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Corporate Sustainability
and Governance. The term Corporate Responsibility is being bandied about in many out-of-context terms. It is important to look at the whole of business, rather than at the micro-niche parts. Depending upon whose definition of Corporate Responsibility we hear, it could currently symbolize:
In reality, Corporate Responsibility has long been with us, though some companies did not observe, designate or prioritize it Discussions about ethics in business come from the shadows when crises of magnitude present themselves. Also in reality, companies will continue to make catastrophic blurs in public confidence unless their eyes are widely opened. In order to succeed and thrive in modern society, all private and public sector entities must live by codes of ethics. In an era that encompasses mistrust of business, uncertainties about the economy and growing disillusionments within society's structure, it is vital for every organization to determine, analyze, fine-tune and communicate their value systems. In my opinion, Corporate Responsibility is more than just a statement that a committee whips together. It is more than a slogan or rehash of a Mission Statement. It is an ongoing dialog that companies have with themselves. It is important to teach business domestically and internationally that:
Corporate Responsibility relates to every stage in the evolution of a business, leadership development, mentoring and creative ways of doing business. It is an understanding how and why any organization remains standing and growing...instead of continuing to look at micro-niche parts. Corporate Diplomacy and Other Pro-Active Measures. Integrity is personal and professional. It is about more than the contents of a financial report. It bespeaks to every aspect of the way in which we do business. Integrity requires consistency and the enlightened self-interest of doing a better job. Financial statements by themselves cannot nor ever were intended to determine company value. The enlightened company must be structured, plan and benchmark according to all seven categories on my trademarked Business Tree™: core business, running the business, financial, people, business development, Body of Knowledge (interaction of each part to the other and to the whole) and The Big Picture (who the organization really is, where it is going and how it will successfully get there). One need not fear business nor think ill of it because of the recent corporate scandals. One need not fear globalization and expansion of business because of economic recessions. It is during the downturns that strong, committed and ethical businesses renew their energies to move forward. The good apples polish their luster in such ways as to distance from the few bad apples. Mandated reforms cannot take the place of personal responsibility, company ethics programs and industry standards that uphold values. No piece of legislation cannot cause sweeping actions overnight. In my younger days, I was involved in writing the Civil Rights Act of 1964, as well as the first trade with Mexico bill (the Bracero program). In the administration of Lyndon B. Johnson, we understood the concept of behavioral modification. People used to think certain thoughts and behaved certain ways. As time passed, our judgment ripened, and we no longer tolerated unacceptable behaviors in ourselves and others. In regards to diversity, environmental protection and trade with international partners, we crafted policies that allowed people to modify behavior with time. Behavioral modification allowed us to see how our judgment matured and how we learned from the unacceptable behaviors of others. Mandated reforms will no doubt focus on the same handful of issues that raised during the Enron scandal: financial disclosure, controls of abusive tax shelters and corporate inversions, control over pension funds and the need for tougher SEC regulations and enforcement. During two years of corporate scandals, some have blamed business schools for turning out graduates programmed to increase shareholder value at any price. But if a key to business success is the ability to adapt to changing circumstances, then business schools are now demonstrating that quality. Many are now integrating ethics into existing programs and training courses. I applaud that trend and ask that more be taught about corporate citizenship and the critical executive mastery skills. Also, retain more adjuncts with real-world business savvy. Having myself functioned periodically as an adjunct since 1971, I value the mentoring opportunities with fresh minds who will be future leaders in the New Order of Business. It's not about who caused the problems. It is all about who is doing something to stop them. Those who resist taking proactive measures and persist in playing the Blame Game are the sabotagers of corporate success. By refocusing upon the opportunities, rather than being stuck in bureaucratic paralysis, the company can make strides. Taking the Ethical High Road, Reading the Signs. Corporate Responsibility means operating a business in ways that meet or exceed the ethical, legal, commercial and public expectations that society has of business. This is a comprehensive set of strategies, methodologies, policies, practices and programs that are integrated throughout business operations, supported and rewarded by top management. The growth of corporate responsibility as an issue and a mandate in the New Order of Business stems from several events and trends:
The value of corporate responsibility can be measured in quantitative and qualitative ways. Companies have experienced bottom-line benefits, including improved financial performance, reduced operating costs, access to capital, increased sales and customer loyalty, positive reactions to brand image and reputation, heightened productivity, employee commitments to quality, empowered loyal workforces and reduced regulatory oversight. Corporate Social Responsibility is concerned with treating stakeholders of the company ethically or in a socially responsible manner. Consequently, behaving socially responsibly will increase the human development of stakeholders both within and outside the corporation. Corporate Sustainability aligns an organization's products and services with stakeholder expectations, thereby adding economic, environmental and social value. This looks at how good companies become better. Corporate Governance constitutes a balance between economic and social goals and between
individual and community goals. The corporate governance framework is there to encourage the
efficient use of resources and equally to require accountability for community stewardship of those
resources.
Burst Bubbles, Being Refilled. Perception is reality. It is no longer sufficient to pay lip service to ethical issues, such as investor protection, consumer accountability, issues management, protecting the environment and diversity. Concern must be demonstrated. The public needs to see action on every company's part. The same holds true for public sector institutions. Corporate credibility is formed by the ability to impact all other issues. Total quality means that we must communicate cross-culturally. Find out what people need to know, when they need it and then deliver it. Companies who fail to address ethical issues of the day are endangered species. Whatever the public expects of companies, then those companies should expect the same of themselves. My concerns revolve around these areas: 1. Society that Produced the Business Scandals. If we decry the scandals and wrong doing, then modern society must accept our roles in letting them happen. Too many artificial measurements abound and are based upon flash, sizzle and hucksterism. Having the weekend movie box office grosses for movies on TV and in newspapers every Monday is bogus. Momentary box office grosses are not accurate measures of a film's worth. So much coverage of sales volumes leads media pundits to use ludicrous terms like "X knocked off Y this weekend." When the public hears that misleading statements, they start talking that way too. The public consciousness needs to get away from teasers and slogans. Anybody who hangs their hats on changeable, temporary rankings is headed for a fall. Top rankings as the ultimate measure of worth and value lead to cottage industries that manipulate the numbers. Bogus research gets purchased. Inflated production reports, unrealistic market shares and improvement quotes receive the spin of those vested in perpetuating the myths. Projecting futures by past momentary successes will escalate the sweepstakes mentality. As long as the media keeps posting movie box office receipts as the only measure of films' standing, then films will be made to match those criteria. Business has turned into a smoke and mirrors aura. When perceptions matter more than realities and hype more than substance, then the stakes keep escalating to a frenzy. Wall Street chose to be sold bills of goods by the dot.coms and Enrons, believing the sizzle, rather than investigating the facts. It was too easy to paint rosy pictures than to ask the tough questions. They parlayed the hype to the media, who conveyed to the public, who reconveyed to each other via idol chatter. The buzz created an unrealistic stock marketed, populated by get-rich-quick day traders. The frenzy for slogans and clever quips has annointed the word "solutions" into the business lexicon. Solutions are vendor commodities that appeal to purchasers who don't know any better. We keep investing in technology, rather than developing "human intelligence." We buy "solutions" from providers rather than address real, systemic and longterm challenges and opportunities for the company. The computer consulting industry gave us the Y2K scam...a fever frenzy that was designed to generate billings for consulting, training and sales of technology. American business spent more than $600 billion on Y2K consulting...paying for it by cutting such more important activities as strategic planning, training, employee compensation and marketing. Research shows that 91-99% of those problems never would have occurred. The vendors perpetuated the spin that their work kept the problems from occurring...with unsuspecting buyers believing and perpetuating the justifications. 2. Accounting. Too much emphasis and control of business has been placed in the hands of accountants. Their focus is micro-niche (only about 2% of the Big Picture of business), and to turn over all framing of business issues to accountants is short-sighted. Large accounting firms have influenced the system in their favor. Public companies must be audited by one of them, thus creating as monopoly situation that cuts qualified mid-sized and local accounting firms out of public company work. Accountants see business through the financial dimension. To pick most top management from their ranks tends to perpetuate the myopic viewpoint. Accounting firms are notorious at not wanting to collaborate with other consultants and professional disciplines. By not allowing other perspectives on their radars and controlling the business model in their favor, a continuum of sameness has occurred. It will continue to occur until business widens its scope and perspective. 3. CEOs. Too much romanticism has been placed upon the term "CEO" by others who want to be rewarded by them. No Chief Executive Officer by himself or herself can make or break a company. They need codependents in order to do damage. The company that lays down all the gold to one CEO in hopes of magical results is inviting being ripped off. Conversely, as a reaction to corporate scandals the term CEO is currently in disfavor. The public
decries CEOs for the same reasons that we canonize them. People envy the power, status and wealth and
cannot fathom the endless behind-the-scenes work conducted by reputable CEOs and management teams. A CEO is only as good as the team that he-she leads. A top CEO fulfills roles and responsibilities across every business unit. The CEO must amass people skills, marketing savvy, planning expertise, quality orientation, leadership tenets, marketplace championing and much more. The days of the internal, bottom-line-only-focused CEO are long obsolete. 4. Boards of Directors. Companies must hold boards of directors, management teams, mid-manager ranks and line directors more accountable. These folks expect financial rewards and must be more accountable. They must work in collaboration with the CEO, not as pawns of his-her ideology. Chapter 10 covered the dynamics of board service and the myriad of responsibilities that good directors undertake. Widening the Frame of Business Reference. Ethics is the science of morals, rightness and obligations in human affairs. Institutions must conduct many activities which impact their general welfare. Ethical issues go beyond nice rhetorics and must encompass duties, principles, values, processes, responsibilities and governing methodologies. Companies who fail to address ethical issues of the day are endangered species. Whatever the public expects of companies, then those companies should expect the same of themselves. The company's Ethics Statement must be more than a terse branding slogan. Like the Mission Statement in the Strategic Plan, it is the amalgamation of careful thought, weighed insights and tests for fairness and durability. The Ethics Statement must be a part of the Strategic Plan, as are such other fundamental statements covering customer-focused management, diversity, valuing stakeholders, quality management and an empowered workforce. Every organization differs in how it will implement Corporate Responsibility and Ethics programs. The differences are factored by the company's size, sector, culture and the commitment of its leadership. Some companies focus on a single area of operation. The Code of Ethics may include Fundamental Canons, Rules of Practice and Professional Obligations. Business ethics encompass much more than accounting fraud and the publicly stated values of stocks. Ethics should be attached to many other important areas of business. Elements in the Ethics internal company review, which could subsequently be addressed in the full ethics plan, may include:
The corporate ethics program may include a code of ethics, training for employees for ethical behaviors, a means for communicating with employees, reporting mechanism, audit system, investigation system, compliance strategy, prevention strategy and integrity strategy. The program seeks to create conditions that support the right actions. It communicates the values and vision of the organization. It ligns the standards of employees with those of the organization The program relies upon the entire management team, not just the legal and compliance personnel. A formal and well documented corporate ethics program will prevent ethical misconduct, monetary losses and losses to reputation. If communicated well, it may breed customer trust. In fact, I highly recommend using executive summaries of the ethics program as a corporate communications tool. The sending of the Ethics Statement to customers, suppliers, regulators and other stakeholders demonstrates the extra length to which the company goes to become a model. It becomes a good marketing mailing... and it's the right thing to do. As part of strategic planning, corporate ethics helps the organization to adapt to rapid change, regulatory changes, mergers and global competition. It helps to manage relations with stakeholders. It enlightens partners and suppliers about a company’s own standards. It reassures other stakeholders as to the company’s intent. Managers must balance efficiency, effectiveness and change management. Efficiency means doing things right. Effectiveness means doing the right things. Change management seeks to empower people and optimize resources so that the organization will benefit from change, rather than become a victim of it. Responsible companies should inspire executives to think wholistically about each component of the business in terms of the Big Picture, master change and take companies to new tiers. Executives should inspire their companies to take fresh approaches toward re-applying past knowledge and experiences. As part of the planning process, they should develop strategies to reduce band-aid surgery approaches to problems...making business more creative, effective and profitable. Pressures continue and accelerate for companies to stay in operation, become competitive, keep ahead of the marketplace and perform quality work. Businesses of all sizes are besieged with opportunities, competing information sources and large amounts of uncertainty. Executives are not really prepared to handle challenges of the moment...much less to begin developing Big Picture thinking. Seasoned executives face burnout daily. Much of the workforce is in transition...with unclear anchoring of where they've been and where they could head. Young and mid-level workers do not really know what it takes to succeed long-term and are, for the most part, impaired from optimum achievement. |
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