When good companies do bad things
August 28, 2002 | 12:00am
Today’s consumers are more socially conscious. And companies that don’t behave in socially responsible ways will increasingly risk their bottom lines. Those that do behave well can do well by doing what’s right. This is all about social responsibility, where corporate boards and top management integrate good governance into their company’s plans through an analysis of its various stakeholders – employees, suppliers, customers, creditors, government agencies and shareholders, big or small.
Corporate social responsibility has a new meaning in the increasingly globalized economy, characterized by the interconnectedness of people and nations, interactivity of communication technology, and the increasing number of vigilant non-government organizations. A shoe company in Oregon, USA that manufactures a high-profile athletic brand is held publicly accountable for employment practices in its shoe factories in Southeast Asia. An oil company based in Europe that prides itself on being a "trustworthy partner" with developing nations is flayed when one of those governments turns vagabond and the company does not act against the government. An international cosmetic brand is boycotted because of its use of animals for product testing. All of these companies and brands came under intense social criticism following events or revelations that damaged their reputation.
A good reputation creates wealth. When strongly developed and consistently managed, it can generate hidden assets or reputational capital that can give companies a distinct advantage – their products and stock offerings bring in more customers and investors; their job openings attract more quality applicants, and generate more loyalty and productivity from their employees; their clout with suppliers is greater; and their risks of crisis are fewer, and when crises do occur, they survive with less financial loss.
But to a public that has raised its expectations of companies’ responsibility to society, being good just isn’t good enough. More than public relations posturing or kowtowing to political correctness, social responsibility in corporations is proving itself essential to long-term success. Businesses must now contend with a public that is increasingly aware of their obligations to society and expects a level of fairness, accountability and transparency that most companies cannot meet. Good companies must go beyond merely being good. They must have integrity – which covers the concepts of honesty, uprightness, ethics, and quality integration with society – and a strategy aligned with it.
The importance of anticipating and responding directly to the demands of the public opinion rather than waiting for government intervention, mediation and regulation to force them into action has been thoroughly discussed in the book When Good Companies Do Bad Things by Peter Schwartz and Blair Gibb. It explores the strategic relationship between know-how and integrity, demonstrating how companies that do not embrace the deeper meaning of these terms can jeopardize their own reputations and future prosperity.
The book covers widely written and discussed case studies, viewed both from the suddenly beleaguered companies and from their critics’ perspective. Nike in 1996, suffering a reversal of reputation when hundreds of demonstrators in one store opening, exposed its "sweatshop" operations in China, the Philippines and Thailand. Nestle boycotted through the 1980s for pushing breast milk substitutes in developing countries. Texaco, an oil company, in 1996 responding quickly and very effectively to public revelations of racism in its senior management. Union Carbide and the disastrous 1985 chemical leak in Bhopal, India. Unocal facing human rights violations in Myanmar. Royal Dutch/Shell in 1995 dealing with simultaneous crises over its relationship with the Nigerian government and its decision to dump an oil storage platform at sea. These cases illustrate the huge financial risks of corporate assumptions that lead many good companies to make poor choices.
When Good Companies Do Bad Things also contains brief but interesting discussions of "best practices" of some of the world’s most socially responsible businesses – Hewlett Packard’s "HP’s Way" philosophy, Levi Strauss’s anti-AIDS project, Bata Shoe Company’s village-based cooperative manufacturing project in northeast Thailand, and American Express’ partnership with Share Our Strength. The case studies are all foreign, but the lessons that can be learned from their stories can serve as a guide in detecting impending crisis warning signals, managing the crisis response, putting in operation the immediate reaction needed, changing policies when the dust has settled, and implementing a recovery plan.
Why do good companies do bad things? Schwartz and Gibb reason out, "It can be partially answered by saying that the world is a complicated place, that none of us can control every feature of our environment, and that as a result, accidents happen." Unfortunately, the point of the book is that in far too many cases, good companies fail to prevent bad things from happening for the following reasons:
• They fail to create a culture that tolerates dissent or one in which planning processes are encouraged to take non-financial risks seriously;
• They focus exclusively on financial measures of performance;
• They discourage employees from thinking about their work as a whole people, from using their moral and social intelligence as well as their business intelligence;
• They talk to the same circle of people and information sources all the time and avoid people and organizations who disagree or criticize them;
• They let their commitment to a particular project or product overwhelm all other considerations – financial, ethical, or social;
• The senior managers consider ethical or social issues as matters for somebody else to resolve – a vice president for social responsibility, the United Nations, the host country government.
The list of prominent speakers and panelists includes Dr. Jesus Estanislao, chair of President Arroyo’s private sector Governance Advisory Council; Governor Rafael Buenaventura, Bangko Sentral ng Pilipinas; Ernest Leung, chair, Philippine Stock Exchange; Roselia Poblador, SEC commissioner, Jerry Isla, president, Joaquin Cunanan Price Waterhouse Coopers, Motassim Al-Ma’ashouq, president, Petron Corporation; Jose Jesus Deduque, managing director, Watson Wyatt Phils.; Ernesto Espinosa, president of Personnel Management Association of the Phils.; Gerard Brimo, chairman and CEO, Philex Mining; Teodoro Bernardino, chairman, PICOP; Julie Freeman, president of the 13,000 strong IABC; and Bish Mukherjee, president of IABC Australia.
This no-holds-barred forum "Taking The High Road" incorporates policy and actual practices that will help clarify, inform and express the thinking and concerns not only of the captains of industry but of the key people who regulate or are affected by these policies and their actual implementation. For registration and inquiries, call the IABC secretariat at 845-5380 or 816-9439.
BrandSpace Articles
<
>
