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Published: October 11, 2002

 
 

Globalism without Tears: A New Social Compact for CEOs

Differing perceptions of the power and obligations of multinational companies complicate the issues. From the standpoint of nearly all global CEOs, companies have far less power than that with which governments and public pressure groups credit them. These business leaders believe that only governments have the legitimate authority to make laws, enforce them, and cater to the social needs of their citizens — and the primary responsibility to do so. When host governments or pressure groups ask them to get involved in education, health, or the promotion of human rights — over and above the treatment of their own employees — the executives worry that they are undertaking something for which they have no mandate, no competence, and little time. They also fear being held responsible for results that are beyond their ability to deliver or control. On the other hand, governments, international institutions, civic groups, and NGOs often see global companies as having more resources and influence — and a broader mandate — than corporate chief executives think they do. Governments and NGOs are frequently looking for these companies to be agents of social change and development in arenas in which the governments have failed.

Very few CEOs or members of their boards of directors have experience in managing, or the knowledge of how to manage, these conflicting viewpoints. But neither can they avoid dealing with them. CEOs are under public pressure to get involved, and whatever they do or fail to do will be evaluated in a highly public way by a wide variety of groups. Equally important, as corporations struggle to recruit the most educated and talented men and women around the world, these companies’ ability to be seen as being on the right side of progressive causes will become increasingly essential to their success. “If you want the best and the brightest,” William C. Ford, Jr., chairman and CEO of Ford Motor Company, told me, “then you have to build a company they can feel good about.”

A Corporate Citizenship Agenda
There are no clear answers to the many dilemmas surrounding the question of what it means to be a good corporate citizen, and how this goal can be integrated with obligations to shareholders. But CEOs don’t have the luxury of waiting while they and others figure out the answers. They operate in the here and now, and they must act today with the best knowledge and instincts they can muster. The imperative now is to give corporate citizenship more attention and higher priority, albeit in a careful way. A five-point agenda can help CEOs and boards fulfill their obligations in a way that will help the global economy become more humane and more secure.

Agenda Item 1: CEOs must be proactive and transparent when it comes to issues of corporate citizenship and social responsibility.

The starting point for any business leader in navigating these swirling political and social currents is to have a clear idea where the company’s responsibilities begin and end. Since there are few accepted international guidelines to rely on, CEOs and their boards need to make their own judgments. Although they will all begin with the idea that creating shareholder value is the sine qua non of the firm’s existence, they should define what else a company must do to create satisfied customers and productive employees who feel well treated. CEOs must also develop a philosophy that sets parameters on where corporate activity in a community begins and ends. These parameters will never be sharp lines; the best way to determine them is to be in close consultation with host governments and community leaders, and to raise these questions to the level of boards of directors.

 
 
 
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Resources

  1. Jeffrey E. Garten, “From New Economy to Siege Economy: Globalization, Foreign Policy, and the CEO Agenda,” s+b, First Quarter 2002; Click here.
  2. Amy Cortese, “The New Accountability: Tracking the Social Costs,” New York Times, March 24, 2002; Click here.
  3. Geoff Dyer, “Biotech Sector Urged to Focus on Problems of Poor Countries,” Financial Times, June 12, 2002; Click here.
  4. Alison Maitland, “Human Rights and Accountability,” Financial Times, June 13, 2002; Click here.
  5. Roger L. Martin, “The Virtue Matrix: Calculating the Return on Corporate Responsibility,” Harvard Business Review, March 2002; Click here. 
  6. Business Partners for Development, Putting Partnering to Work, April 2002; Click here.
  7. Global Reporting Initiative, Sustainability Reporting Guidelines on Economic, Environmental, and Social Performance, June 2000; Click here.
  8. Manufacturers Alliance and National Association of Manufacturers, U.S. Manufacturing Industry’s Impact on Ethical, Labor, and Environmental Standards in Developing Countries: A Survey of Current Practices, April 2001; Click here.
 
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