When CEOs Do Well by Doing Good

By Michelle Matthews

Companies are increasingly called upon to demonstrate values that go beyond marketing of products and ensuring solid investor returns. In South Africa, companies undertaking social investment, staff community development volunteer programmes, or support for enterprise development initiatives, is an increasingly ubiquitous phenomenon driven by various complementary factors.

One is the dti’s codes of best practice that actively reward businesses that take on broader societal development work. Then there is pressure from below; employees and trade unions insistent on this sort of effort. Least obvious are market pressures where company and brand values that transcend the ordinary and embrace the “general good” are assumed to attract consumers.

But if doing good is truly good for business, to what extent should CEOs involve themselves in directing company policy and practice in its broader societal positioning? And how should the inevitable tensions between the needs of short-term shareholders be squared against longer-horizon company positioning needs? Some of the answers might be found in US experience, where top-ranked CEOs have grappled with these conundrums in a unique forum established in 1999.

Started by American actor and philanthropist Paul Newman, the New York-based Committee Encouraging Corporate Philanthropy (CECP) brings together 150 often otherwise competing CEOs who regard broadly-defined business philanthropy as important to their bottom lines. More than that, they think their own role in company social investment work to be key to its success.

Says Bill Green, the now-retired Executive Chairman of Accenture: “You’ve got to care about it in a meaningful way. You have to set the tone and pace, and you have to be famous for caring about it in your own company.” Simply, a company’s employees have to believe that the CEO is genuine in commitment to community engagement and its importance. Authenticity is key – it’s pointless, even counter-productive, to host staff volunteer days and then revert to behaviour that works against broader community interests.

Even so, CEOs have many pressing issues that rightly compete for attention, and on a recent visit to SA, CECP executive director Margaret Coady outlined some basic approaches that CEOs who believe in the importance of their community engagement could take:

  • Firstly, they should talk to those societal issues that are material to the business, repeating the point that the company’s long-term success is linked to that of broader society. Some employees intuitively understand this, but others may believe that companies do not have a role beyondpaying taxes and creating jobs. It’s best that the CEO explain that, done properly, company actions that face down social problems can bring competitive advantage (never mind any underlying moral imperative). These things are the right thing to do, and they happen to be strategic too.
  • Hire top talent into the philanthropy and sustainability management roles. Failure to recognise these functions as equally strategic to things like marketing, finance, and human resources severely reduces a company’s chances for success in this field.
  • Create structures to empower passionate employees, using these as a company’s community “eyes-and-ears”.
  • Reinforce a company’s social mission with relevant incentives, ensuring a consistency between business values and reward.
  • Set the company pace and tone.

The last may be more difficult than it seems. Indeed, when the CECP asked its members earlier this year what they thought the most effective steps were that CEOs could take in restoring public trust in formal business values, answers were instructive.

The single biggest category thought they should “speak publically, in my own voice, on what my company is doing and why”, but a significant 20% felt constrained by “shareholder pressure against getting too involved”. Further discussion revealed worries at “the overwhelming complexity of societal problems” and with “the difficulty of collaborating effectively with others”.

These are all real problems with wariness of investor scepticism probably the biggest. Said one CEO: “If you’re holding my stock for two days, should I really consider you an owner of my company?” And so company leaders are increasingly making public statements about the type of investor that they think is appropriate for their business. Peter Brabeck-Letmathe, Chairman and former CEO of Nestlé S.A., has clear views on this, saying that if someone invests in Nestlé it must be because they truly want to see the company succeed over the long term: “That is who we are as a business, that is how we make our management decisions, and that is who we are looking for as owners in our company”.

In last month’s Harvard Business Review, Sam Palmisano, former Chairman, President, and CEO of IBM, spoke of how he manages the shareholder versus long company vision: “I don’t do quarterly earnings calls -I did one investor meeting a year. You’re there to protect the entity for long-term returns.” That’s pretty brave, but it’s interesting to see some leading CEOs retaking the conversation, elevating their own agenda rather than feeling like they’re always responding to base quarterly forecasts.

Remarks Coady: “Supporting this approach are analysts who understand that when a company invests cleverly and effectively in its broader community, it is a signifier of that company being well-led. If a company has robust social responsibility programmes, it shows long-term planning and a clear vision of the future”.

Matthews is Trialogue content editor (www.trialogue.co.za). First published in Business Day, 18 July 2014

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