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Posts Tagged ‘responsibility’

 Is to make money right? Absolutely yes, but let’s not kid ourselves – there are rules. It’s not as if you can just do what you want to do. The “free market” might sound like a pretty neat idea but that only exists in theory. If markets were truly free we wouldn’t have all the subsidies, incentives, trade limitations etc that almost all companies benefit from or lobby for in some or other way. All markets are regulated to ensure that they serve a purpose. A social purpose that goes beyond shareholder gains only.

Do companies seriously want to debate this? Then give back your subsidy. Drop the demands for more favorable trade rules. Your business is about making money within a set of rules. Live with it even when all those rules don’t slap you on the back and give you money.

Some rules are written into law and you have to comply to them. But some rules are unwritten – the social contract you have with society as a whole.

Let’s put it in another way. We have laws regulating individual behaviour. These laws did not come from nowhere. Before they became written law, they were the unwritten rules we had as a society to organize ourselves and somehow get us to live in some sort of pact – harmony being a dream only. Before we wrote down a law that said – don’t kill, murder etc – we had that as part of the societal contract. It was a societal contract governing our behaviour. One that organized how we lived with and amongst each other and the roles and responsibilities each of us had towards each other and ourselves. We “gave up” our freedom to pillage and burn to gain from living with each other. A societal contract that defines and creates society. One that helped us move forward as a specie instead of going off driving individual gain only. There are and were many of these societal contracts to help drive cohesion. Stealing, murder, property rights, trade etc.

It’s the same for business. There have been unwritten rules of engagement – the societal contract to ensure that they serve a broader positive societal role and not purely out for personal gain. For example – Rule one, don’t sell me snake oil. And eventually that made it into law. Don’t sell me food that will kill me. That eventually became law. All of these regulations are there to underscore the societal contract that existed before the actual law was written.

And like any law, it became more complicated the longer we lived together as a society. Those who don’t value the societal contract will try to find new ways to break it to stay within the written law or even change the written law. But because they are breaking the unwritten societal contract, we need to rewrite and bring in new written laws. Take killing for instance. It was pretty simple, you shouldn’t kill someone else. Well, what happens if it was by accident? Or in self-defense. Oops, let’s expand on that law a bit. And it becomes more complicated each day as people and companies try to find new ways to break the societal contract by finding ways to undermine the written law. (I wonder if these ‘complications’ with writing the societal contract into law were the first example of lobbying as well?)

Business cannot just operate the way it wants. It serves a societal need whether it is bringing the goods we need to us via a retail shop or provide us with the fuel we need to keep us warm or just get around. It does not have the freedom to do what it wants to do for the sake of itself. It must serve a purpose (real or perceived – thank you advertising) and play within the written and unwritten rules. You can’t exploit workers for the benefit of your bottom line. You cannot dump toxic materials into the water streams used as drinking water just because it is better for your bottom line. You can’t knowingly sell a product that will kill people even if it does help your bottom line. You can’t lie to people about what your product does just to increase your bottom line. You can’t use your bottom line as the sole reason why you do something – legal or illegal. That bottom line is not always in the interest of the bottom line of society – to live and prosper.

The unwritten rules and social contract with society is based on trust. People trust that you will do the right thing. It’s why people tend not to like government regulating behaviour – it not only creates the perception that it limits freedom but it goes against the principle of trust. And, of course, government will argue that these laws are there to serve the societal contract and ensure (consumer) protection from those who refuse to work within the spirit of the societal contract. The societal contract is based on trust. But lobbying behind their backs to “get away with it” because of greed or any other reason breaks that trust. The trust is broken when companies lie about their impact and when their impact is not beneficial to society – today or tomorrow. Especially if the company does it on purpose – knowingly. When you break that trust you break the societal contract. Then you cease to have a reason to exist. It’s not in the interest of the societal bottom line.

So, the business of business is to make money but only within the confinements of the societal contract – written or unwritten. The next time you lobby for something that is in the best interest of your company or you hide your true impact or your falsely advertise the benefits or impact of your product or service, do ask yourself if you are breaking the unwritten contract that you have with society.

Do you serve a purpose that is beneficial to society? And please refrain from drinking the Kool Aid. Think before you drink. Consider the truth before you answer. Because you are also a member of our society.

The business of business is to serve a societal purpose. We love it when you make money while doing this and we see this as the reward we provide you because you are one of us and doing something good for all of us. Now go and have a purpose. A real one.

So the next time you use the line of “the business of business is business” or argue against CSR or sustainability – please think again. Your responsibility might lie with your shareholders but your licence to operate lies with us. The people. CSR and sustainability is our way of defining the rules for you. We don’t expect you to like it but that’s the way the cookie crumbles. Live with it. Implement it. Embrace it. Or maybe we’ll just have to revoke your licence.

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We can all breathe a sigh of relief – the recession is over! Oops… Actually the recession was over in June 2009 already. So let’s get this party started!

But for some reason the public party hasn’t stated yet. The recession is over but the pain remains for the Average Joe in the street. No jobs being created and a drop in the average wealth of Americans just to rub salt in the wounds. But it’s been bad for everyone, no doubt. And we all did our fair share of suffering during the recession – some more than others. More importantly, companies practiced their responsibility during the recession, right?

A few things have really bugged me during this recession – or whatever you want to call it. It comes down to a simple question of how would a responsible company act during a recession. I’m not convinced that all companies acted as responsible as they should have during these tough economic times.

Firstly, it’s been reported that corporate cash in America is at a record high. The Fed estimated $1.8 trillion in total corporate cash balances in both absolute numbers and as a percent of total corporate revenue. A nice pile of money. And of course there are rational thinking behind it. They have good reasons for keeping the cash. But having a rational reason doesn’t mean it is the right reason. I feel uncomfortable knowing that it was the public money that bailed out so many companies. And that it is public money going into the stimulus that targets businesses of all sizes to benefit. And that people expect the public to start spending to get the economy going again. People are paying for this recession through job losses and rising public debt. My question – what should a company that believes it has a responsibility towards the public do during these times? Should it keep record cash stashed away for when the economy picks up or should it use that money to also help stimulate the economy? It just feels as if all expectations are on the average Joe in the street and the government to lead the recovery while too many businesses sit and wait it out until the economy has recovered. Doesn’t make sense when they always promote the idea that they are the heart of the economy. Really? And when the blood doesn’t flow as fast as you like you decide to stop beating for a while?

I believe a responsible company would acknowledge that they are as much of the problem as all of us – and do as much as the rest of us when trying to dig ourselves out of it. They expect us to start spending to get this economy going. We expect them to start spending as well. You don’t want us to put all our money in the bank right now. You want us to buy new cars, build new houses, buy more clothes, speculate on the market – make the little we have work for the economy. Ditto… We want you to invest in new fleets, upgrade your facilities, keep your workers… Make your money work and make it work now. I’ll do it when you do it. Don’t ask the public to do something you aren’t willing to do yourself. Stop giving us reasons why you are holding the cash. You might have good reasoning but not as good as the reasons why you should make that cash work now. It’s always easier to say why you won’t do something than doing the right thing. And remember, the quicker we get out of this the better it will be for all of us.

Secondly, this thing about those jobs not being created… I am always amazed how companies consistently tell me that their employees are their greatest assets. Really? But you don’t hesitate to “downsize” when the bad times roll? If employees are really the greatest asset that a company might have – how about keeping those crown jewels during tough times? Of course I understand that companies will have to fire workers during really tough times. And we’ve had really tough times. But let’s put these tough times into a bit of perspective.

Of course it makes 100% sense to let workers go when a company is making a loss. Companies cannot exist when not making money. But here is the catch. Many companies didn’t let workers go because of the losses the companies were making but because of lower profits. Many of them weren’t making losses, they were just making lower profits than before. That’s a huge difference. Making a loss means that you might have to close your doors and one of the only ways to save the company is to let a few people go – cut costs. But what if you are still making a profit but just lower than expected? Do you cut your workforce or define a new strategy to you can keep your “greatest asset” and be ready for when the good times kick in?

Maybe you should devise a strategy where you retrain those workers, maybe cut some hours off some of their time, maybe cut the bonuses and pay increases for all workers (including senior staff), invest in strengthening relationships with key customers etc – show your innovative spirit you brag about by finding new ways to keep your workers and stay profitable during tough times. Instead of laying people off you invest in them to be better placed than your competitors when the economy turns for the better? Your workforce will be better, sharper and your relationships stronger. I know a company who did exactly this and guess what? They actually grew at a higher rate than their competitors during the tough times and moved from number 3 in their industry to number 1. I’m just damn glad I work for that company… It helps when you have visionary leadership, your “greatest assets” believe in you as much as you believe in them, and we all work extra hard to make all of us better. Simple strategy? Yes. But it takes leadership to know that.

Maybe that is what a responsible company should be doing during a “slow growth” period. Instead of taking the easy option and letting people go you invest in them and grow your market share. Show you believe in your “greatest asset” as much as what you want them to believe in you. Leadership is defined not by what you do during the good times but what you do during the bad times. Relationships, loyalty, responsibility etc are defined in the same way – by what you do during the bad times and not the good times. The good times are easy but the bad times needs leadership, vision and balls.

But it goes beyond pure leadership. I think trade unions and employees were soft during these the recession as well. Too often they allowed the business side to frame the debate. They allowed business to panic and let workers go without a thoughtful strategy. Also, some companies used the opportunity to streamline their workforce that might not have been possible during other times. Cut human resources costs during the bad times always makes more sense from a risk and reputation perspective than doing it during the good times. Actually, it still comes back to leadership – what it takes to gear a company for the long-term and build a true culture of “great assets”.

You might not be able to create new jobs but you can show your responsibility as a company by not letting workers go during “slow growth” periods. It’s bad for all of us – every business suffered. But keeping your greatest assets intact and polishing them a bit will put you ahead of your competitors when the time comes. And now? Now you will be playing catch-up.

As a third point – the investor excuse. Of course many companies cut their workforce because investors demanded it. Those darn investors… They always want their 20% return each year. Actually, the 20% per year types aren’t really the problem. It’s those 1% week guys that are the problem – they want their money to go in-and-out and have no commitment to any specific business in the long run. So companies are under short-term pressure to show constant growth in returns. And if you can’t do it with growth then you do it by cutting costs. Talk about cutting off your nose…

Investor responsibility has been at the sidelines of CSR for far too long. We just can’t seem to get a grip on them. Maybe it is because we don’t know how to “sell” responsibility to them. Or maybe it is because many of them just don’t care. That’s for another day as Enron, BP etc have made a solid case on why CSR is important for investors… Here is a note for companies – how about you focusing on those who actually do care about you? We do. Us consumers and those workers of yours. We want you to succeed. Investors? The speculators amongst them don’t care about you one dime. What they do care about is the return they get from you in the next week or month. If they see someone better looking? They move on. They act like a 16-year-old who promises you the world as long as they can get what they want – untill they find the next hot one and move on. I’m 40-ish. I’ll stick with you if you promise to stick with me…

Last point on a responsible recession – patriotism. I was in a meeting a few weeks back with some of the best minds around. All of them geared towards helping a great company break through the clutter – they do so much that they create white noise instead of a clear position when it comes to CSR. Anyway, all these values were written on the board that reflected what the company stood for. And then someone said the “A” word – America… They argued that the company should show more pride in them being an American company with American values. Of course my first reaction was … WTF? I did point out that those values written on the board were no different from the corporate values practiced in my country of birth South Africa or the UK – or Europe. Or Japan. Or… The point was that most values are shared by various different cultures and that the differences are marginal not matter how much we like to tell ourselves something different.

But it did make me think about patriotism. The reason why the idea of American values were raised in the meeting was because the people in the room were pretty patriotic – and rightly so, be proud of who you are and where you come from even when you are more or less the same when compared to others. But what does corporate patriotism mean during a recession? Patriotism isn’t something CSR takes seriously but it is something we should look into when a company claims certain values and make claims of patriotism through advertising, lobbying etc. So the question was – what would a patriotic and responsible company do during a recession? Will they fire their fellow Americans? If yes, what does that tell you about their patriotism? Are they “fair weather” patriots who will say the right thing to get attention but then not back it up by action?

If you claim patriotism in some form then your actions should reflect that. Not only should you not downsize when you aren’t making a loss but you should go out of your way to help rebuild your country with the record cash you have in hand. Isn’t that what a responsible patriot will do? Use their resources to help their fellow Americans? Or does patriotism stop at getting people to buy a product made by an American company? Of course “made in” is a completely different story – and so are taxes. But that we’ll leave for another day.

Do I think companies acted responsibly during the recession? Some did and some didn’t. Those who let workers go when they weren’t making a loss lost their right to make the “greatest asset” claim. Don’t expect the same level of loyalty and commitment because you didn’t show it. Those who kept their cash when it could be used more effectively to rebuild the economy weren’t responsible citizens because they expected their fellow citizens to pick up most of the slack. Those who did everything to keep speculators, I mean short-term investors, happy weren’t looking at their long-term responsibility to their own company. Those who beat the drum to get consumer to buy their American products but didn’t put their own money into the game weren’t very patriotic or responsible.

The recession showed, and continues to show, us those companies who truly practice responsibility to themselves and society. Some were caught out while others shared the burden with the rest of us. The recession was good for CSR because it helped us define success of CSR in the toughest of conditions. Some failed and some helped us build a more responsible and profitable corporate world. At the very least the recession showed us the true CSR colors of companies. A good spin or substance…

So tell me – Were you a responsible corporate citizen during the recession? Really?

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Don’t know if you’ve noticed the bit of oil in the Mexican Gulf. Bit of an issue for BP and the oil industry in general. I think enough is being said about the oil spill and the responsibility of companies by the experts – you really don’t need me to add another opinion to this. However, it does remind me that almost every company has an oil spill waiting to happen.

Every company has a big issue they face. Some have more than one. For the oil industry it is price, human rights, sourcing location and environmental impact. For the pharmaceutical industry it is price, intellectual property and access. For food companies – sourcing practices and obesity. Car manufacturers face safety issues. Clothing and show companies know that people are always looking at the working conditions in those far-flung places where their goods are made. Banks… Where do I start….

The point is that all companies will face these issues. It is driven by multiple factors – what is material to your company and what activists (NGO types or investors) highlight and where people want change in behaviour. What’s your biggest issue? Are you even aware of what it is?

There are other big issues that are less well-known within the broader public or even amongst activists. The skeletons in your cupboard. Most companies have these. Those issues you know you where are vulnerable but no one is looking at it at the moment. For instance, people focus on the working conditions in clothing and footwear. We are all aware of it and all responsible companies are trying to do something about it. But tell me, do you use leather? Few people know the way leather gets from cow to shoe. The tanning and dyeing are not something most people think about too much. It’s leather – how bad can it be? I’m lucky that I worked with the footwear unions and business in South Africa for a while. It gave me a bit of first-hand experience. Just go and have a look at how the huge quantities of leather needed for your shoes and clothes are tanned and then dyed. Not a pretty sight… But it’s out there in the middle of nowhere and no one of note campaigning on this. And maybe it isn’t even such a huge issue when looking at the broader impact of companies. But it’s out there – as visible as an oil spill for anyone looking.

It does not have to be the biggest impact – it just needs to be the most visible impact. You think the oil spill in the Mexican Gulf is the worst oil spill ever? Think again. It’s just the worst oil spill in the US and developed world. Oil spills happen daily – we just don’t see it every day because we can’t or don’t want to visit some of the places where our oil is secured from.

So the question for business to ask themselves is how far am I from a disaster hitting me? What is the disaster waiting to happen and will anyone notice? And what can I do now that makes sense. Companies can’t fight every potential disaster – No more than what the Average Joe can prevent every single thing that might go wrong in their day. Things happen no matter how much we try to prevent it. We plan and hope for the best. It is part of living. If we didn’t do that we will all stay at home and eat apples – too scared of being in a car crash, hit by a natural disaster or eat crap and die from obesity. Life is assessing the risks and doing what we think is best. Most of the time it pays off and sometimes it doesn’t. That’s life. But we better be prepared to face life with careful planning and open eyes.

It’s not that companies aren’t trying to do their best to prevent disasters. BP and the companies they worked with did not want this to happen. It just happened. Unplanned.

That’s the challenge – unplanned. What can we do to prevent the disaster from happening? Are you ready? Or ready enough? The reality is that we can’t live a business life without a disaster but the challenge back is that many businesses just do not prepare well enough to deal with disasters. Risk is one thing. Cost and risk combined generally brings us that little bit closer to disasters.

Let’s look at the oil disaster again. Some are arguing that the lack of a safeguard device resulted in this oil spill becoming the disaster it is today. The WSJ (and many others) reported that the Leaking Oil Well Lacked (a) Safeguard Device. I won’t go into the details of what this device does as I am no oil expert, but the argument goes that Brazil and Norway requires oil companies to have this device in place as it chokes off the oil flow in case of an emergency. The US doesn’t require this – and most countries don’t. The oil industry lobbied hard to not have this requirement. The main reason? It adds $500,000 to cost.

It’s easy to look at it now and say that this decision by the US government (under President Bush) and the oil industry was a major mistake. However, responsible companies do not wait to be regulated into best practices – they lead. Without naming the company, I worked with a US company who adopted best practices as required in Australia because they believed it was the best thing to do for the company – and the most sustainable. Responsible companies have to manage the costs that comes with taking in best practices but one great disaster substantially undermines the argument of “too much costs”. How much do you think one single big disaster will cost your company? It’s always difficult to judge the effectiveness and cost argument when nothing goes wrong when you prepared for it though.

But I want to take this one step further – are you truly global?

We talk about those large companies as global because they work across the globe. But the truth is that few companies really are global in practice. They might source from or sell to the globe but they don’t always have the required global systems in place. A responsible company will ensure that their responsibility practices and policies are global. You take what is best in the market and make that global. Not only for preventing oil spills but also when it comes to hiring practices, recognizing human rights, transparency, environmental impact etc. Responsible companies do not go to the “what is legally required” level – they go to “what is required” level. Required by investors, stakeholders, employees and society as a whole. BP should ask themselves where the valve falls. Pharmaceuticals should ask where access or intellectual property rights fall. Food companies should ask where obesity, advertising to children, nutritional information etc falls. Clothing and footwear manufacturers should ask where working conditions, human rights and dyeing falls. Every company should have a heart-to-heart and ask themselves where their major potential disaster(s) fall.

…And companies are still surprised why consumers and activists are tired of green washing? It’s because they know that you are one wrong risk assessment away from a disaster – in the open or in the closet.

What is your oil spill waiting to happen? And what are you doing about it?

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No one likes taxes and we all pretty much find news ways to complain about our tax burden. Both left and right have their own issues. The left complains about too much taxes going to subsidize big companies or the military and too little going to social needs such as health care or education. The right complains that money going to government provided health care or unemployment benefits pushes up individual taxes and the burden on those who work. Where the money goes is just politics. What they do have in common is their universal dislike of taxes. And there is one tax that they all hate most…

Those hidden taxes. The little bits of taxes you pay each and every day. Taxes on stuff you buy. Taxes when you die. Taxes to fill up your car. Taxes to recycle. Taxes to use the park. Taxes to blow your nose. One hidden tax after the other. You don’t see it or notice it too much because there are so many of them hidden away in each and every corner. You do something  and you pay taxes. Little bit by little bit. But they are always there. Somewhere.

No wonder companies (and people) complain that these hidden taxes are just too much. They want transparency. They want to know what they are paying and when they are paying it in a more open and transparent way. Why not just have a flat rate on everything so we can know what we pay and when we pay it. They are just asking for the basic ingredient of CSR – transparency.

(Of course the underlying reason for this call is not only to have taxes be consistent and transparent but to also have a single source they can attack.)

Companies are especially vocal about their opposition to these hidden taxes. They complain that it puts them at a disadvantage over their foreign competitors. The odd thing is that all companies complain about this no matter where they are based… And they complain that they just have to pass on all these hidden tax costs to the consumer. A good way to get the average Joe on your side – tell them it isn’t your fault that you are charging them more than before… you are just doing what the government forces you to do, right?

Bad argument that one. Any cost a company takes on will be passed on to the consumer no matter what the reason or source of that cost might be. Pharmaceutical companies pass on the cost of finding new drugs. It doesn’t matter if the drug fails or not – you get charged for the failures. Oil companies pass on the cost of searching for more oil. You pay for the investment they make. All that makes perfect sense. It’s what companies do to find something new to sell us or keep servicing our thirst for new and more products. It’s business.

But companies also pass on failure that can be put squarely at their own feet. Years of bad decision-making at US car manufacturers? Guess who pays? Big oil spills? Guess who pays? A golden handshake to a failed CEO? Guess who pays? The consumer do. Companies just pass on those costs to the consumer in the same way they pass on every other cost. Companies will not make decisions that will pull them down. And rightly so. Companies target their bottom line and know what margins they need to keep investors happy. And if these margins get squeezed then they make “price adjustments” to cover their bases. I’m not saying there is anything wrong with this. That’s just how business works. That’s business life. But let’s be transparent about those costs. Business do not only pass on taxes to consumers. They pass on every single cost to the consumer. Until the consumer kicks back when the benefit of the product is surpassed by the cost they have to pay – then the business fires a few people and make a product or service “adjustment” or creates a new product that offer more value to that consumer. But that doesn’t happen as often though. Consumers tend to take a lot of punishment before they start kicking back.

That brings me to the hidden taxes that companies complain about but that they are more than happy to implement themselves. An article in the NY Times highlighted how hotels are expected to substantially increase surcharges in the coming year. Oh we know about some of those surcharges the same way we know about some of the hidden taxes – internet connection in your hotel room for example. But some are hidden away or in fine print that most travelers don’t know about and hardly have time to look into while on holiday or a busy business trip. For example, I don’t use the minibar because of the stupid prices they charge. But I didn’t know that some hotels even charge you a minibar restocking fee of $2.95 to $5.95 a day, once the first item is removed. Not only do they rip you off with the high prices but they charge you an additional fee to restock! It’s like complaining about high taxes and then being charged a few more dollars for paying those same taxes.

Of course it is not only hotels that do this. Almost every single company has these in one way or another. Pay up for your luggage please. Want to use the toilet? No problem – pay up. Want to use the ATM to pay for something? Here is another charge if you don’t mind. Oh, you actually wanted to get paid if you are sick? Some fine print in your health care benefits says you have to pay more. Want to access your money at the bank? Heck, they have different ways to charge you no matter what you do – teller, ATM or check. More taxes. More hidden taxes. These are the easy ones. The less well hidden taxes. The ones we can sniff out because some sparky manage to get upset enough about it when they had nothing else to do but go through the fine print.

I wonder how many hidden taxes are out there practiced by companies each and every single day. The little bits of fine print you know you can’t read because it isn’t written in plain English or a font large enough to read with your glasses on or you don’t have 72 free hours to spend reading the pages and pages of documents that comes with almost every single product and service you buy nowadays. They are out there. We just don’t know where or how much.

So… To those business who complain about hidden taxes. Please stop. Practice what you preach and then we can talk. Most governments are not transparent and neither are most companies when it comes to these hidden taxes. It’s life and the consumer will continue to pay. Let the consumer complain if they want. But please make sure you are “hidden taxes free” before you start complaining about government taxes – especially hidden taxes. Responsible companies are transparent about all the costs consumers pay – no hidden costs or taxes allowed. Make it simple. Make it transparent. Write it in BIG LETTERS and tell each consumer about these charges BEFORE charging them. Why don’t you write a document about your own hidden taxes so consumers can read this the way you read tax laws? Actually don’t because no average person can ever understand tax laws. Be better than the government and make it a short, simple and easily understood document and then we can talk. Transparency is not only about making information easily available. It is also making it easy to understand. And ensuring that people know about it. That’s what a responsible company will do. Or at least what they should do.

Maybe we can all do what the rich individuals and big companies do – find tax havens. Maybe we can find a few companies out there who won’t have these hidden taxes. Maybe then we can talk about transparency. But I won’t hold my breath looking for those companies. It would be like holding my breath for a government somewhere who will actually get rid of the hidden taxes. And we know that ain’t happening soon. No matter who is in charge…

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Nice to see that profits bounced back in 2009 for the Fortune 500. According to Fortune, “for 2009, the Fortune 500 lifted earnings 335%, to $391 billion, a $301 billion jump that’s the second largest in the list’s 56-year history”. Nice. These last few years have been a tough time for most companies so this financial turnaround is good news for investors and for these businesses. Good news for everyone, right?

Maybe not for everyone…

Fortune also said that “in 2009, the Fortune 500 shed 821,000 jobs, the biggest loss in its history”. Earnings up but jobs down. How’s that? Well, earnings might be up but actual revenue went down by 8.7%. What happened was that companies panicked when they saw the economy stuttering. Fearing the onset of a depression, companies raced to lower expenses even faster. “Producers practically panicked,” says Mark Zandi, chief economist at Moody’s Analytics. “They cut costs incredibly aggressively.” And by cost we mean that little line item accounting for two-thirds of their costs: labor…

So companies protected their profits by cutting labor. They cut costs not to keep the company afloat but to ensure profits remain high. One can understand that companies have to cut costs when the business is threatened. If they don’t then all jobs might be lost and the business pushed over the edge – shutting down or getting sold to the highest bidder. However, it is one thing to cut costs to make the company more competitive or to save a company but another thing to cut costs to ensure higher profits when everyone is struggling.

Is this really the way a responsible company should act?

So often we hear business leaders talk about their greatest asset being the people who work for them. They go on about how these people are the heart and soul of the company and that the company won’t be who it is today if it wasn’t for every single person working so hard. Loyalty by workers and the effort they put in to make the company succesful forms part of the bragging rights for business leaders – they take it to conferences, annual meeting, the media, their competitors etc. And they hunt hard to make the “Best Place To Work” list each year.

In addition, almost every CSR survey I look at shows how you treat your employees as the most important thing a responsible company can do. So, not only is it something that companies brag about but it is also something that the public view as the most important thing a company can do.

Can companies who ran up record profits therefore really be seen as responsible corporate citizens if they did this on the back of laying off workers during a tough time? Should the responsible company not stick with their workers during tough times and rather use the good times to gear themselves to be even more competitive? If business leaders truly believe that their employees are the most important asset of their business, should they not show greater loyalty to those workers during tough times?

What would a responsible company do during tough economic times? Would a responsible company push hard for higher profits no matter what or would a responsible company protect both their employees and the profitability of the company? Make not mistake, this is not an either or question. The Fortune 500 companies had more than solid earning – record increases. For many of these companies the choice was remaining profitable and protecting employees or drive profitability to new heights by laying off employees.

Many companies made the choice to drive earnings on the back of job losses. There is nothing wrong with that. It is a business model followed by many and one that holds the investor as the ultimate stakeholder. But, if this was the route you chose, please do not talk about your employees as your greatest asset again. Greatest assets are never left behind in tough times. Greatest assets are protected and respected at all times. It’s during the tough times that we can judge whether it was words or actions.

Or maybe you just shouldn’t panick the next time we have an economic downturn. Take a deep breath, keep calm and remain level-headed. This will pass and you should focus on how to turn a challenge into an opportunity instead of a panick picnic. Huddle together with your greatest assets and make them part of the solution. Heck, you might actually be able to find a few new assets as your competitors panick and drop their best assets as they run for cover.

It’s not about people or profits. You can have both and respect both. And be committed to both people and profits. Treat both as assets and be true to your word. That’s how you protect your people so they can help protect your profits – now and for the future.

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Exxon not paying US federal taxes and kids smashing their new iPad. That made for a sad day of reading. But thank you Intel for saving my day with some real leadership in stakeholder engagement.

Exxon Pays NO US tax

It took me a while to try and figure out a snappy headline for this one but I think this one works best – plain and simple… Exxon paid no US federal tax in 2009. I must admit that I am a bit shocked by this. Is it even possible for a very profitable US company to get away with not paying any federal tax in the US? Well, the original source is from Forbes so I take it as true. I’m not going to go into details on their anti-climate change position and funding of dubious organizations and positions. Neither will I discuss how this non-tax paying bit makes their pro-carbon tax look a bit like playing politics. And I’m not going to mention how this might be a slap in the face of the US when taking into consideration the subsidies they received. Or that they really should not complain about the tax rate in the US anymore. Or maybe they are doing that on behalf of the lobbyist they hire…

However, I am interested in how this reflects on their broader responsibility as a supposedly proud American company. Look at this line from the Forbes report:

Exxon tries to limit the tax pain with the help of 20 wholly owned subsidiaries domiciled in the Bahamas, Bermuda and the Cayman Islands that (legally) shelter the cash flow from operations in the likes of Angola, Azerbaijan and Abu Dhabi. No wonder that of $15 billion in income taxes last year, Exxon paid none of it to Uncle Sam, and has tens of billions in earnings permanently reinvested overseas.

So Exxon (or any other company for that matter) reduces their federal taxes by hunting for the best shelters hidden on nice little island. Can these companies ever be judged as responsible companies if they go out of their way to not to pay taxes in their country of origin or where their headquarters might be? It seems as if those who have the means to get away with not paying taxes tend to get away with it and those small businesses who drive so much economic activities are more inclined to own up and pay up.

It’s when I read headlines like these that I get a bit despondent and ask whether there is any line out there we can agree on or is it just a free for all? Fight, argue, lobby – it’s all fine. But let’s agree that if you are going to fight, argue and lobby then you should at least pay your taxes and not run from your responsibilities. Does your home country and your responsibility towards your fellow countrymen mean so little to you that you will do everything to run and hide the money?

It’s just a bit too much, isn’t it?

The Empty Generation?

Continuing on this sad reflection on society – let’s talk about American teenagers today…

It seems as if everyone under the age of 21 waited in line to get hold of the latest cool Apple product – the iPad. (Full disclosure, I want one…) It’s the new must-have Apple product. The iPad brings us so close to having our device big enough to use and small enough to carry around easily. A few Apple tweaks and we should be there in a few years or months. Anyway…

A bunch of teenagers just managed to capture everything that is wrong with consumption today. They bought an iPad and then smashed it to pieces. Why? “It was just something to do.”

Again I am dumbfounded. They bought something that costs more than most people in this world make in a year and then just smashed it to pieces? So that they could put it on YouTube and have a few laughs? No consideration to the impact of making the product.

We live in a society that consumes just for the sake of consuming. And we get so bored of consuming that we purchase just to destroy. Out of boredom.

Companies can create products that can help society. But kids (or grownups) with too much money will prove that even the best products can be wasted by people who are a waste to society.

Intel (Sustainability) Inside

I couldn’t end with two stories on groups who just don’t get it – so here is a feel good story to make up for it.

Intel agreed to a shareholder resolution requesting the creation of a Board Committee on Sustainability. Harrington Investment submitted the same proposal last year but it got shot down. They tried again this year and Intel agreed with the proposal. The easy part will be to applaud both Intel for establishing the Board Committee and Harrington Investment for sticking to it and get the job done. That’s the obvious bit of good news. But there is more.

What I see as the real leadership is Intel showing that listening to stakeholders is something they actually believe in. Last year they didn’t agree but they sat down and considered it again. Instead of having the typical knee-jerk reaction that most companies have to activist shareholders, Intel listened and considered. And they supported the proposal because it was the right thing to do for them and for the shareholders and stakeholders. Big thumbs up to Intel for bringing a real maturity to shareholder proposals.

Sustainability inside.

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Is this where your savings are?

I have to say that it is one of my least favorite corporate practices – mountaintop removal or MTR. I just don’t see any sustainable benefit from it. And it’s pretty ugly too. So no surprise that people continue to target the industry for some activist scrutiny. 

Their latest target is JPMorgan Chase. Young activists are targeting JPMorgan Chase for underwriting “environmental Armageddon”. Harsh words but that’s in the nature of activism. Although I am interested in the MTR issue this specific campaign raises another long standing interest of mine – defining CSR and Sustainability for the banking and financial sector.

The recent economic meltdown raised serious questions on the role of banks and financial institutions and how they serve society. I’m not going to go there as it is well documented and an ongoing discussion. But I would like to propose we think of banks in a similar way that we look at other companies – via their value chain.

We ask of companies to be responsible by looking at the impact of their business operations as well as throughout their supply chain – upstream and downstream. It’s not good enough for a clothing company to only look at their own operations, they now have to have guidelines and systems in place to ensure their suppliers don’t commit human rights violations. Today we go even further by asking companies to also look at the environmental impact of their suppliers and to favor those who have a better environmental impact.

Of course we also ask companies to make sure that they take some level of responsibility for their products once they leave their stores. We expect computer manufacturers to offer some level of recycling and we want bottled beverage companies to take responsibility for the bottles they sold us. Heck, some cities and states help us (and the companies) to recycle these goods.

In short, we ask companies to make sure their products are manufactured in a responsible way and that they take responsibility even when they no longer ‘own’ the product.

Banking works the same way. We don’t want banks to make money through theft or money laundering and we don’t want them to fund terrorism or offer services to dictators or organized crime. That’s the easy part…

Why do we not expect them to take responsibility for the environmental impact of their services? Banks make investments that could threaten our future through global warming possible. Should they not be held responsible? Should we not measure the environmental impact of their money? Or rather, the environmental impact of their “investments”?

For me it goes beyond activism as we can then start measuring the impact of banks and financial services. We can make judgements on the values of these companies based on the impact they have – directly or indirectly. And the nature of CSR and Sustainability is to adapt to make it work for each industry. Maybe this is the way we can start figuring out the social and environmental impact of companies offering services – look at the impact they result in.

Maybe then we’ll stop funding everything in the name of profit. Or at least know what a responsible and sustainable bank looks like.

Do you know where your investment is going?

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