Good For Business
The Rise of the Conscious Corporation
By Andrew Benett, Cavas Gobhai, Ann O'Reilly, Greg Welch
Palgrave Macmillan Copyright © 2009 Andrew Benett, Cavas Gobhai, Ann O'Reilly, and Greg Welch
All rights reserved.
RETHINKING THE ROLE OF THE CORPORATION
I hope we shall ... crush in its birth the aristocracy of our moneyed corporations which dare already to challenge our government to trial and bid defiance to the laws of our country.
What might Thomas Jefferson make of the modern-day corporation? In 1776, the year he penned the Declaration of Independence, the U.S. population stood at 2,527,450. That is just half a million more people than are currently employed by Wal-Mart alone. Far from "daring" to challenge government to a trial of strength, corporations have grown so big that fifty-one of the world's one hundred largest economies are now businesses, not countries. Moreover, corporate power has become so concentrated that, at the start of this decade, sales of the two hundred largest corporations represented more than a quarter of total world economic activity.
Jefferson and his peers had a clear understanding that greater size more often than not translates into greater power—a power likely to be of detriment to the common man. It is a concern that has only deepened in modern times, as corporations have too often stepped outside the boundaries of acceptable—even lawful—behavior. In this decade alone, we have borne witness to a string of scandals that has rocked financial markets, toppled once-mighty companies, and given the public more reason than ever to regard Big Business through a prism of suspicion and fear. Enron may have emerged as the poster child for early-twenty-first-century corporate excess and greed, but it has had plenty of company. Even domestic diva Martha Stewart had to put aside her muffin tins for a stint behind bars for insider trading—an offense that seems almost quaint now that we have seen the likes of Bernie "King of the Ponzi Scheme" Madoff.
In the current environment, it is virtually impossible to tune out negative news of the business world. Our fears of the deepening recession and mortgage foreclosures are interrupted by massive recalls of contaminated pet food and children's toys. Gas prices fall, but then banks begin to fail. We can't even escape by putting in a DVD: Tales of corporate scandal and immorality have been fed to us through a steady slate of films exposing the dark sides of industries ranging from pharmaceuticals (The Constant Gardener) to health care (Sicko), from weapons dealing (Lord of War) to the diamond trade (Blood Diamond), and from Big Oil (Syriana) to corporate law (Michael Clayton).
Is it any wonder our faith in business is shaken? In 2007 consumer confidence in large corporations, as measured by the Gallup Poll, hit its lowest point in history. At that time, only 18 percent of Americans claimed to have a "great deal" or "quite a lot" of confidence in Big Business; that was down from 30 percent in 1999. Two years on, in the midst of an even worse economic crisis, the media are full of stories of board-level greed alongside relentless reports of layoffs, government bailouts, and a "stimulus" package that at least initially produced far more fear than hope. By early 2009, Edelman's Trust Barometer had found steep falls in consumer trust in business in major developed countries. In the United States, 77 percent of consumers had less trust in corporations compared with the year prior; internationally, that figure was 62 percent. Harris Interactive's 2009 Reputation Quotient survey results were just as bleak: 88 percent of respondents rated the reputation of corporate America as "not good" or "terrible." As the Financial Times reported after the 2009 World Economic Forum in Davos, business leaders are stunned by the extent to which the public has lost faith in business.
Yet, something interesting is happening. Even in the face of the global economic meltdown, people have not entirely given up on business. To the contrary, they have begun to look to corporations to play an expanded role in society—to step in where governments have failed and craft solutions to our greatest global challenges. For as much as the public is cognizant of the damage corporations can wreak when left unchecked, they have also gotten a glimpse of the potential of corporations to drive meaningful change. Once content to let Big Business exist on a separate plane and carry out its work in secrecy, the public is now demanding that corporations become full-fledged global citizens. Rather than simply assume the rights of "natural persons" under the legal systems in which they operate, corporations now also are expected to accept the responsibilities that come with being part of the human family.
However bleak the current economic situation, we believe it is actually creating a unique window of opportunity for today's business leaders. The desire to "believe in something" is deeply ingrained in human nature—whether one is talking about how a child wishes to view a parent or the faith one might put in a newly elected official during a particularly difficult time. Such a dynamic provides a powerful platform for business leaders who are capable of taking bold steps in addressing both consumers and the marketplace at large.
MORE POWER, MORE RESPONSIBILITY
How is it that people who have grown more wary of corporations have also come to want and expect more from them? The most important reasons are these:
Government has historically fallen short.
Consumers live closer to business.
The empowered public demands payback.
Government has historically fallen short: First, we are looking to corporations for help because they may be our last, best hope—even in a time of government bailouts. The safety nets provided by governments around the world have grown increasingly tattered, and many people feel our largest global problems are simply beyond the capacity of governments to solve—even when working together. Such organizations as the United Nations, World Trade Organization, and European Union are widely regarded as too cumbersome and bureaucracy bound to act sufficiently, quickly, or decisively, and their level of commitment and motivation is often questioned, especially regarding issues concentrated in less developed countries.
In contrast, over the past decade, we have seen some familiar corporate faces actively tackle such issues as disease eradication, hunger, and global warming. In 2008, the Bill & Melinda Gates Foundation dispersed $2.8 billion in grant payments under its health and development programs. To put that in perspective, the entire annual budget of the UN's World Health Organization is $4 billion. As a private entity, the foundation is able to avoid a lot of the procedural steps that bog down government agencies, so the funds can go further. Virgin Group founder and chairman Sir Richard Branson has taken on global warming as his pet project. Through the Virgin Earth Challenge, he is offering a $25 million prize to the first person or organization to come up with a viable way to remove greenhouse gases from the atmosphere. Nortel and Sun Microsystems have each taken leading roles in pushing low-cost and free technology and online learning materials into Third World classrooms.
The extent to which the public now counts on business leaders to act in difficult times has been made abundantly clear over the course of the last decade, especially as governments have struggled to coordinate their own responses. In what has been termed "the first step in the globalization of corporate philanthropy," Fortune 500 companies contributed more than a quarter of a billion dollars to relief efforts in the immediate aftermath of 2004's Asian tsunami. The following August, while the U.S. federal, state, and local governments were so famously bungling their response to Hurricane Katrina in Louisiana, Mississippi, and other southern states, the private sector stepped in with $1.2 billion in relief funds. While the Federal Emergency Management Agency (FEMA) was adrift in red tape, miscommunication, and mismanagement, companies such as The Home Depot and Wal-Mart were on the ground, providing not just funds, but also tools, other materials, and guidance to local organizations. It makes sense, then, that as Hurricane Rita bore down on Texas one month later, 87 percent of Americans polled by Cone, Inc. said they expected corporations to play a major role in rebuilding affected areas from that storm, and nearly two-thirds (62 percent) agreed companies are better able than government agencies to respond effectively to disasters.
This notion that Big Business should play a leading role in disaster response has been bolstered by the concerted efforts of corporations to do just that. Frustrated by their inability to effectively coordinate their efforts with those of the federal government in the wake of the September 11, 2001 terrorist attacks on the United States, some of the nation's top business leaders devised a plan to create a disaster-response task force, to be called on as needed. The task force is now a permanent arm of the Business Roundtable, an association of chief executive officers of leading U.S. companies. Comprising nearly a third of the total value of the U.S. stock market and employing in excess of ten million workers, member companies have both the resources and the clout to get things done quickly. Among other initiatives, the task force has created an around-the-clock phone link to the Department of Homeland Security and maintains "swat teams" capable of flying into any disaster site within twenty-four hours, assessing what's needed, and then reporting back to both the government and corporate leaders.
Consumers live closer to business: The public also expects more of Big Business because we feel more connected than ever before to the companies that have a presence in our daily lives. We consider them part of human society and, as such, expect them to share our burdens.
There was a time when businesses lived apart from everyone but employees and shareholders. They were figuratively—and sometimes literally—housed behind tall iron gates that denied admittance to all those not central to the organization's operations. Ordinary citizens had precious few avenues through which to influence corporate decisions—and, in most cases, had little opportunity even to learn what policies and practices existed. Moreover, most of the products consumed were commodity items. People didn't go to a supermarket to buy Perdue chicken and Dole broccoli; they went to the butcher for meat and poultry and to the green grocer for produce. No brand names, no logos, no marketing messages ... and no emotional relationship between producer and buyer.
That is no longer the case. Today, brands matter a lot, and the companies with which we do business matter. We all know Mac people and PC people. People who swear by Pepsi and others who insist on Coke. Drivers who wax eloquent about their Toyotas or Jaguars and others who intend to go to their graves without buying any car other than a Ford. The brands we own—and especially the brands we love—tell a story about us that goes far beyond the contents of our home offices, refrigerators, or garages. They speak to the sort of people we are, to the values we hold dear and the way we both perceive ourselves and wish to be perceived.
As part of its benchmark Prosumer Pulse® Study, communications agency Euro RSCG Worldwide asked consumers in ten markets about the role brands play in their lives. A majority in most markets—including 69 percent in the United States—claimed to be very aware of brand names. Nearly four in ten U.S. respondents agreed the brands they own say something about who they are—higher than expected, given that Americans typically are loath to admit they are influenced by marketing. Even greater percentages of respondents in some developing countries agreed the brands they use say something about who they are: 47 percent in China and 65 percent in India.
It has been interesting to watch brand logos become part of people's identities over the years. Logos matter, and not just as a brand identifier. Having a brand name or symbol emblazoned on one's chest, handbag, or wristwatch gives one a sense of connection to the company; and that, in turn, tends to make one feel more invested in how that brand acts and is perceived. A woman who totes around a bag with the Whole Foods logo on it is broadcasting a few things about herself: She cares about the environment and the foods she puts in her body, and she can afford to shop at a higher-priced store. The sense of satisfaction she derives from carrying that bag may well fluctuate with good or bad news about the company. Would you have worn a JetBlue-branded baseball cap in the week following the airline's public relations fiasco in early 2007? As you may recall, a Valentine's Day ice storm left more than 1,000 passengers trapped for hours on the tarmac of New York's John F. Kennedy International airport. One day, the brand logo is worn proudly as a symbol of a hip and trailblazing company; the next day, it is associated with overflowing toilets, food deprived infants, and apoplectic passengers.
Importantly, as we will discuss in greater detail in Chapter Two, the recollections many of us have of the ordeal JetBlue's travelers went through that day came directly from the trapped passengers themselves. In this age of Internet communication and democratized media, those passengers had all sorts of ways to voice their displeasure, both directly to JetBlue's corporate headquarters and to the world at large. An incident that in an earlier age might have been swept under the rug was replayed again and again online in all its gory detail. JetBlue, in turn, responded in a way that reflects a new approach to crisis communications. CEO David Neeleman did not simply address those customers who had been aboard the affected planes that ill-fated day; he appeared on numerous television shows, including the morning programs and "Late Show with David Letterman," and also posted a direct response on YouTube, in which he pledged that the company would do better, outlined changes being made to ensure such a disaster never recurs, and introduced a new JetBlue Customer Bill of Rights.
David Neeleman's post-crisis response speaks clearly to a new relationship between company and consumer. Corporations are far more vulnerable to consumers today, which means they have no choice but to hold themselves more accountable. They can no longer operate outside the bounds of public scrutiny, and that means they have far more reason to engage with consumers and take actions that bolster their public standing.
The empowered public demands payback: The third reason consumers have heightened expectations of what corporations can and should do is in keeping with the biblical admonition: "For of those to whom much is given, much is required." We are at a tipping point, a time when consumers have become acutely aware of the disconnect between how much corporations are raking in, in terms of profits and power, and how much they are giving back to the greater community in return.
At the tail end of 2007, Euro RSCG surveyed nearly 2,000 consumers in the United States, United Kingdom, and France as part of its Future of the Corporate Brand study (see Appendix for additional findings). The consensus from the three markets is that corporations have benefited enormously from their business dealings in recent years but have yet to return the favor to the consumers and communities that have supported their growth. Nearly eight in ten respondents (79 percent) agreed corporations had become more profitable over the five years prior, but only one in four (24 percent) think businesses have become more philanthropic during that time. That's a gap of fifty-five points! Moreover, only a minority believe corporations have raised their standards or become more accountable. (See Graph 1.1.)
So, what exactly is it people want and expect from corporations? The answer is both simple and revolutionary: They want their brand partners to internalize a set of humanized values that directs everything they do. They want Big Business to take a stand on key issues and put the weight of their wealth and influence behind activities that will benefit the greater good. And, on a larger scale, they want companies to be more involved in propelling communities, countries, and the world forward. Nearly six in ten people surveyed in the three markets (59 percent) believe corporations have become better positioned over the past five years to create positive social change. Yet few, if any, companies are seen as doing all they can in that regard. And that is important at a time when a large majority of those surveyed (74 percent) believe businesses bear as much responsibility as governments for driving positive social change. What once was the view of a leftist fringe is now mainstream thinking. (Continues...)
Excerpted from Good For Business by Andrew Benett, Cavas Gobhai, Ann O'Reilly, Greg Welch. Copyright © 2009 Andrew Benett, Cavas Gobhai, Ann O'Reilly, and Greg Welch. Excerpted by permission of Palgrave Macmillan.
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