solved by the collective reputation system, since any supplier is identified on the web with a synthetic quality score from previous performances calculated as an average of previous customers’ evaluations.

The birth and growth of large players in the market of collective reputation such as TripAdvisor is playing a crucial role in reducing informational asymmetries on quality, generating significant growth of tourism revenues. This is because, with the birth of such market, small producers of high quality can bridge the information gap with customers with reduced advertising costs.

The necessary innovation here in the perspective of the fight against marginalization is the rise of a Corporate Advisor, that is, a player in this market that aggregates evaluation and produces corporate scores not just on product quality but also on social and environmental responsibility. In an ideal world with no asymmetric information any consumer has the information about the CSR score of any company and therefore disposes of all information to choose between the sustainable and the conventional product.

4.3 Balanced budged tax/subsidy schemes incentivizing the vote with the wallet

The other obvious policy suggestion given our inequalities (1) and (2) is a balanced budget tax/subsidy scheme where the individual choosing the responsible product receives a subsidy paid by an extra tax charged on the individual choosing the conventional product. This policy measure changes (1) into

πβ+α-c+s-t>0                                                                                                             (1’)

where s is the unit subsidy perceived when choosing the responsible product and t is the unit tax paid when choosing the conventional product.

This policy measure has strong theoretical grounds. If we make the example of the gambling tax/subsidy scheme applied in 5 Italian regions, cafes with slot machines pay a higher corporate tax rate while those without slot machines pay a lower tax rate. The logic is that the former are producing a negative externality (gambling addiction) that implies extra costs for the government budget (anti-addiction therapies). Another well known example of similar mechanisms are feed-in tariffs that grant a subsidy to individuals using solar panels for producing energy paid by those using conventional sources of energy. Couture and Gagnon (2010) document that feed-in tariffs are applied in 62 legislations around the world. A third mechanism is the so-called “Samaritan Tax” where efficient provision of food and product wastes to charities is incentivized with a reduction of the garbage tax that will be paid by those not opting for this opportunity in a framework of balanced budget (see the legge Anti spreco recently approved in Italy). The convenience of the tax/subsidy scheme in the government perspective crucially depends on its zero balanced budget property. The problem therefore is that tax/subsidy rates cannot be defined once and for all but must vary according to the share of consumers choosing one or the other option. To give an example, if we only have one consumer installing solar panels his subsidy may be easily paid with almost negligible costs divided among all other consumers choosing non-renewable sources of energy. As far as the share of solar panel installers grows, the burden for “conventional” consumers grows if the balanced budget constraint has to be met, up to the opposite situation of n-1 consumers installing solar panels and only one consumer choosing conventional energy, with the burden for the latter clearly becoming unsustainable. What is needed therefore is a feed-in tariff mechanism with flexible tax/subsidy rates conditional on the share of citizens choosing the two options, which has the further advantage of reducing uncertainty for companies working in the field.

A new emerging literature has simulated in the lab the effects of feed-in tariffs in multiperiod vote with the wallet games. The main findings are that the traditional decay of cooperation is inverted when the tax/subsidy scheme is introduced. These findings show that human beings are for the most part “conditional cooperators”, that is, if they believe that everyone will cooperate they may opt for the more costly choice that contributes to the common good and ends up producing a better private outcome. When they realise, however, that a significant share of individuals are opportunistic and do not cooperate they also switch to non-cooperation even when such change has a cost for them (negative reciprocity). The introduction of the feed-in tariff tax/subsidy scheme is therefore crucial to solve the dilemma. To make a concrete example the share of inhabitants driving electric cars in Oslo is far higher than in Rome. The main difference between Oslo and Rome is only in part the better infrastructure and mostly the more generous subsidy scheme.

4.4 Communication and cash mobs

As clearly implied by the πβ factor in (1) the crucial problem of the vote with the wallet is coordination and aggregation of a multiplicity of atomistic consumers in order to solve the Prisoner’s dilemma (see Figure 1 for a well known picture expressing this concept). The literature has proposed several solutions for the problem of coordination in these types of social dilemmas. The role of tax/subsidy schemes has been discussed in the previous section. Other authors have explored the possibility of costly private punishment showing in labs that pro-social individuals may opt for it thereby contributing to the solution of the dilemma (Fehr and Gachter, 2000). The possibility that a systemic solution to the problem may arise along this specific channel is, however, minimal. What we consider here is the potential of private and voluntary action on the positive side signaling to the rest of the market one’s own willingness to vote with the wallet. Cash mobs (mobs where a crowd of pro-social consumers gather at a shopping place and buy the products) are a typical instrument to perform this action. Cash mobs are therefore a combination of action and communication and their role is to stimulate awareness and promote coordination of all other consumers.

Results on simulation of the effects of cash mobs reveal that an increase in the number of experiment participants that have the possibility of being cash mobbers and take this opportunity produces a significant and positive change of cooperative choices a. The slotmob campaign in Italy and the Fairtrade challenge described in the introduction are examples on how cash mobs are becoming a novel and interesting tool to make a large mass of consumers aware of their vote with the wallet potential, helping them to coordinate toward the cooperative outcome

4.4.1 A new form of grassroot participation: civil wikieconomics

As it is clear from the vote with the wallet formula, communication plays a crucial role for the success of this initiative in promoting social and environmental sustainability and fighting marginalization. This is because working on making the maximum number of citizens aware of the potential of the vote with the wallet is crucial to raise the multiplicative factor π that is decisive in determining the political effect of its action. The Fair Trade Challenge mentioned in section 1 is a clear example of how communication and coordination may work in producing a significant amount of responsible consumption around the world. In this respect, the civil economy paradigm has created the new concept of “civil wikieconomics”. As is well known, the web revolution represents the second cultural revolution. The first cultural revolution signs the passage from the era of performing arts to the possibility of mass reproduction of cultural products (books, newspapers) through the press. This revolution ensured the low-cost diffusion of cultural products to a vast number of readers. The second revolution signs the passage from the era of the press to the era of the web. The web allows the masses to be not just passive consumers of cultural products but co-producers of them. Wikipedia is an example of how a cultural product (an online encyclopedia) can been created by a mass of producers around the world cooperating gratuitously in the creation of a global common good. The same approach should be followed for civil wikieconomics, that is, progressive global awareness and knowledge of the potential of the bottom-up action of the vote with the wallet. Civil wikieconomics therefore consists in working on all social network platforms to disseminate the contents of the idea, exchange information, and inform about collective actions being organized around the world on this issue.

4.5 Voting without the wallet: the Oxfam behind the brand campaign

Another interesting example of creation of information infrastructure and stimulus to the vote with the wallet is the Oxfam Behind the Brand’s campaign. The NGO created an articulated set of indicators on which experts provided evaluation of corporate conduct of the 10 most important multinationals in the food industry with quantitative measures. Such measures have been aggregated into a synthetic evaluation of corporate performance along its product chain in the specific fields of “land”, “water”, “human rights”, “transparency”, “climate”, “women”, and “farmers”.

The campaign websites stimulate citizens around the world to create pressure on companies for the improvement of their scores by sending messages of approval/disapproval for their scores through Twitter or Facebook. The important point of the campaign is that of promoting a bottom-up pressure that has negligible opportunity and monetary costs for participants. In this sense the proposed action may be seen as a vote without the wallet or as a choice where the two goods of participating in the creation of a public good and enjoyment of one’s own choice can be obtained without any extra-costs (c) involved. The campaign originated an important flow of messages to the 10 companies and a process of engagement by which the latter agreed to start a path of improvement along corporate responsibility. New rankings of the companies are updated every two months in order to measure their progress along this dimension.

4.6 Institutional rating stimulating the vote with the wallet: the experience of “rating di legalità” and procurement preferential treatment

Institutions may give an important contribution to the vote with the wallet promoting social and environmental sustainability by creating proper rating standards. A prominent example in Italy is the legality rating created by the Antitrust Authority.[18] The rationale is that legal companies suffer the unfair competition of illegal companies that evade taxation and dispose of an illegal and cheaper source of finance represented by money laundering. In order to offset this illegal competitive advantage the Authority gives the opportunity to companies that decide to participate in obtaining a (one to three stars) legality standard. The success of the standard in attracting the willingness to pay of responsible consumers that decide to vote with their wallets depends on proper communication and advertising of companies obtaining it. Preferential treatment in procurement for the rated companies can also help to correct their competitive disadvantage vis-à-vis illegal companies. Ethical procurement is another crucial sector where institutions can support with their choice the vote with the wallet process. As is well known, green and social procurement are already well developed. The crucial issue here is the reconciliation of the two principles of ethical responsibility and competition. The international legal tradition in this field is that procurement rules based on the requirement of ethical products and not on the exclusion of conventional firms have been successful and not banned by judges and courts.

4.7 Institutional moves to capture wellbeing beyond GDP: the Italian BES

The Italian case is a success story in the development of measures beyond GDP (see section 3.1). In June 2016 the Italian parliament approved a law requiring that the quality of DEF (the comprehensive document of economics and finance outlining all government measures of the oncoming year) should be evaluated not just in terms of impact on GDP but in terms of impact on BES as well. The problem now lies in developing proper methodologies to perform such evaluation in a synthetic way out of the 137 BES indicators and 11 domains. Research in the field of the definition of social value and social return on investment is urgently needed at this time.

4.8 Traditional policies against marginalization (not related to the vote with the wallet): the civil economy approach to an active universal measure

Civil economics’ policy measures against marginalization are not limited to the vote with the wallet issue. A main question in this phase of the globalisation characterised by a high pace of innovation and growing future expected replacement of workers with machines is how to redistribute wealth creation which inevitably tends to be concentrated in the hands of the owners of the new technologies or of the capital needed to develop them. And, with it, how to avoid marginalization of all the low-skilled workers performing repetitive tasks (lacking creative knowledge and/or skills in social activities) that are more likely to be excluded from the labour market.

Two main positions that emerge in the debate are those of a universal unemployment subsidy or of a universal citizens’ income. There are limits to both. The first measure does not cover the poor (the younger and the elder) that are not in the intermediate age cohort of active population. The second, beyond its high costs, is a measure that solves the first problem but has a negative impact in terms of life satisfaction and self-fulfillment since what gives dignity to human beings is their capacity of being active in the society. The proposal of the civil economy paradigm is therefore for a universal measure extended also to the non-working age population, conditional to the performance of an activity useful for the society (study for the younger, some form of social activity for the elder). The measure should cover the gap between actual income and the absolute poverty threshold (or some higher threshold) and should be conditional, that is, removable if the recipient does not accept the proposed social activity (if in the non-active age cohort) or does not demonstrate to be actively in search of a job. The universal measure should also be participative, involving the most active and representative organisations of the civil society that should take in charge the beneficiaries. This would ensure appropriate selection of those who are really in need, accompanying and proper monitoring of the beneficiaries during the process.

The universal active measure is fundamental to fight poverty, reduce in part inequality and sustain aggregate consumption in the economy.

4.9 Other bottom-up measures for local administrators in the logic of the civil economy paradigm

The strong focus of the civil economy paradigm on societal participation finds support in the empirical findings in the subjective wellbeing literature on the positive effect of participation on life satisfaction.

Among others Frei and Stutzer (2005) with their concept of procedural utility demonstrate that the same proposal may find much more consensus if those who have to vote it have been involved in the formulation process. In this direction the civil economy paradigm proposes a series of policy measures for local administrators stimulating grassroot participation. Typical examples of them are: i) grassroot management of local common goods; ii) multistakeholder cooperation commissions.

All these measures may have an important role to stimulate grassroot participation and fight marginalization.

5. Conclusions

Marginalisation and environmental unsustainability are not illness whose remedies are still unknown and undiscovered. We know very well how these illnesses can be cured. The correct way to tackle the problem is not just to enunciate one of these remedies (see our introductory quote). What is absolutely urgent to do is to understand why the known remedies are not applied and what can help us to apply them. In this respect saying that human rights must be respected or that a world government has to be created to fight poverty is a value claim but it is absolutely irrelevant in terms of probability of solution of the problem. True progress in the desired direction may be done by understanding the forces at work in the socio-economic system and how these forces at work may be shaped and redirected to create enough momentum for the application of the solutions.

In this respect we start by explaining why the traditional two-handed approach (where markets and benevolent institutions are expected to solve the problem) has not properly worked so far and cannot solve all the problems and why the political vote is a necessary though absolutely insufficient form of civic participation. We start from this point to elaborate a two-sided definition of civil economy as a fourhanded system where anthropological, corporate and value reductionist perspectives are overcome for richer and broader visions of human beings, companies and wellbeing. We then discuss how the desire to overcome the three reductionist perspectives has led the way to promising research fields. Finally, we elaborate and discuss a core concept for the civil economy represented by the vote with the wallet, a powerful level that can crucially help civil economy work in solving the marginalization problem. We end up with indicating promising directions of progress and policy measures that can bring us closer to the solution of successfully contrasting marginalization.


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[1] It would have been impossible to write this paper without the support and lively exchange of ideas during these years of colleagues that are leading exponents of the Civil Economy paradigm. And among them especially Stefano Zamagni, Luigino Bruni, Benedetto Gui, Vittorio Pelligra.

[2] The literature of the political business cycle dates back to the seminal paper of Nordhaus (1975) and has developed for decades since them. See among others Persson and Tabellini (1980), Alesina et al. (1997) and Drazen (2000).

[3] The number was calculated to be 62 in the last (2016) Oxfam Report down from 388 in 2010 (



[6] As a synthetic reference in the literature on other-regarding preferences see contributions on the existence of elements of (positive and negative) reciprocity (Rabin, 1993), inequity aversion (Fehr and Schmidt, 1999, and Bolton and Ockenfels, 2000), other-regarding preferences (Cox, 2004), social welfare preferences (Charness and Rabin, 2002), and various forms of pure and impure (warm glow) altruism (Andreoni, 1989 and 1990).

[7] Among the most relevant examples in the last decade we remember the ruling party’s loss at the Bulgarian elections after a 3% growth in its 2001-2005 mandate, the decoupling of happiness and GDP very close to that shown in the Easterlin paradox in Egypt on the eve of the Arab Spring and the Irish government’s more recent loss of political election, having arrived at the election with a 6.6% growth rate achieved just before them.

[8] The well known passage illustrating in words this decoupling in Kennedy’s 1968 speech to University of Kansas students, “Our Gross National Product, now, is over $800 billion dollars a year, but that Gross National Product – if we judge the United States of America by that – that Gross National Product counts air pollution and cigarette advertising, and ambulances to clear our highways of carnage. It counts special locks for our doors and the jails for the people who break them. It counts the destruction of the redwood and the loss of our natural wonder in chaotic sprawl. It counts napalm and counts nuclear warheads and armored cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the Gross National Product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages, the intelligence of our public debate or the integrity of our public officials. It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile. And it can tell us everything about America except why we are proud that we are Americans. If this is true here at home, so it is true elsewhere in world”.

[9] See among others Veenhoven (1993), Blanchflower and Oswald (2004), Frey and Stutzer (2002), Stevenson and Wolfers (2008), Bartolini et al. (2008) and Easterlin and Angelescu (2009).

[10] “The defeated and the downtrodden come to lack the courage to desire things that others more favourably treated by society desire with easy confidence” (Sen, 1985: 15).

[11] Pigou, A.C. (1920). The Economics of Welfare. London: Macmillan.

[12] On CSR literature see among others Kitzmueller and Shimshack (2012).

[13] The same vote with the wallet game discussed below (section 4) as the crucial lever of the civil economy paradigm to fight marginalisation is a special version of a social dilemma and the possible solutions to solve it in order to avoid the non-cooperation trap will be discussed in the policy section of the paper (section 5).

[14] More in detail, inequality is the utility difference between the choice of the responsible versus the conventional product where individuals are assumed as having a simplified utility function where the public good component and the costs of buying the product enter linearly. More complex versions assuming more elaborated functional forms for the effect of the public good component and utility of money can be devised without substantially changing the result of the simplified inequality in (1).

[15] An obvious critique to the vote with the wallet framework may concern the heterogeneity of views and values that translate into heterogeneity of CSR tastes. Such heterogeneity can be expressed along the range of values of α. Empirical evidence on this point however documents that views on some crucial issues of corporate responsibility are extraordinarily common and shared among experts and the public opinion, and among different value and religious views (Becchetti et al. 2016).

[16] A typical stylized fact of experiments in behavioural economics is that the majority of individuals behave as conditional cooperators against small minority of unconditional cooperators. This vast majority of conditional cooperators progressively stops cooperating when seeing that other players do not cooperate as well. The decay of cooperation over time is therefore a typical finding in this literature

[17] The managerial compensation footprint consists in verifying whether the company adheres or not to a series of rules for optimal compensation, including proportionality between fixed and variable wage, existence of clawback rules, and proper time windows for the measurement of managerial performance for stock option or bonuses. The most important measure, however, is the presence of social and environmentally responsible key performance indicators for the definition of managerial performance. Without them the risk is that bonuses based only on profits or stock values enhance distributional conflicts in the company. This occurs when there is no value-added growth and the manager has the incentive to compress remunerations of other stakeholders in order to raise profits and cash the bonus.

[18] Rating Legalità 


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