The Need for Courageous People

published in The Daily Transcript, July 16, 2003

Ethical Corporation Magazine sponsored a conference last month on corporate ethics in Washington, D.C. Addressing both coiporate accountability and corporate social responsibility initiatives, presenta­tions and discussions included examples of the corporate “non accountability” issues we’ve all read about during the last several years.

  • WorldCom’s multibillion-dollar acquisition that the board approved without question;
  • The Martha Stewart cover-up and the millions lost by shareholders; and
  • Xerox’s auditing scandal and associated shareholder losses.

Along with these examples of corporate fraud, there were plenty of suggestions on how to rebuild trust, become more transparent to stakeholders and improve the bottom line. In a sense, it felt as if speakers were say­ing to corporations, “Your time’s up. You can’t fudge numbers, put out fluffy PR reports or pretend the proxy resolutions are going away” (One speaker cited that proxy resolutions have increased by 20 percent in 2003 alone!)

Corporate social responsibility initiatives are no longer a passing fancy or used by large corporations to look good Today, the strong push for corporate accountabili­ty worldwide is exemplified in Britain’s recent proposed legislation (Company Law Review) requesting that com­panies disclose their policies and practices related to social and environmental programs (with the approval of the board of directors), as a part of their business report­ing requirements. And corporate social responsibility is getting more visibility in the investment fund arena, on Wall Street and among growing numbers of institution­al investors. They are taking a closer look at social and environmental indexes touted by such firms as FTSE America and funds such as Calvert, which carefully screens companies for their social/environmental per­formance. Speakers pointed out mat it is far more pro­ductive for corporations to be proactive and more trans­parent in decision-making and efforts to address social and environmental issues, instead of being left to defend bad decisions and then attempt to rebuild trust.

As the conference keynote speaker, Eric Pillmore, the SVP of corporate governance at Tyco International, admitted the theft of the company’s former senior lead­ers as an “ethical crisis at the top,” and outlined how the totally new board of directors would drive the compa­ny’s code of conduct.

Kennel’s group will focus on climate change, the loss of biodiversity and ris­ing sea levels. He sees today’s environ­mental problems as having reached a breaking point. In discussions with Kennel, he sites the numerous facts related to depletion of our natural resources. Beyond these problems, he sees science and business must come together to focus on sustainability in a win-win agenda that will tackle these tough problems. And his vision is that science can provide the “sustainable” solutions that businesses can integrate into their operations.

“Ethics in character matters to a variety of stakehold­ers — employees, customers, suppliers, investors,” said Pillmore, adding that codes of conduct must be part of the corporate fiber. “The real moment of truth occurs every day in hundreds of little decisions people make at all levels of the organization.” He added that initiatives such as Sarbanes-Oxley (with its financial controls and audit committee rules), a 1-800 telephone hotline reporting method and a full-time ombudsman who reports to the independent audit committee are excel­lent first measures to drive accountability.

The vice president and general counsel for corporate compliance at Fannie Mae, Deborah House, said her review of WorldCom reports revealed its corporate cul­ture required they “make the numbers above all else.” She cited an example of how one CFO thought that adopting a code of conduct was a waste of time. To House, it’s time to “put a higher value on integrity as a leadership quality, versus production numbers.”

Corporate social responsibility begins with corporate accountability (ethics and character). The conference opened with discussions about accountability, corporate governance and codes of conduct, then addressed CSR issues — how companies adopt global standards, com­municate with their stakeholders and report social/environmental (and financial) progress.

Tyco’s VP said his company was committed to “build­ing courageous people” that are not afraid to bring unethical issues to light. He ended his presentation with this quote from Edmunde Burke, “The only thing nec­essary for the triumph of evil is for good men to do noth­ing.” Corporate social accountability, corporate social responsibility — it’s really all about ethics, and ethics matters.

Burton is a specialist in the field of corporate social responsibility and received accreditation on conducting social audits from the New Economics Foundation in London.

Source Code: 20030715tza