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In addition to performing their traditional functions,
paying taxes and obeying the law, organisations are now expected
by the public to set a high ethical standard and contribute to broader
societal goals, writes Lynn Sharp Paine
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| Communities want enterprises to clean
up their messes—and often those of their predecessors |
The corporate turn to values
reflects an evolutionary process. As companies have become pervasive
and powerful actors in the world, society has endowed them with
a new kind character. More and more, they are being evaluated as
if they were responsible human beings whose functional tasks must
be carried out within a moral framework. Accompanying this transformation
has been the emergence of a new yardstick for assessing corporate
performance. Instead of being measured only in financial terms,
companies today are increasingly being held to a standard that has
both moral and financial dimensions. The most outstanding performers
are those that excel along both.
Evidence of this "ethico-nomic"
standard is abundant. Corporate reputation studies, best-company
rankings, employee commitment surveys, public opinion polls, stock
price movements—these are a few of the more telling indicators.
Like the survey respondents mentioned earlier, those who say that
companies should set a higher ethical standard and contribute to
broader societal goals in addition to performing their traditional
functions, other constituencies are injecting moral criteria into
their evaluations of corporations. We can see this in the expectations
and concerns different groups bring to their dealings with companies.
Whether they are deciding where to work, where to buy, where to
invest, or what companies they want in their communities, significant
numbers of people are including moral considerations with financial
ones in their deliberations.
Constituency expectations
A tour of the corporation from
the vantage point of various constituency groups illustrates some
ways in
which both types of considerations come together to shape attitudes
and judgments.
Employee perspectives
Consider employees. Of course,
employees want to be well paid. They expect compensation that is
at least competitive, if not better than, market rates in terms
of wage and salary levels, benefits, bonuses, and increasingly,
stock. They also want the resources they need to do their jobs and
do them well. And of course, they will be concerned about their
employer’s long-term financial prospects, especially if they are
asked to develop firm-specific skills that are not readily transferable
to other work environments.
At the same time they want
to be respected, treated fairly, and recognised for their contributions.
They prefer colleagues who are trustworthy and who can be counted
on to keep their promises. Increasingly, employees expect to be
informed about on-the-job hazards, and they appreciate consideration
shown for their health, safety, and general well being. Most value
opportunities for learning, advancement and personal growth. Many
also want to use their talents to make a positive difference in
the world and to be part of a company they can feel proud of. And
most want time for their families and a life outside of work.
Customer perspectives
Customers, too, bring both
ethical and economic concerns to their dealings with companies.
Of course, they want low prices and fair value for money. And, like
employees, if they are contemplating a long-term relationship or
will face high switching costs, they want assurances about the company’s
future as a going concern. At the same time, they want to deal with
companies that are reliable, treat them fairly, and respect the
confidentiality of personal and business information. They look
for suppliers whose products and services meet their needs for quality
and performance. Most customers want to know about health, safety
and environmental risks associated with what they buy.
In some parts of the world,
particularly more developed countries, consumers are paying more
attention to the conditions under which a company’s goods and services
have been produced and preferring those made in accordance with
certain social and environmental standards. Again, several studies
and surveys bear out these general observations. As we have already
seen, customer loyalty depends as much on how customers are treated
and the quality of what they buy as on the price they pay for goods
and services. Reputation experts have found that the companies held
in high repute by consumers are those that display excellence across
a variety of dimensions—financial performance, workplace environment,
products and services, vision and leadership, social responsibility
and general appeal.
Companies that do best in reputation
studies are generally, according to a Fortune report on America’s
most-admired corporations, "good guys", in addition to
being financial standouts. Other studies have found that consumers
have more favourable impressions of companies that support causes
they themselves are concerned about. Consumers are also more disposed
to buy from companies they perceive as ethical and socially responsible.
Marketing studies have found that consumers rank honesty, fairness
and trustworthiness as the principal attributes of the ideal company.
Community perspectives
A similar picture emerges when
we move to the community perspective. Communities, too, want companies
to provide jobs and tax revenues, and they are often willing to
offer up generous incentives to induce companies to bring these
benefits to their locales. However, as we have seen, many expect
companies to do more than just supply these basic economic goods.
They also want enterprises to clean up their messes—and sometimes
those of their predecessors—and to reduce or eliminate other negative
impacts of their activities. In addition, they expect companies
to obey local laws, protect the natural environment and help solve
community problems. Although the specific needs of communities vary
widely around the world, public officials and civic leaders everywhere
are looking to business to take up the slack left by a shrinking
government sector.
In 20 of the 23 countries surveyed,
a majority said that companies should go beyond their historic role
of making a profit, paying taxes, creating jobs and obeying the
laws. Among the issues of global concern were employee health and
safety, fair treatment of employees, ending bribery and other forms
of corruption, protecting the environment and eliminating child
labour. These findings are consistent with other public opinion
polls indicating that people today expect companies to conduct themselves
as citizens—moral actors with civic responsibilities—in all their
countries of operation. Besides paying taxes and obeying the law,
this often means companies are now expected to take an active role
in helping to address broader societal problems. Further evidence
regarding the public’s expectations comes from a recent study of
US juries charged with deciding questions on corporate liability.
About half the jurors surveyed said that corporations should be
held to exactly the same moral standard as individuals. A typical
comment: "I feel that corporations have the same ethical, moral
responsibilities that we individuals do, and I think they should
be held to those standards." Although this group felt it would
be unfair to expect more of companies than of individuals, about
40 percent of the jurors said that corporations should be held to
a higher moral standard than individuals. These more demanding jurors
pointed to such considerations as corporations’ greater resources,
greater knowledge, greater size, greater impact, and special role
in society.
Investor perspectives
And what about investors? Without
question, shareholders are looking for competitive returns, if not
something even better. But most also expect other things—transparency,
timely information, reliable forecasting, fair treatment, opportunities
to be heard. Also, whether large or small, investors generally expect
to be treated with respect and their interests, financial and otherwise,
to be taken seriously by knowledgeable and dedicated management
teams whose loyalties are not compromised by conflicts of interest.
Some shareholders are even beginning to pay attention to how the
companies they invest in treat other parties. The past several decades
have seen growing investor interest in an ever-widening set of corporate
issues. As shareholders have become more numerous and more organised,
they have also become more actively interested in the management
of the companies in which they invest.
Excerpt from ‘Value Shift’ by Lynn
Sharp Paine; Tata McGraw-Hill
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