The Value of Business Stewardship
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By Edward D. Hess,
Distinguished Executive in Residence and
Adjunct Professor of Management, Goizueta Graduate School of Business
I have written several
commentaries for Catalyst over the past two years on the issue
of leadership - and my conviction that leadership is at the heart
of building any high performance organization. And that values
and character are the heart and soul of leadership.
Enron, Andersen, Worldcom,
and HealthSouth have been followed by Parmalat, Shell Oil, KPMG
Tax Shelters II, etc. No, it is not a few bad apples. It is systemic
- caused in large part by putting human beings under immense pressure
based upon an unrealistic assumption that businesses can and should
grow every three months. This pressure for growth has led to significant
cost reduction pressures for the cheapest labor, cheapest capital,
and cheapest places to do business wherever in the world, no matter
the personal, social, or environmental consequences.
Is it no wonder that
the Academy of Management Executives Journal in a May 2004 article
(p134) reported that 71% of the American public believes that
none, very few, or only some businesses operate in an honest manner.
Who are the American public? Your and my customers, partners,
employees, friends, etc.
Like most things in
life or history, events and trends go in cycles until there is
a countervailing movement. And that is what I want to talk about
in this commentary - to alert you to a growing countervailing
movement that will impact many businesses. Every business that
is a supplier, partner, or customer of a global or non-U.S. based
business will be impacted.
This movement asks
- Are there limits
on what a business should do to make profits?
- Do businesses have
social and environmental responsibilities in addition to making
- Are businesses
held to a societal duty of stewardship?
These questions are
being fueled by a strong international environmental stewardship
movement, the sustainable development movement, and the humanitarian
movement - all of which are worldwide, strong, and vocal. These
movements are led by NGOs, non-governmental organizations, and
And we have seen different
businesses and governmental responses to these countervailing
pressures. In England, the movement is quite strong and is becoming
not only NGO led but government led and is now part of some business
school research centers. In Europe, historically their capitalist
systems have both governmental and labor checks and balances on
business which have both prevented and protected against unfettered
laissez-faire market capitalization. And in Asia, the underlying
Eastern philosophies and strong government controls, too, have
placed limits on capitalism.
In the U.S. we have
seen Nike, Intel, Starbucks, Wal-Mart and others having to confront
and deal with the impact their businesses are having on local
communities and whether their businesses have duties to enforce
child labor and/or environmental standards or development standards
in different regions of the world.
In response to the
Corporate Social Responsibility movement, Fortune 500 corporations
have formed and funded the Business For Social Responsibility
(bsr.org) and there are a number of recent books on the topic
including Moral Capitalism by William Kreider; What Matters Most
by Jeffrey Hollander; and Value Shift by Professor Lynn S. Paine
@ Harvard Business School.
The debate is whether
a corporation has any duties to society and to the environment.
Or putting it another way - is how you make your money important?
On one hand, you have those who argue that corporations have only
one duty - to create shareholder value. Implied is that it is
okay to do anything necessary to generate profits except break
the law. On the other hand, the corporate social responsibility
movement argues that corporation should take into account its
external costs or impacts on the environment, human rights, etc.
Do not dismiss those
debates or trends. They are not limited to liberals or to a radical
few, or to think tanks. This movement has fundamentally affected
how big global companies do business and how they have had to
change business practices. Nike, Starbucks, Intel, Shell Oil.
British Petroleum are a few.
Look at the companies
speaking in New York City at the Annual Businesses for Social
Responsibility Conferences: in November: BP, Newmont Mining Corporation,
Whirlpool, Pfizer, Hewlett Packard, General Motors, Cisco, Xerox,
The Gap, DaimlerChrysler Corporation, Sony, McDonalds, and Coca
And this movement is:
1) Going to go both
up and down the supply chain of these companies and others;
2) Going to affect customers perceptions of brands; and is
3) Going to push all businesses to be aware of the impacts of
what they do.
To further bring home
the strength of what is going on out there, let me quote from
British Petroleum's August 2002 Business Policies as found on
its website - BP.com.
WE STAND FOR: A GOOD BUSINESS SHOULD BE BOTH COMPETITIVELY SUCCESSFUL
AND A FORCE FOR GOOD. AT THE CORE OF BP IS AN INSTITUTIONAL COMMITMENT
TO HUMAN PROGRESS."
_ _ _ _ _
"WE BELIEVE THIS FREEDOM IS INSEPARABLE FROM THE RESPONSIBILITY
TO PRODUCE AND TO DISTRIBUTE OUR PRODUCT IN WAYS THAT RESPECT
BOTH HUMAN RIGHTS AND NATURAL ENVIRONMENTS."
IN HIS AUGUST 2002
LETTER TO EMPLOYEES BP CEO LORD BROWNE STATED,
AIM IS TO DO NO DAMAGE - TO PEOPLE OR TO THE ENVIRONMENT."
IS NOW ONE OF THE LARGEST COMPANIES IN THE WORLD WHICH MEANS THAT
WE MUST EXERCISE ANY POWER WE HAVE WITH THE GREATEST CARE."
And then BP sets forth
its detail policies on ethical conduct, employees, relationships
(suppliers and customers and practices) health, safety, environmental
performance, and controls and finance. BP further states:
PROMOTION AND PROTECTION OF ALL HUMAN RIGHTS IS A LEGITIMATE CONCERN
OF BUSINESS. WE WILL EXPECT THE SAME COMMITMENT FROM THIRD PARTIES
ACTING IN BP'S BEHALF."
PARTNERS, CONTRACTORS, AND SUPPLIERS, WE WILL SEEK PARTNERS
WHOSE POLICIES ARE CONSISTENT WITH OUR OWN."
WILL MAKE OUR CONTRACTORS AND SUPPLIERS AWARE OF OUR COMMITMENTS
AND EXPECTATIONS AND OF THEIR RESPONSIBILITIES IN IMPLEMENTING
Go to BP.com
and download the business policies and read them. Think about
them. Think about your business - your brand - what you stand
for - will this impact you?
YES. Customers care,
and employees care. How you conduct your business will impact
your employee productivity and retention which impacts your financial
performance. And maybe you should care because it is the right
thing to do.
does your business have?
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