Promotional message of corporate responsibility is just self serving guff

In many corporate offices, around the world, all that matters to directors and executives is shareholder value as expressed in share price, writes Terry Prone

Promotional message of corporate responsibility is just self serving guff

ANY management consultant, particularly one specialising in communications, can tell stories of explaining to a major corporate chief executive officer (CEO) that a course of action to which they were committed was going to lead to customer dissatisfaction or media disdain. Or maybe even was just plain wrong.

The management consultant has watched, mystified, as the CEO shrugged and left the issue to their PR division to do the best they could with. It takes a few of these experiences to cause the penny to drop and the management consultant to realise that unless unhappy customers are going to leave in such unprecedented droves as to damage the dollar or euro value of the company, the unhappiness of those customers or of the media reporting on it matters not a toss. All that matters is shareholder value as expressed in share price.

Nor is this a personal decision by an individual CEO. It is, many of them will tell you, their contractual obligation: to concentrate relentlessly on share value, and — just as importantly — to accept no matter how pleasing they are to have around, no matter how splendid the talk they give to the IMI, no matter how media rolls over at the mere sight of them, extending its furry tummy for tickling, if the share value goes down the tubes, the CEO is going to go down the same tubes pretty smartish. If the shares tank, then nothing else matters. Or has mattered up to now.

Towards the end of the summer this year, however, roughly 200 CEOs of globally recognisable corporations came together and sent out a statement that things are going to change. The guys and dolls at the top of companies such as Walmart, Amazon, and Apple are part of a body in the US called the Business Roundtable, and what they said, on the face of it, flies in the face of a fundamental business belief about the purpose of a corporation. Companies, they said, should stop their total, unremitting focus on the interests of those holding equity in their entities. The focus should widen to include the interests of those employed, those who supply goods or services, together with the natural environment.

“While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders,” the group statement said.

“We commit to deliver value to all of them, for the future success of our companies, our communities and our country.”

Now, when I started in the communications training business, half a century ago, our customer base was made up of priests and nuns. Particularly priests. We provided homiletics training which meant we tried to help them deliver sermons that might reach and change at least a few members of the congregation. They came to us in pretty ropey rhetorical condition, so their first recording was predictably awful. We had an internal shorthand for the kind of acceptably generic sermon some of them would start out with. It was, we would mutter, a “Let us all strive to be better Christians” sermon. Goodwill and piety spread with a vague hand.

Frankly, the same judgment applies to the Roundtable statement. It firmly commits to a positive so inchoate that nobody could, right now, measure its absence, or, in the future, measure its presence. Even when they purport to get specific, they in fact get less specific. Take their promise to become more environmentally responsible. It was couched in terms of “embracing sustainable practices across all our business”. Two non-promises right there, starting with one about embracing something. Embraces do not enforce. Or guarantee. Or even ensure. And “sustainable practices” is not quite the same as “we will abandon our dependency on ‘fast fashion’, one of the great environment wreckers [Walmart] or delivering single items people could buy, along with others, in the store [Amazon].”

When the Roundtable group talks of having responsibilities to stakeholders other than shareholders, they fail to include in the happy-ever-after-narrative the employees sleeping in tents on wasteland near to their plants or books written about how little they pay and what little security they offer those tent sleepers. Even issuing it as a collective manifesto lets them off any offered hook. It is as individual corporations they will be criticised or probed.

Notwithstanding such criticism, it is nonetheless a move to be welcomed. The primary commitment to shareholders goes back, it’s fair to assume, to a time when family and friends demonstrated their faith in an up-and-coming entrepreneur by investing in his/her business. It is wholly legitimate for such shareholders to desire to be able to cash in their investment by selling the shares for more than they paid for them. Legitimate within capitalism — we can discuss the alternatives to that system some other time. However, many of the early shareholders in lads like Ben and Jerry or the two garage-founders of Hewlett-Packard had a much wider vision: They invested because they liked the ethics and principles of the founders. They saw other stakeholders, including the environment and employees, as important.

But the early idealistic and often small shareholders in businesses destined to be massive tend, for age and other reasons, to sell out to less idealistic and often much larger shareholders, like pension funds, who don’t give a sugar about the environment or gender pay equality or the damage done to society, individuals and couples by the gig economy. Once those shareholders settle their asses into the saddle, everything but profit and shareholder value goes out the window. Life stops happening in years or decades or centuries, and gets chopped into quarters. Management responds by making each quarter profitable, frequently, as a responsible CEO puts it, “borrowing from the future to make the present look better than it is”. The ones who are successful at making the present look better than it is tend to profit, personally, as a direct result. Some CEOs in the US get paid 250 times the average pay of their employees. They don’t get $250,000 more than the ordinary Joe or Josephine. It’s a multiplier. They get paid hundreds of times what Joe and Josephine get. You don’t have to be a socialist to feel in your water that this is unjustifiable.

And yet the Roundtable, in their bid to improve the corporate world, kind of missed out on the CEO pay thing. Understandably. Divorces like the recent one of Jeff Bezos are expensive, and lads like Bezos need to divvy up to the ex in a way that doesn’t expose them to any nasty publicity. (Athough the verb ‘to expose’, in relation to Mr Bezos, might be infelicitous, him being one of those deluded males who are convinced photographs of their manhood will delight others.)

Until the commitment to stakeholders gets enshrined in law and in the board-driven policy statements of corporate entities, this latest bit of self-serving guff is just that — self-serving guff.

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