By Johanne Bouchard, Governance and leadership advisor to boards, CEOs, executives and entrepreneurs
Theresa May has taken a stand early in her tenure as the Prime Minister of the UK, calling for corporate Britain to embrace a new vision that includes protectionism, honouring the voices of workers and considering more than just profits when judging whether or not a company has been successful.
In essence, I interpret May’s position as a clear request to summon healthy governance and healthy leadership to build, to sustain and to grow healthier organisations. It is a request to fully engage as humans for humans, individually and collectively.
While shareholders are due a just return, it is time for all constituencies to be conscious and aware of their respective roles and responsibilities and to exhibit the will to succeed beyond profits and power. Leaders of our organisations must aspire to being held accountable to higher standards, conscious of their duty to serve stakeholders beyond shareholders. In effect, boards themselves need to realise that their oversight is inclusive of stakeholders’ interests and relentless diligence towards elevated corporate social responsibility (CSR).
Many visionary, successful CEOs, such as Marc Benioff of Salesforce.com in the US, are inspiring other CEOs and their boards to ensure that the needs of all stakeholders are met, not just the shareholders. They understand that the impact on communities, our economic ecosystem and future generations is too great to neglect the stakeholders (a company’s investors, employees, customers, partners, suppliers, consumers, their industries, the environment, local and global governments and their communities).
“May’s position is a clear request to summon healthy governance and healthy leadership to build, to sustain and to grow healthier organisations. It is a request to fully engage as humans for humans, individually and collectively”
Boards must evolve and grasp that the ultimate realisation of success is beyond just achieving a return on any investments and short-term financial success milestones. With a shift towards organisational health and a long-term outlook, a board is humbly faced with the great responsibility of the outcome of its decisions within a highly interconnected global and digital ecosystem and must assume its responsibility within that ecosystem, ensuring regulatory compliance and readily supporting corporate social responsibility and sustainability.
Moreover, while the board and management have the responsibility to ensure that their organisation complies with legal and ethical standards in achieving results, the board also has a duty to question how performance priorities are established that will not overrun their stakeholders and will not be a source of irrational and/or unhealthy behaviours.
Examining recent corporate scandals, favouring of short-term financial results, unscrutinised strategy and aggressive performance priorities can often lead management and employees to give preference to achieving results at any cost, considering corporate misconduct, deviant behaviours and bypassing compliance to governance standards, all eventually resulting in systemic issues that we can no longer refuse to address.
Rating whether the performance of our organisations is successful can’t be narrowly dependent on financial metrics, but must intrinsically be tied to human factors: engaged employees, satisfied customers, trusted partnerships with suppliers and consumers, strengthened communities and a social and ecological environment that is not depleted by corporate actions.
This consideration of stakeholders beyond the shareholders is emerging as the sensible model for business globally and here are some of the common denominators I’ve observed in the companies that are moving successfully to this model.
Top-down commitment
The companies that have been most publicly successful in shifting their focus towards this more inclusive definition of success have support for the approach beginning at the very top. The CEO is often the instigator and, at very least, the undisputable leader of the company’s stakeholder-centric vision, and the board and executive leadership team are in clear alignment for the model to succeed.
When I mentioned Marc Benioff earlier, it wasn’t casual. His commitment to corporate social responsibility is indistinguishable from Salesforce’s commitment – they are one and the same. This can also be said of Richard Branson, whose personal commitment to water scarcity is expressed through Virgin’s partnership with whole earth water, just one example of his CSR being synonymous with Virgin’s CSR.
Measurable metrics
Saying that a company prioritises stakeholders is not the same as showing that this is happening and measurable data is the best way to show that progress is taking place. One example is Procter & Gamble’s ‘five priority CSR areas’: human rights, employee rights, environmental protection, community involvement and supplier relations. Each of these five areas can be tracked by specific key performance indicators (KPIs) and P&G employs people whose specific responsibility it is to do just that.
Follow-through
Again, there’s a difference between stipulations that a corporation serves its entire ecosystem of stakeholders and demonstrating that this is more than a public relations gambit. The companies that are truly pursuing this course are able to demonstrate year-over-year growth in CSR metrics and they make the news for more than just profitability and shareholder returns. Delta Airlines, a US-based airline carrier, for example, made the news recently for distributing $1.5billion to its employees in record profit sharing. The employee benefit was the headline and the company’s reported $5.9billion in 2015 profits became a footnote to it.
Emphasising stakeholders is recognising and conscientiously acknowledging their interests in the entire business ecosystem, not exclusive of achieving and realising financial performance goals. It is paying attention to the role and the responsibilities of corporations in our society and proactively assessing the effect of corporate decisions on society and the environment.
When boards govern, they have an opportunity to establish their commitment to ‘valuing people’ throughout the ecosystem the business affects, as no corporation grows and exists in isolation. A board that commits to serving the interests of stakeholders is more likely to have to adapt its composition, structure, behaviour, CEO compensation and its functioning to this new role. This can be for the greater good and for the good of the company.
Being in tune with a company’s effects on the world it exists within seems so obviously reasonable when stated this way that perhaps the truly remarkable aspect of this shift is that the shift is remarkable at all. In my opinion, it is unavoidable.
About the Author:
A thought leader and former C-Level executive, and now an accomplished advisor to Boards, CEOs and Executive Teams, Johanne Bouchard is an expert in board dynamics, and board composition. Her career has spanned technology (having earned her degree as a computer engineer), marketing and worldwide strategy. Johanne has launched over 25 high technology companies in Europe, Asia, Japan and Australia, was instrumental in helping leading manufacturers and software companies be more efficient worldwide and led the repositioning of public and private corporations. See her blog and first eBook, Board Basics, at JohanneBouchard.com.
