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Doing GoodThe New Rules of Corporate Responsibility, Conscience and Character
By Adonis E. Hoffman
AuthorHouseCopyright © 2010 Adonis E. Hoffman
All right reserved.
Rule 1: Accept Responsibility
Harry Truman epitomized responsibility in a chief executive. His now famous words, "the buck stops here," became part of the national lexicon and changed the way Americans viewed their leaders from that point forward. "The Buck Stops Here" became an instant euphemism for responsible leadership.
President Truman's sense of accountability and his acceptance of responsibility for the actions of his administration fundamentally changed the way all chief executives were to be viewed from that point forward. It was a classic lesson in the principle that responsibility begins at the top.
In today's business environment, leadership must come from the top. Directors, CEOs and key executives should establish the tone for the rest of the company. The classic excuses employed by Enron CEO, Ken Lay, that all of the misdoing was some other executive's responsibility do not hold water in today's environment.
Business leaders need to accept responsibility for every facet of corporate affairs, recognizing that their employees, shareholders, investors, and customers will be judging their actions and the world will be watching.
"You are not here merely to make a living. You are here to enable the world to live more amply, with greater vision, and with a finer spirit of hope and achievement. You are here to enrich the world. You impoverish yourself if you forget this errand." Woodrow Wilson, 28th President of the United States
Rule 2: Develop Vision
According to the Proverbs: "Without vision, the people perish". Likewise, without a clear sense of vision, a business leader cannot effectively lead an organization in today's highly competitive marketplace.
Very few people are born visionaries and business leaders are no different—most must work hard at it. By carefully following macro trends, studying all of the external factors that affect the company and its industry, a business leader can learn to develop uncanny and extraordinary vision.
The first step is to develop a broad worldview—well beyond the narrow interests of the company. Look at the world. Where does the organization fit? Where does it want to be? How will the company operate in the future political and economic climate? What are the larger geopolitical and global economic factors at play?
How will employees, customers and shareholders buy into the vision, and how will you communicate in a way that inspires confidence, commitment and concerted action? These are all challenges for the business leader, but not insurmountable. Develop a vision and let it guide the organization's actions. Without vision, the profits, too, will perish.
"A visionary company doesn't simply balance between idealism and profitability: it seeks to be highly idealistic and highly profitable. A visionary company doesn't simply balance between preserving a tightly held core ideology and stimulating vigorous change and movement; it does both to an extreme." Jim Collins, author, Good to Great
Rule 3: Put Value on Values
Corporate values are just as important as brands. Companies today become associated with broader values whether they like it or not. Developing, defining and articulating those values are among the business leader's most difficult, but important, challenges.
In a recent survey of leading CEOs, "the internal communication of values and policies" received more votes than any other option as a key way to measure the integration of corporate citizenship into the performance of corporate leaders.
As fundamental as this may be, many business leaders fail to state their values explicitly, even though doing so provides their customers, clients and partners with a great sense of comfort. In essence, they undervalue their values!
When the leadership of a company lays out its values, it is telling customers, investors, and the market what it believes, and what it aspires to become.
For many consumers, it is comforting to know which values a company prioritizes. Business leaders should spend whatever time it takes to define, develop and deliver a values-based company and do their best to integrate those values into every corporate message.
"Ultimately, what distinguishes a company's practice of corporate citizenship is expressed by the way in which it delivers its core values. The competitive companies of the future will find how to fundamentally align and embed their core values — including the values that society expects them to hold. Values are becoming a new strategic asset and tool that establishes the basis of trust and cooperation." Boston College Center for Corporate Citizenship
Rule 4: Be Good for Something
Martin Luther King, Jr. once said, "If you don't stand for something, you'll fall for anything". At the time, those words were a clarion call to his countrymen to become people of principle and to work for the greater good. It was a reminder that unless our lives and work are tied to bigger things, we risk failure and marginality.
When it comes to business, the notion of goodness presents an entirely new set of thorny issues. Corporations exist to produce and to profit. By design, they are not persons, but institutions of commerce, trade and service. In human terms, companies don't have a heart or a soul. Goodness—beyond what is legally required and expected—has no place on the corporate agenda, some would argue.
But they would be wrong.
Today, society expects corporations to act differently than in the past. Consumers, activists, regulators and policymakers have come to believe that corporations should have a heart, if not a soul. As a society, we believe a company must stand for something other than productivity and profit. It is one of the greatest challenges for today's business leaders, but more companies are meeting the challenge by digging deeper to find their corporate character.
"Regardless of industry sector or country, global corporate citizenship rests on four pillars: values; value protection; value creation; and evaluation. These four pillars not only underpin the long-term success and sustainability of individual companies, but are also a major factor in contributing to broader social and economic progress in the countries and communities in which these companies operate. Along with good governance on the part of governments, they offer one of our greatest hopes for a more prosperous, just and sustainable world." -Professor Surinder Pal Singh, Rai Business School, New Delhi
Rule 5: Expect Excellence
Excellence has been defined as "possessing good qualities in an eminent degree; exalted merit; superiority in virtue." Several years ago, In Search of Excellence, by Tom Peters became a New York Times bestseller, and "excellence" became a corporate watchword.
Today, excellence is still important to consumers and shareholders, but seemingly not as important to companies and business leaders.
While many companies vie for competitive dominance, that is, the drive to be first, we know that not all number one companies are excellent—they're just number one.
"In the past, corporate excellence was defined in terms of product quality, price, delivery time and profitability. But this definition will no longer suffice in the 21st century; excellent companies not only must pursue economic rationality, but social and environmental rationality."
Business leaders who make it clear to their employees that they expect excellence are more likely to achieve it. By integrating expectations of excellence into the core business, a company is bound to succeed. With excellence comes a unique competitive advantage that is wholly consistent with the new rules of corporate responsibility.
Chapter TwoStandards & Ethics
Rule 6: Set High Standards
According to popular minister and evangelist Joel Osteen, many people suffer from low expectations and low self-esteem. We fail to set high standards for ourselves, and as a result we fail to achieve at higher levels.
Some companies fall prey to the same syndrome. They lapse into a comfort zone, relying on tried and true systems, the usual procedures, and the same old standards that were established at a different time and place than today. Critics of the American automotive industry cite its failure in this area as a key factor in the rise and eventual dominance of foreign carmakers.
Our society today expects corporations and their leaders to set high standards for performance, accountability and quality. The higher the standards, the more respect and esteem consumers and shareholders appear to attribute to the company. We expect the CEO to set and keep lofty standards.
Today's responsible business leaders must find a way to communicate the importance of high standards within the structure of their organizations. A constant and consistent emphasis on standards will yield high dividends in the marketplace and set those companies apart from the competition. High standards leave little room for lapses of conscience or character.
"Some people have greatness thrust upon them. Few have excellence thrust upon them.... They achieve it.
They do not achieve it unwittingly by doing what comes naturally and they don't stumble into it in the course of amusing themselves.
All excellence involves discipline and tenacity of purpose." -John W. Gardner, Founder Common Cause and The Independent Sector
Rule 7: Influence Other Companies to Do Good
Competition not only is good for business, it also is good for society. When one company sees its competitors behaving responsibly, its own competitive instincts get into gear, especially when those competitors are being rewarded in the marketplace.
In the same way as a company establishes itself as the pacesetter for an entire industry, it can lead the way in other areas. I am reminded of organizations such as Microsoft, Johnson & Johnson, and Starbucks, who, by their consistent examples, have prompted their industry competitors to strive to do good things.
Corporate leaders set positive examples for others to follow. All too often, corporations are influenced by the wrong kinds of actions— spiraling executive pay, more and more perks for the board, and stupendous stock grants—while many of the basic issues which matter to their customers go overlooked.
Conscientious corporate leadership propels a company to influence others to make lasting investments in underserved communities, to take extraordinary measures to preserve the environment, and to promote sustainable development throughout the world, for example. These are measures of character. Doing well, alone, is never enough. The new rules of corporate responsibility require companies to influence others to do good, too.
"There is but one rule of conduct for a man to do the right thing. The cost may be dear in money, in friends, in influence, in labor, in a prolonged and painful sacrifice, but the cost not to do right is far more dear: You pay in the integrity of your manhood, in your honor, in strength of character; and, for a timely gain, you barter the infinite." Archer G. Jones
Rule 8: Engage Public Policy
Political consciousness and political engagement are hallmarks of leading companies. Public policy at the federal, state, and local level affects not only the functions of government and citizens, but the functions of companies as well.
Any business leader who believes he / she can stick its head in the sand and avoid politics or policy is in for a rude awakening. Corporate leaders who ignore this aspect of business do so at their peril as several big companies learned in the 1990s.
If a company does not have a political action committee (or PAC), it should organize one. If a company does not have a committee on its board that deals with public policy, it should establish one. If a company does not know its elected representatives at the local, state and federal levels, it should learn them. If a company does not have a go-to person or group that is responsible for public policy, it should develop one. And if a company is not using its industry trade association to the fullest, it should start now.
Finally, if corporate executives are not personally contributing to political candidates from both parties they are missing a golden opportunity to establish and develop a leadership profile. Responsible companies have much to contribute to the ideas and individuals that shape public policy for all Americans.
"The price good men pay for indifference to public affairs is to be ruled by evil men." Plato
Rule 9: Reject Bad Behavior
Throughout history, it was acceptable for companies to engage in a conspiracy of silence. See no evil, hear no evil, speak no evil was a familiar veil behind which almost any company could hide and avoid dealing with its own misdeeds or those of others.
But that is not the standard or expectation in today's world. Bad corporate behavior by one company potentially hurts all companies. It colors the public perception of corporations, leads to a lack of investor confidence, and invites unwanted regulatory scrutiny and statutory oversight.
Blowing the whistle on the bad guys reflects conscientious leadership. Telling the referees that a corporate player is violating the rules of the game not only is responsible, but it is necessary. Of course turnabout is fair play. But the bottom line is that we expect today's business leaders to be straight shooters and to tell the truth at all costs. If they fail to do so, they will face a credibility gap.
Business leaders should not be afraid to step up to this level of corporate responsibility. Playing by this rule will garner immense credibility among shareholders, investors, customers, the media and policymakers. It is what the new rules of corporate responsibility contemplate and expect, and it reflects character.
"The truth is that good ethics sometimes is good business, but sometimes it's not. It depends on one's goals and how one defines good business. Sometimes, good ethics can end in bankruptcy.
Of course, so can bad ethics.
A fairer statement is that good ethics can be a very powerful business asset and that good things tend to happen to companies and individuals that consistently do the right thing and bad things tend to happen to those that even occasionally do the wrong thing.
The moral obligation to live according to ethical principles is not dependent on whether it's advantageous. People of character do the right thing in the pursuit of virtue, not self-interest." Michael Josephson, Founder & President Josephson Institute
Rule 10: Admit and Correct Mistakes Quickly
Nothing suggests strength of character as the ability to admit when you are wrong. It is not unusual for CEOs to make mistakes. It is a rare, indeed, for a CEO to admit mistakes. Conscientious leaders should be able to own up to their shortcomings.
Studies show consumers respect a company that admits mistakes readily and corrects mistakes quickly. Think about product recalls and auto recalls. Most customers willingly return or exchange their product for a new or repaired version. And they tend not to hold these mistakes against the manufacturer for long. That is, unless you delay, deny and deceive. As Steve Jobs noted, "... when you innovate, you make mistakes ... Admit them quickly and get on with improving your innovations."
Of course, if you attempt to cover up or hide them, the company opens itself not only to possible legal liability for the underlying actions, but also to the cover-up charges as well. Plus, it destroys consumer confidence.
To be sure, litigation, class actions and other risks are important considerations. But conscientious leaders will find a way with their lawyers to recognize mistakes and address them publicly. Your personal stock will soar, and your company will be known as a good corporate citizen, and one with character. It can be a win-win.
Chapter ThreeGovernance & Accountability
Rule 11: Respect Shareholders
Long before there was Sarbanes-Oxley, there was a well-recognized duty by the CEO to be accountable to shareholders. By virtue of her position as leader of the company, the CEO must use her best efforts and best judgment on all matters related to the corporation.
But CEOs at several leading companies have been caught showing a high level of disdain and disrespect for the shareholder.
Respect for shareholders means the CEO must make the hard financial, management, business and labor decisions in the best interests of the company, and it also requires her to protect the long-term interests of its equity owners.
Respecting shareholders means that you don't lie, you don't hide the ball, and you don't employ sleight-of-hand tricks that make you look good today, but leaves them holding the bag tomorrow. It also means doing everything possible to protect the corporate brand from embarrassing, negligent and fraudulent behavior.
In essence, you work for the shareholders, the owners of the company. Open up the company to its owners and investors. Whether the CEO plans to be at the company for two years or two decades, the shareholders demand the respect and honor accorded them as investors and owners of the company.
Excerpted from Doing Good by Adonis E. Hoffman Copyright © 2010 by Adonis E. Hoffman. Excerpted by permission of AuthorHouse. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
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