Why Corporations Fail to Do the Right Thing

success failureAfter reading Why Corporations Fail to Do the Right Thing, I’ve decided to reproduce the article’s main points (below) to highlight the real 2 reasons Corporations Fail to Do the Right Thing, and suffer the consequences.

The subtitle “Six reasons why international business remains dangerous to workers and the environment, even when its leaders genuinely want to do better” is straightforward, but I’d like to add that it really comes down to 2 points, AND that it affects many more organizations than you think.

Reason 1 = Company Culture (Core Values)

☛ Corporate Responsibility; and any interpretation of the same, is a consequence of a company’s culture, primarily their core values in action (see practical example below).

☛ People lie; comes back to core values being lived! You must have a process that audits the fact that company values are indeed being lived & practiced on a regular basis by ALL employees, especially senior leadership modeling the way.

☛ Safety and responsibility cost money—and no one gets rewarded for disasters averted; is a culture issue! What’s the message sent from senior leadership? It’s their responsibility to create a culture where doing the right thing & averting disasters are rewarded. It’s one thing to encourage pushing the boundaries to innovate & reward “mistakes” in the pursuit of innovation, but the limits of that boundary has to be established by a hard RED line established by core values.

☛ Few people bear witness; All of the above. It’s Company Culture & Core Values, including Leadership Modeling the Way!

☛ Consumers won’t pay more; YES they will, but you might have to think long-tail. The problem we have today is that everyone wants everything short-term & they don’t properly evaluate long-term risk. One of the key steps in effective Problem Solving & Decision making is a process called “potential problem analysis”. Specifically, follow the rule of physics “for every action there is a proportional reaction”. By taking action to prevent or resolve a problem, what possible problems could you be creating (now & in the future) and what do the guidelines from your company culture guide you at accept as acceptable liability & risk? Where is that hard RED line established by core values (company culture)?

Practical Example; I worked with a major pharmaceutical a few years back that had to face a significant decision. In an impoverished African country, where the government had subsidized a life saving drug, that subsidy was about to be greatly reduced due to the dramatic economical situation of the country. The pharmaceutical was contemplating pulling the drug out of that African nation due to the certainty of loosing significant revenue. They then did a potential problem analysis benchmarked against their core values (a.k.a. corporate responsibility), and upon determining the thousands of lives that would be lost without the required drug, they decided to remain & offset the losses from profits had in other countries & divisions. Core Values in action & Modeling the Way all wrapped into one “isolated” profit loss, which by the way, resonated with their customer based & drove an increase in long-term customer revenue and profit. When their customers found out about their decisions, they actually bought more & reffered more friends as new customers!

Reason 2 = Communication

☛ People don’t talk to each other (silos); is a communication issue, in itself a by product of the company culture & core values that have been established.

So at the end of the day, you can say that you really only have ONE reason why Corporations Fail, they fail to do an effective job of creating & then living a strong company culture.

Article’s main points reproduced

1. People lie. More than one person I interviewed told me a story of touring a factory, doubling back on the pretense of forgetting something, and catching workers turning in their goggles or other protective gear. Factory owners will hide bad news if failing an audit means losing business.

2. People don’t talk to each other. Big organizations often operate in distinct, siloed divisions, and multi-disciplinary issues like human rights and sustainability often fall through the cracks. As director of corporate citizenship at Microsoft, Dan Bross oversees assessments that cut across multiple functions like legal and product development to identify potential risks to users. He told me, “I have a horizontal job in a vertical world.”

3. Safety and responsibility cost money—and no one gets rewarded for disasters averted. Even those companies not living explicitly by Ford’s 1970s model have to perform some sort of cost-benefit analysis. Since the work that I did for BP and that my peers do for their companies is preventative and complex, it can be hard to justify the expense of any one intervention.

4. Few people bear witness. Sadly, if an executive doesn’t see problems firsthand, he or she is much less likely to commit resources to addressing them. Even the most numbers-driven executive can only be brought so far with a spreadsheet.

5. No one knows what corporate responsibility is. Right now we’re in a free-for-all in which “CSR” means whatever a company wants it to mean: From sending employees out in matching t-shirts to paint a wall for five hours a year, to recycling, to improving supply-chain conditions, to diversity and inclusion. This makes it difficult to have a proper conversation about what corporate responsibilities are and should be. In some respects, that’s okay: The breadth of the concept brings companies to the table to discuss their role in society. Then, as Aron Cramer, President and CEO of BSR told me, “The trick is to get them to the table, then move the table.”

6. Consumers won’t pay more. One report showed that ensuring good working conditions would add less than one dollar to the price of a pair of blue jeans. But despite responding to surveys that they care about ethics, shoppers refuse to pay more. In one study, only half of customers chose a pair of socks marked “Good Working Conditions” even when they were the same price as an unmarked pair; only one quarter of customers paid for the socks when they cost 50 percent more.

 

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