As the debate about stakeholding continues, two companies make dramatic moves: Britain’s largest company promises to undergo social auditing, while America’s most aggressive oil company is held to account by its black employees.
Ian Ash, BT’s director of corporate affairs, says that feedback from customers and other stakeholders is vital in assessing commercial and ethical performance, so BT is preparing for independent monitoring along the lines of a social audit. On November 21, BT published a set of four books outlining its practical experience in responsible corporate behaviour:
– Putting Ethics on the Agenda explores research by BT into consumer attitudes to companies on issues of public concern;
– Putting the Environment on the Agenda shows how the company approaches monitoring and reporting on green issues;
– Putting Disability on the Agenda gives the history of telecommunications technology and current services for people with a disability;
– Putting Consumers on the Agenda details how consumer consultation panels work.
For copies of the books, contact BT Consumer and Environmental Programmes on 0171 728 8807
REPORTING NOT ACCOUNTABILITY
Directors of successful companies must consider the interests of customers, employees, suppliers, creditors and local communities, but these groups should not have a place on the board, the CBI has said in its submission to the Hampel Committee on corporate governance. Two tier boards or other representation raise conflicts of interest and blur responsibilities. However directors should report to shareholders through the annual review how they are serving those groups. Contact Chris Wilson, CBI, on 0171 379 7400
PERSONAL STAKES
Stakeholding, as typically advocated by economists such as Will Hutton and John Kay, is backward-looking and culturally inappropriate to Britain, and would involve cumbersome and unworkable rules trying to incorporate rights of workers, suppliers and the community at large into corporate governance and law. So argue Charles Leadbeater and Geoff Mulgan in a Demos paper, Mistakeholding: whatever happened to Labour’s big idea?, published in October. Instead the emerging information and software industries of America’s west coast offer a better model, based on four ingredients:
– widening shareholdings and enlarging shareholder rights, to create a true shareholder democracy;
– giving people a personal stake in their own economic future, rather than in their employer, through individual learning accounts and career development funds;
– personalising pensions policy, so people have identifiable assets to pay for old age;
– setting minimum standards of corporate behaviour, not detailed prescriptions, with entrepreneurship and dynamism preserved through freedom of approach.
Contact Mark Leonard, Demos, on 0171 353 4479
TEXACO APOLOGISES
Oil company, Texaco, has settled a class action lawsuit with 1,400 African American employees, with a 6115 million payment and an 11% salary increase, a new Equality and Tolerance Task Force to improve HR programmes, new company-wide diversity, sensitivity and mentoring programmes, wider advertising of senior management positions and comprehensive monitoring and reporting of corporate behaviour. Making the announcement on November 15, CEO Peter Bijur issued an unprecedented apology and also promised to do more business with minority-owned companies. The company employs 27,000 people worldwide and was threatened with a consumer boycott when taped conversations about the two year old lawsuit were made public. Contact Jim Swords, Texaco, on 00 1 914 253 4156
GRANDMET CITIZENSHIP
Grand Metropolitan has issued a detailed report on its international corporate citizenship programme, describing the policy and underlying principles, illustrating activities through seven case studies, and presenting a detailed evaluation of costs and impact. Total input costs exceed ?16.7 million world-wide, following the methodology developed for the London Benchmarking group, split between charity, social investment, programme management and commercial initiatives. Assessment of programme outputs covers leverage of additional or matching resources and illustrations of both social and business impact. Contact Geoffrey Bush, GrandMet, on 01273 570170
INVESTING FOR SUCCESS
Shares in companies which follow the ‘inclusive approach’ advocated by the RSA Tomorrow’s Company Inquiry have out-performed the FTSE all share index, according to Kleinwort Benson. On November 19 the investment management company launched two vehicles for investors wishing to benefit, an equity fund and a portfolio management service. An independent governance committee, chaired by Sir Anthony Cleaver, will oversee the screening techniques which examine behavioural aspects of companies as well as business processes and financial results. Among aspects considered are:
– company leadership and communication of values;
– internal systems to measure performance on all elements contributing to sustainable success;
– a healthy licence to operate, with good relations with customers, employees, suppliers, investors and wider society. Contact Mark Goyder, Centre for Tomorrow’s Company, on 0171 930 5150
STUDYING CITIZENSHIP
The new BP Corporate Citizenship Unit at Warwick Business School was formally launched on November 13 with a seminar and discussion on future trends. Led by Chris Marsden, on secondment from BP, the unit will promote research and teaching on the role of business in society and seeks to influence other business schools to integrate these issues into their existing curricula. Contact Chris Marsden, WBS, on 01203 524158
RESPONSIBLE STUDY
The University of Bath is offering a new management Masters degree to help managers study social, ethical and environmental issues. Starting in March, the MSc in Responsibility and Business Practice will be part-time over two years with four intensive five-day residential sessions each year. It is run in partnership with the New Academy of Business, an independent educational centre. Contact Alex Cutler, New Academy of Business, on 0181 563 8780 (www/bath.ac.uk/carpp/msc.htm)
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Don’t underestimate the significance of BT’s quiet announcement that it will undergo a thorough-going audit of its relationships with all those having an interest in the business. Such social audits have been pioneered in the UK by ethical companies like TraidCraft and latterly by The Body Shop. Until now ‘mainstream’ companies may have thought that producing a glossy brochure describing their community involvement activities was enough. Not any more.
The social audit process tests performance against pre-set objectives, with assessment and independent verification. There is a world of difference between a company saying what a lot it does for the local community and asking that local community what it thinks – and publishing the answers. In other areas, the process also exposes the reality behind “our people are our greatest assets” and “we care for the environment” and “we nurture our suppliers through partnership sourcing”.
The difficulty is that techniques are still in their infancy, as Kleinwort Benson will find in deciding which is an inclusive company. Some companies have made a good start. Reported above, GrandMet is one. BP is another. Now it is important that business schools get involved to help – as well as teaching tomorrow’s managers about the new realities of corporate accountability.
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