tag:theconversation.com,2011:/fr/topics/corporate-ethics-39701/articlesCorporate ethics – The Conversation2023-09-28T04:43:55Ztag:theconversation.com,2011:article/2144742023-09-28T04:43:55Z2023-09-28T04:43:55ZBeyond the PwC scandal, there’s a growing case for a royal commission into Australia’s ruthless corporate greed<figure><img src="https://images.theconversation.com/files/550795/original/file-20230928-17-n9ydfs.png?ixlib=rb-1.1.0&rect=441%2C306%2C1671%2C912&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Accounting and consulting group PwC has been front page news ever since its chief executive Tim Seymour stepped down “<a href="https://www.pwc.com.au/media/2023/pwc-announces-further-actions-230529.html">effectively immediately</a>” in May, when the firm said it had “betrayed the trust” of Australians and promised an <a href="https://www.pwc.com.au/media/2023/ziggy-switkowski-leads-pwc-independent-review.html">independent review</a> of its governance, accountability and culture.</p>
<p>That review, conducted by former Telstra chief Ziggy Switkowski, was <a href="https://www.pwc.com.au/about-us/commitments-to-change/independent-review-of-governance-culture-and-accountability-at-pwc-australia.pdf">published</a> on Wednesday, along with an assurance from the firm that it would implement the recommendations.</p>
<p>Released with the review was a separate <a href="https://www.pwc.com.au/about-us/commitments-to-change/pwc-australias-statement-of-facts.pdf">Statement of Facts</a> prepared by PwC. This set out how it had provided advice to clients based on confidential government information about tax policy, which had been provided to one of its partners on the condition it be kept confidential.</p>
<h2>‘Untouchables’ and ‘troublesome practice matters’</h2>
<p>Switkowski found PwC Australia’s culture and governance practices were so weak they led to “integrity failures”.</p>
<p>It was an organisation that prized revenues and growth over ethics, values and purpose, with a “whatever it takes” culture that made “heroes” out of partners who raked in the most money. </p>
<p>If you were at the top, you were called a “rainmaker”. The biggest rainmakers who brought in the most money were referred to as “untouchables”, to whom “the rules
don’t always apply”.</p>
<p>Switkowski found the culture was “collegial” in the sense that dissent wasn’t welcome. </p>
<p>While good news was shared among partners, difficult news was kept quiet and referred to internally as “troublesome practice matters”, or TPMs. Legal updates about TPMs were “generally verbal”. </p>
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Read more:
<a href="https://theconversation.com/more-than-reputation-at-stake-pwc-faces-penalties-including-jail-time-206853">More than reputation at stake: PwC faces penalties, including jail time</a>
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<p>The chief executive, elected by partners in a “presidential-style campaign”, was “not perceived to be accountable to the board”.</p>
<p>Among Switkowski’s most important recommendations were that PwC Australia be <a href="https://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-fourth-edn.pdf">run</a> like a public company listed on the Australian Securities Exchange – with a board that included independent directors and had the power to hire and fire the chief executive.</p>
<p>PwC Australia has agreed to this, and all <a href="https://www.pwc.com.au/about-us/commitments-to-change/pwc-australias-commitments-to-change.pdf">23 recommendations</a>.</p>
<h2>Problems far from over</h2>
<p>As damning as the report is, Labor Senator Deborah O’Neill – who is chairing the Senate inquiry into the management and integrity of consulting services – says it “<a href="https://www.smh.com.au/business/companies/pwc-tolerated-poor-behaviour-gave-ceo-too-much-power-review-finds-20230927-p5e7xg.html">merely scratched the surface</a>” of what was going on both at PwC.</p>
<p>Her committee has until <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Finance_and_Public_Administration/Consultingservices">November</a> to report.</p>
<p>Back in May, the Australian Treasury asked the Australian Federal Police to consider commencing a <a href="https://treasury.gov.au/media-release/referral-australian-federal-police-pwc-collins-matter">criminal investigation</a> into PwC’s improper use of confidential Commonwealth information.</p>
<p>And in July, Greens Senator Barbara Pocock formally referred PwC’s conduct to the new <a href="https://www.afr.com/companies/professional-services/treasury-refers-pwc-tax-leaks-scandal-to-federal-police-20230524-p5db1v">National Anti-Corruption Commission</a>.</p>
<p>This all spells more trouble ahead for PwC, and perhaps for the Australian consulting industry more generally.</p>
<h2>More than one bad apple?</h2>
<p>Although sparked by the revelations about PwC Australia, Senator O'Neil’s committee is inquiring into the behaviour of <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Finance_and_Public_Administration/Consultingservices/Terms_of_Reference">all of Australia’s consultancy groups</a>.</p>
<p>It has taken evidence from Deloitte, EY, KPMG, McKinsey and The Boston Consulting Group.</p>
<p>New research by <a href="https://www.roymorgan.com/findings/9321-risk-monitor-moral-blindness-august-31-2023">Roy Morgan</a> suggests the bad image of corporations spreads beyond the consultants.</p>
<p>Asked about distrust or distrust of <em>any</em> brand in Australia in June, the result was an all-time high for distrust.</p>
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<p>Roy Morgan identified the PwC tax scandal and the data breaches at Optus and Medibank among recent events accelerating distrust. </p>
<p>It also identified:</p>
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<p>the Harvey Norman JobKeeper scandal, Rio Tinto’s destruction of the Juukan Gorge, Qantas’ refusal to pay back any of the $2.7 billion in COVID government handouts and the class action by hundreds of thousands of customers fuelled by the airline’s unwillingness to refund $2 billion in cancelled flights</p>
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<p>A record number of those surveyed identified “too motivated by profit” as a reason for their distrust.</p>
<p>This makes it reasonable to ask whether a culture of ruthless profiteering has infiltrated Australian corporate cultures across the board.</p>
<p>After the consultants have been dealt with, there is a case for royal commission into whether Australia’s entire corporate sector is meeting its responsibilities.</p>
<p>PwC has helped open the door.</p>
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Read more:
<a href="https://theconversation.com/my-3-point-plan-to-untangle-the-public-service-from-consultants-such-as-pwc-210050">My 3-point plan to untangle the public service from consultants such as PwC</a>
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<p class="fine-print"><em><span>Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A new review found PwC Australia had a ‘whatever it takes’ culture, making those raking in the most money ‘untouchables’. Australians need to know if that culture has infiltrated other big businesses.Carl Rhodes, Professor of Organization Studies, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1871362022-07-24T12:28:51Z2022-07-24T12:28:51ZBusinesses have the responsibility to invest in health and safety when governments fail to<figure><img src="https://images.theconversation.com/files/475482/original/file-20220721-10125-b05lmy.jpg?ixlib=rb-1.1.0&rect=6%2C0%2C4456%2C2951&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">With governments seemingly giving up their responsibility to keep people safe, it is time for businesses to take the lead on health and safety. </span> <span class="attribution"><span class="source">(AP Photo/Seth Wenig)</span></span></figcaption></figure><p>With the lifting of <a href="https://doi.org/10.1038/d41586-022-00620-7">public health measures</a> all over North America and Europe, some governments seem to believe the pandemic is over. Restaurants and theatres are <a href="https://www.cp24.com/news/remaining-capacity-limits-covid-19-vaccine-passport-system-dropped-in-ontario-1.5800267?cache=%2F7.548484">operating at full capacity and without proof of vaccination</a>. <a href="https://www.cbc.ca/news/canada/edmonton/limit-pcr-testing-rapid-test-results-1.6301128">PCR testing has been scaled back</a> or nearly eliminated. Masks are gone — even in crowded and <a href="https://www.ctvnews.ca/health/coronavirus/covid-19-transmission-in-schools-experts-call-for-better-ventilation-monitoring-1.5836746">poorly ventilated school classrooms</a>.</p>
<p>This is despite many people continuing to be highly susceptible to the disease — especially as <a href="https://doi.org/10.1056/NEJMoa2118946">vaccine-derived and prior infection immunity starts to wane</a> — booster campaigns stall and <a href="https://theconversation.com/why-are-there-so-many-new-omicron-sub-variants-like-ba-4-and-ba-5-will-i-be-reinfected-is-the-virus-mutating-faster-182274">increasingly contagious variants keep emerging</a>. </p>
<p>And while medical professionals have been <a href="https://www150.statcan.gc.ca/n1/daily-quotidien/220603/dq220603a-eng.htm">driven beyond the breaking point</a> and are quitting in droves, <a href="https://coronavirus.jhu.edu/data/mortality">thousands of people continue to die</a> and the number of people living with <a href="https://www.ama-assn.org/delivering-care/public-health/what-doctors-wish-patients-knew-about-long-covid">debilitating long-term effects</a> of the disease are growing. </p>
<p>By any objective measure, it is not the pandemic that is over, but rather government efforts to minimize the human toll of the pandemic. With governments seemingly giving up their responsibility to keep people safe, it it time for businesses to take the lead on health and safety. </p>
<h2>Corporate social responsibility</h2>
<p>Protecting the health and safety of employees, customers and suppliers in the absence of government mandates is the very essence of corporate social responsibility. While <a href="https://doi.org/10.1177%2F000765039903800303">the definition of corporate social responsibility has evolved</a> over the decades, it is now known as a company’s obligation to act in service of the public good. </p>
<p>Early in the pandemic, many businesses invested in the health and safety of customers and employees by <a href="https://www.thestar.com/podcasts/thismatters/2021/04/28/how-hero-pay-came-went-and-is-pushing-business-to-be-more-responsible.html">offering “hero pay.”</a></p>
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Read more:
<a href="https://theconversation.com/explainer-what-is-corporate-social-responsibility-or-csr-and-what-do-investors-need-to-know-169256">Explainer: what is corporate social responsibility or CSR – and what do investors need to know?</a>
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<p>But recently, we have seen some businesses go in the opposite direction. Instead of investing in protections for workers and customers, <a href="https://www.npr.org/2022/03/24/1088669929/airlines-federal-travel-mask-mandate">airline CEOs have demanded</a> that <a href="https://edmonton.citynews.ca/2022/06/02/westjet-air-travel-restrictions/">mask mandates be ended</a> and business leaders have been <a href="https://www.insauga.com/travel-industry-calls-for-end-to-covid-19-measures-at-mississaugas-pearson-airport/">some of the most vocal advocates</a> of going “back to normal.”</p>
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<img alt="A worker pushing a row of shopping carts towards the entrance of a store" src="https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/475480/original/file-20220721-14484-kvgeej.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">At the start of the pandemic, many companies provided frontline workers with extra pay to both incentivize and thank them for putting their lives at risk for their job.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
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<p>It appears as though businesses found it easier to be socially responsible when there was a clear social consensus about COVID-19 and governments were willing to provide clear guidance. But now, more than ever before, it is time for businesses to step up.</p>
<h2>Fighting the lonely fight</h2>
<p>We expect businesses to be more socially and environmentally responsible by minimizing greenhouse gas emissions and eliminating socially harmful business practices, such as sweatshop labour — why don’t we do the same for COVID-19? </p>
<p>We should be applying similar pressures to businesses that are unwilling to mandate masks for employees and customers during surges, thereby contributing to spread of COVID-19.</p>
<p>Similarly, we should commend the businesses that are fighting the lonely fight to protect customers and employees. Chapman’s Ice Cream, for instance, has promoted vaccination among its employees and paid for regular testing for those who refuse to be vaccinated. As a result, it has become a frequent <a href="https://www.cbc.ca/news/canada/london/chapmans-ice-cream-1.6447871">target for anti-vaxxers</a>. </p>
<p><a href="https://www.restaurantji.com/on/mississauga/the-apricot-tree-cafe-/">Apricot Tree Café</a>, a restaurant in Mississauga, Ont., has sought to ensure safety for its staff and patrons by investing in <a href="https://www.thestar.com/news/gta/2022/03/11/one-restaurants-fight-against-covid-15000-four-filters-and-a-co2-monitor.html">HEPA filters and carbon dioxide monitors</a>. These practices are <a href="https://www.canada.ca/en/public-health/services/diseases/2019-novel-coronavirus-infection/guidance-documents/guide-home-ventilation-covid-19-pandemic.html">recognized by public health experts as crucial for combating airborne pathogens</a>, such as SARS-CoV-2, the virus causing COVID-19. </p>
<p>More businesses should take inspiration from these two companies and make good on their commitment to corporate social responsibility. If companies truly care for their employees and customers, they will prioritize their safety and well-being.</p>
<h2>Business schools have a role to play</h2>
<p>There is a key voice that has been missing from this conversation — business schools. This silence might be because business schools, like any other faculty, defer to university administrators to implement government-mandated COVID-19 health and safety policies. </p>
<p>At the same time, health and safety issues have not been identified as a “business issue,” unlike forced labour or climate change, both of which have been identified as business responsibilities. This needs to change.</p>
<p>Business schools cannot remain silent in the face of society’s ongoing failure to address a crisis that is vastly disruptive, despite widespread availability of solutions, including masking in crowded spaces, improving ventilation, offering sick days to employees and encouraging or mandating up-to-date <a href="https://hbr.org/2021/09/why-business-leaders-need-to-mandate-the-covid-19-vaccine">vaccination regimens</a>. </p>
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<span class="caption">Business schools have the responsibility to ensure future business leaders are aware of and ready to take on current and emerging global challenges, including pandemics.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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<p>Business schools conduct cutting edge research and educate future business leaders. They have the responsibility to ensure leaders are aware of and ready to take on current and emerging “<a href="https://doi.org/10.5465/amj.2016.4007">grand challenges</a>,” like the <a href="https://health-infobase.canada.ca/covid-19/inequalities-deaths/index.html">rampant inequality</a> that has been <a href="https://www.scientificamerican.com/article/covid-has-made-global-inequality-much-worse/">exacerbated by the pandemic</a>. </p>
<p>Business schools should lead by example by modelling best business practices and equipping future business leaders with the skills to tackle the issue of health and safety as a business responsibility — even beyond the current pandemic. Speaking up and taking the lead on public health and safety will prove that the business world is ready and willing to take on other pressing issues, like climate change.</p>
<p>Carrying out voluntary actions for social good is not easy and, in our increasingly polarized society, these efforts may alienate some stakeholders. For example, customers that just want to “move on” from the pandemic might be displeased by businesses imposing mask mandates, but that is the essence of corporate social responsibility — doing the right thing, even when it’s hard.</p><img src="https://counter.theconversation.com/content/187136/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Maxim Voronov receives funding from Social Sciences and Humanities Research Council of Canada (SSHRC). </span></em></p><p class="fine-print"><em><span>Burkard Eberlein receives funding from the Social Sciences and Humanities Research Council of Canada (SSHRC).</span></em></p>We expect businesses to be more socially and environmentally responsible by minimizing greenhouse gas emissions and eliminating harmful business practices — why don’t we do the same for COVID-19?Maxim Voronov, Professor of Organization Studies and Sustainability, York University, CanadaBurkard Eberlein, Professor of Public Policy and Sustainability, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1827462022-05-18T19:46:17Z2022-05-18T19:46:17ZCompanies leaving Russia are caving to public pressure, not actually making a difference<figure><img src="https://images.theconversation.com/files/464051/original/file-20220518-12-4dw01i.jpg?ixlib=rb-1.1.0&rect=0%2C55%2C5318%2C3484&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A closed Mango store in a shopping mall in St. Petersburg, Russia. The company temporarily suspended operations in Russia in March to protest the invasion of Ukraine, joining a global corporate boycott against the country.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><iframe style="width: 100%; height: 100px; border: none; position: relative; z-index: 1;" allowtransparency="" allow="clipboard-read; clipboard-write" src="https://narrations.ad-auris.com/widget/the-conversation-canada/companies-leaving-russia-are-caving-to-public-pressure--not-actually-making-a-difference" width="100%" height="400"></iframe>
<p>This week, <a href="https://corporate.mcdonalds.com/corpmcd/en-us/our-stories/article/ourstories.mcd-exit-russia.html">McDonald’s announced</a> its final exit from Russia, making it one of almost <a href="https://som.yale.edu/story/2022/almost-1000-companies-have-curtailed-operations-russia-some-remain">1,000 western companies that have partly, or entirely, ceased operations in Russia</a>. They did so, not just to comply with sanctions, but as a voluntary reaction to the war. </p>
<p>In some ways, it is textbook <a href="https://csr.fajrjam.ir/my_doc/fajrjam/csr/books/The%20ICCA%20handbook%20on%20corporate%20social%20responsibility.pdf#page=40">corporate social responsibility</a> — a form of self-regulation in which companies make commitments to the broader social good. </p>
<p>In this case, many companies cut ties with Russia in response to the pressure to support Ukraine from governments, investors, consumers, competitors and the general public. Some even made hefty <a href="https://www.ft.com/content/4d66f931-563a-4fdb-9032-18cffa73a7f6">financial sacrifices</a>. McDonald’s, for example, <a href="https://www.ft.com/content/21a9a482-3a87-42b4-8c70-81b3a25bbcea">expects a hit of up to US$1.4 billion</a>.</p>
<p>I challenge this move by western corporations because it follows dubious ethical judgments. The apparent “social good” created by businesses exiting Russia is anything but clear and should be examined with a critical eye.</p>
<h2>The immoral moral argument</h2>
<p>Companies that provide goods and services used directly in the war, <a href="https://www.economist.com/graphic-detail/2022/05/09/how-companies-exiting-russia-are-faring">including the financial services that fund it</a>, do have an immediate responsibility. It makes sense for certain companies to cease operations in Russia if they directly enable the invasion of Ukraine — financially, technologically or otherwise.</p>
<p>However, producing or consuming a Uniqlo sweater, a Happy Meal or a Renault Clio, has no effect on the war itself. The only impact corporate exits might have are on Russian <a href="https://www.ft.com/content/8d946204-6c74-4bfb-a649-c0335557b4ed">suppliers</a>, <a href="https://www.ft.com/content/86144c9c-2258-4b9c-a0ad-ea8d63b7000f">employees and communities</a>. The rights and interests of the Russian stakeholders of western-owned companies do not seem to matter.</p>
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<img alt="A sign that says 'We Will No Longer Serve Russian Vodka'" src="https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&rect=61%2C0%2C6839%2C4555&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463764/original/file-20220517-16-cgqoxp.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">A sign outside a bar in Michigan declares it will stop serving Russian vodka, presumably to protest the Russian invasion of Ukraine.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
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</figure>
<p>Some proponents have <a href="https://insights.som.yale.edu/insights/why-the-business-retreat-from-russia-matters">compared today’s situation to the boycott of South Africa</a> during apartheid when <a href="https://www.nytimes.com/1984/12/13/business/us-companies-bolster-anti-apartheid-code.html">American and European companies had to implement anti-apartheid laws</a> in their South African manufacturing plants and sales operations. </p>
<p>The corporate exit and boycott in South Africa during that time period was designed to stop companies from being directly complicit in apartheid. It is much harder to establish a similarly direct connection between selling <a href="https://www.cbc.ca/news/business/mcdonald-s-russia-1.6454907">McDonald’s burgers</a> or <a href="https://www.brickfanatics.com/lego-seemingly-still-operating-in-russia/">Lego toys</a> and the Russian invasion of Ukraine.</p>
<h2>Company responsibility</h2>
<p>How much, then, are companies responsible for the actions of their governments? To answer this, we can look to the <a href="https://www.smithsonianmag.com/history/is-china-committing-genocide-against-the-uyghurs-180979490/">genocide of the Uyghur minority</a> in China. Many displaced Uyghurs are currently working as forced labour for <a href="https://www.forbes.com/sites/siminamistreanu/2020/03/02/study-links-nike-adidas-and-apple-to-forced-uighur-labor/?sh=5cdac1ae1003">western companies</a>. No such call for corporate boycotting have been made there. </p>
<p>There is a clear double standard about which wars and atrocities are widely condemned and which are not. There are <a href="https://worldpopulationreview.com/country-rankings/countries-currently-at-war">20 ongoing wars happening around the world</a> as we speak. Which of them qualify for a corporate boycott? </p>
<figure class="align-center ">
<img alt="Protesters wearing masks and holding signs accusing Apple of using forced labour" src="https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463771/original/file-20220517-16-io4wjh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Protesters stage a mock ‘Uyghur forced labour camp’ outside the flagship Apple store on March 4, 2022, in Washington, to highlight the alleged use of illegal forced Uighur labour in its supply chain.</span>
<span class="attribution"><span class="source">(AP Photo/Manuel Balce Ceneta)</span></span>
</figcaption>
</figure>
<p>Saudi Arabia’s role in the war in Yemen, which has resulted in at least <a href="https://www.cfr.org/global-conflict-tracker/conflict/war-yemen">230,000 fatalities</a> since 2015, has never been scrutinized. Such ethical assignments of corporate responsibility are arbitrary and questionable.</p>
<p>But Ukraine is more relevant to the West, as <a href="https://www.theguardian.com/commentisfree/2022/mar/02/civilised-european-look-like-us-racist-coverage-ukraine">mainstream news media has illustrated</a>, because Ukrainians “look like us,” with their “blond hair and blue eyes” who “pray like us” and “drive cars like we do.” Boycotting Russia based on this type of external pressure is just pandering to racism.</p>
<h2>Which side is the ‘good guy’ in this war?</h2>
<p>War is reprehensible in all its forms. The ultimate question for corporate engagement, however, is the moral status of the reasons for war. Who are the bad guys? Who deserves the punishment of sanctions?</p>
<p>On the one hand the <a href="https://www.nytimes.com/interactive/2022/04/07/opinion/companies-ukraine-boycott.html">mainstream consensus seems to be</a> that Russia is aggressively attempting to rebuild the Soviet empire, ignoring the territorial integrity of Ukraine.</p>
<p>On the other hand, there are a number of arguments that challenge this. Russia started the invasion to <a href="https://www.newyorker.com/news/news-desk/why-is-russia-threatening-to-invade-ukraine">prevent Ukraine from joining NATO</a>. Last week, the U.S. and Australia threatened military action <a href="https://www.theguardian.com/world/2022/apr/26/us-wont-rule-out-military-action-if-china-establishes-base-in-solomon-islands">in the tiny Solomon Islands</a> if that government allows China to have military presence there. If the U.S. considers what goes on 12,000 kilometres away from its borders a threat, how can we expect Russia to agree to NATO presence right on its doorstep? </p>
<figure class="align-center ">
<img alt="Protesters drenched in red paint standing outside a retail store." src="https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=502&fit=crop&dpr=1 754w, https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=502&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/463763/original/file-20220517-22-t5keyb.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=502&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Activists protest outside an outlet of French home improvement retailer Leroy Merlin in Warsaw, Poland, on May 7, 2022. Protests have been held across Poland over the company’s decision to keep operating its stores in Russia.</span>
<span class="attribution"><span class="source">(AP Photo/Pawel Kuczynski)</span></span>
</figcaption>
</figure>
<p>Political scientist <a href="https://www.economist.com/by-invitation/2022/03/11/john-mearsheimer-on-why-the-west-is-principally-responsible-for-the-ukrainian-crisis">John Mearsheimer has written about</a> the historical reasons to empathize with Russian anxieties — including tracing the roots of the NATO conflict back to 2008 when George W. Bush’s administration began pushing for Ukraine to become a member — while still placing the initial responsibility for the war on President Vladimir Putin’s shoulders.</p>
<p>By sanctioning Russia, companies take a moral position in this war: Russia is the bad guy and deserves punishment. I argue that this situation is much more ambiguous and that the ethics of such a position is dubious at the very least — as is the social good coming out of this form of corporate social responsibility.</p>
<h2>Being ‘woke’ is profitable</h2>
<p>The commitments to social responsibility and ethical values of a Russian exit are little more than hypocrisy. Ultimately, corporations do these things to remain profitable, in our case, by giving in to pressure from their <a href="https://www.economist.com/graphic-detail/2022/05/09/how-companies-exiting-russia-are-faring">investors, employees and consumers</a>.</p>
<p><a href="https://www.heritage.org/progressivism/heritage-explains/woke-corporate-capitalism">“Woke” corporations</a>, as <a href="https://www.vivekramaswamy.com/wokeinc">Vivek Ramasamy</a> or <a href="https://theconversation.com/prince-harrys-critics-have-a-point-woke-capitalism-is-no-solution-158132">Carl Rhodes</a> would suggest, do this because they know that maintaining an ethical veneer is good for the bottom line. Whether exiting Russia will actually achieve any social good, such as ending the war, is largely sidelined.</p>
<p>It is perfectly legitimate to demand greater social responsibility and ethical conduct from business. We need more of it. But publicly pressuring businesses to undertake responsibilities that can only be addressed by governments and the democratic process is the wrong way to get there.</p><img src="https://counter.theconversation.com/content/182746/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dirk Matten does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We should demand greater social responsibility from businesses, but pressuring them to undertake responsibilities that only governments can address is the wrong way to get there.Dirk Matten, Associate Dean Research, Professor of Sustainability, Hewlett-Packard Chair in Corporate Social Responsibility, Schulich School of Business, York University, CanadaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1778832022-03-08T18:56:10Z2022-03-08T18:56:10ZArtificial intelligence and corporate social responsibility can strengthen anti-corruption efforts<figure><img src="https://images.theconversation.com/files/450789/original/file-20220308-27-1g7ieyt.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C8126%2C5413&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bribery of foreign public officials is of particular concern for Canada, considering the tendency for Canadian multinationals to engage in bribery and corruption in the Global South.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>In previous years, Canada’s ranking among the top 10 countries on the <a href="https://www.transparency.org/en/cpi/2020">Transparency International Corruption Perception Index</a> gave the impression that Canada was a country relatively clean of corruption. </p>
<p>However, Canada has slipped in the rankings in recent years, coming in at <a href="https://www.transparency.org/en/news/cpi-2020-americas">No. 11 in 2020</a> and <a href="https://www.transparency.org/en/cpi/2021">13 in 2021</a>. This gradual decline has been attributed to, among other things, <a href="https://www.transparency.org/en/publications/exporting-corruption-2020">Canada’s limited enforcement</a> of the <a href="https://www.oecd.org/corruption/oecdantibriberyconvention.htm">Organization for Economic Co-operation and Development (OECD) Anti-Bribery Convention</a>, an anti-corruption convention that requires countries to criminalize the bribery of foreign public officials.</p>
<figure class="align-center ">
<img alt="Two hands ripped a Canadian flag in half" src="https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=300&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=300&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=300&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=377&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=377&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450135/original/file-20220305-23-1r03pqg.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=377&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Canada’s rank on corruption index has fallen over the past few years, coming in at No. 13 last year. Canada’s descent to 77 in 2020 from 82 in 2017 is among the fastest over that five-year period.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Bribery of foreign public officials is of particular concern for Canada, considering the <a href="https://www.theglobeandmail.com/opinion/article-how-canada-helps-advance-global-corruption/">tendency for Canadian multinationals to engage in bribery and corruption</a> in the Global South where <a href="https://www.weforum.org/agenda/2019/12/corruption-global-problem-statistics-cost/">corruption is rampant</a> and <a href="https://www.transparency.org/en/projects/strengthening-enforcement-of-the-oecd-anti-bribery-convention-1">anti-bribery enforcement is lax</a>.</p>
<p>Given that this is an ongoing concern, how then can companies conduct business responsibly? In addition to legislative instruments, such as the <a href="https://laws-lois.justice.gc.ca/eng/acts/c-45.2/">Corruption of Foreign Public Officials Act</a>, the OECD convention and the <a href="https://laws-lois.justice.gc.ca/eng/acts/e-22.7/page-1.html">Extractive Sector Transparency Measures Act</a>, I suggest that companies should explore how an integrated corporate social responsibility (CSR) and artificial intelligence (AI) approach can help mitigate corruption risks. </p>
<h2>CSR and corporate corruption</h2>
<p>CSR is a stakeholder-focused approach to business that encourages corporations to make <a href="https://www.worldcat.org/title/corporate-social-responsibility/oclc/271387960?referer=di&ht=edition">voluntary contributions</a> to the sustainable development and improvement of society. This goes beyond legal and regulatory requirements to voluntary, self-regulatory actions taken by corporations. </p>
<p>Using CSR as an anti-corruption tool involves reinforcing the need for companies to <a href="https://doi.org/10.4324/9780429197352">fill governance gaps in anti-corruption regulation</a> and not exploit the lack of adequate legal and institutional frameworks when operating in the Global South. </p>
<p>Adopting this approach means companies have to go beyond the bare minimum, by not just complying with anti-corruption legislation, but viewing anti-corruption as a social responsibility. Doing so will centre transparency and accountability at the heart of a company’s operations, and communicate to stakeholders and shareholders that the company places a premium on these values. </p>
<p>An anti-corruption CSR paradigm will infuse meaning and purpose into corporate anti-corruption programs by ensuring that anti-corruption codes, clubs and disclosure mechanisms are not merely box-ticking exercises, but part and parcel of the way a company does business. </p>
<p>In terms of the effectiveness of CSR measures, studies show that <a href="https://doi.org/10.1016/j.jcae.2018.02.002">corporate governance processes that incorporate CSR, deter corruption</a>, provided that institutional frameworks are effective and freedom of the press is guaranteed. </p>
<p>Despite these benefits, further studies reveal that <a href="https://doi.org/10.5235/147359711798110619">most companies do not view CSR as an anti-corruption tool and are not incorporating it into their governance processes</a>. </p>
<h2>AI and corporate corruption</h2>
<p>In addition to CSR, there has been much excitement about the future of AI in anti-corruption work. AI has increasingly become a part of our daily lives, from digital assistants like Siri and Alexa, to self-driving cars like Teslas and ride-hailing applications like Uber. </p>
<p>Given that AI has been useful in so many ventures, anti-corruption scholars are eager to apply it to their work. In fact, AI has been described as “<a href="https://www.oxfordinsights.com/insights/aiforanticorruption">the next frontier in anti-corruption</a>.”</p>
<figure class="align-center ">
<img alt="A person playing video games on a touch screen while sitting in the driver's seat" src="https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/450134/original/file-20220305-27-1cn3uym.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Artificial intelligence, like the chips Tesla is developing for its self-driving cars, has been described as the next frontier in anti-corruption.</span>
<span class="attribution"><span class="source">(AP Photo/Gillian Flaccus)</span></span>
</figcaption>
</figure>
<p><a href="https://www.u4.no/publications/artificial-intelligence-a-promising-anti-corruption-tool-in-development-settings">AI holds a number of benefits for anti-corruption work</a>, and is particularly good at <a href="https://doi.org/10.48550/arXiv.2102.11567">detecting corrupt activities</a> that were formerly undetectable by human efforts — all at a much faster rate. </p>
<p>For example, the <a href="https://www.oxfordinsights.com/mexico/">Tax Administration Services of Mexico</a> used AI algorithms and analytical tools to detect 1,200 fraudulent businesses and 3,500 fraudulent transactions within a three-month period. This would have taken about 18 months to achieve without AI assistance.</p>
<p>However, AI and anti-corruption discussions so far have mostly focused on governmental efforts to address corporate corruption, not on companies using AI to mitigate corporate corruption — even though many of them already use AI to maximize profit. </p>
<p>In the corporate anti-corruption context, AI can provide companies with a proposed investment destinations or transactions and help <a href="https://www.coalitionforintegrity.org/wp-content/uploads/2021/04/AI_report_2021_postprinting.pdf">detect corruption risks</a> in such ventures and improve due diligence processes. </p>
<p>AI can also provide more information for yearly anti-corruption policy reviews and assist in designing training based on AI analyses of company processes, reports and operations. </p>
<h2>Next steps</h2>
<p>However, there are ethical concerns that arise from AI use. <a href="https://www.u4.no/publications/artificial-intelligence-a-promising-anti-corruption-tool-in-development-settings">These concerns include</a> violations of the right to privacy and freedom of expression, AI data biases or the replication of bias in AI. There are also concerns that such technologies in themselves can be used as tools to <a href="https://doi.org/10.1016/j.infoecopol.2021.100950">facilitate corruption</a> as corrupt persons may use AI to fine-tune their processes.</p>
<p>The <a href="https://www.youtube.com/watch?v=2prrNVaD-Nc">Brazilian machine learning application called MARA</a> is a case study in such concerns. This application involves evaluating the probability of an individual acting corruptly based on data retrieved from their social security number. </p>
<p>This raises privacy concerns, considering social security numbers contain sensitive information. The application also depends on criminal conviction data, which may be biased since marginalized groups are often over-represented in the criminal justice system. An application like MARA is <a href="https://doi.org/10.48550/arXiv.2102.11567">likely to proliferate this bias</a>.</p>
<p>While CSR can help establish a culture founded on transparency and accountability, AI tools can assist companies in implementing these values within the organization. Companies should explore an integrated approach, while taking into consideration the challenges that arise with the use of AI.</p><img src="https://counter.theconversation.com/content/177883/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Oludolapo Makinde receives funding from the Law Foundation of British Columbia. </span></em></p>While social responsibility can help establish a culture founded on transparency and accountability, AI tools can assist companies in implementing these values within the organization.Oludolapo Makinde, Doctoral Student in Law, University of British ColumbiaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1624172021-06-16T20:06:05Z2021-06-16T20:06:05ZCatholic Church response to sexual abuse must centre on survivor well-being, not defensiveness<p>In light of the recent discovery of <a href="https://www.cbc.ca/news/canada/british-columbia/tk-eml%C3%BAps-te-secw%C3%A9pemc-215-children-former-kamloops-indian-residential-school-1.6043778">215 Indigenous children in unmarked graves at a former Catholic-run residential school in British Columbia</a> and <a href="https://www.cbc.ca/news/canada/saskatoon/battlefords-agency-tribal-chiefs-inc-star-blanket-cree-nation-saskatchewan-residential-school-1.6061615">investigations</a> at other former <a href="https://www.cbc.ca/news/canada/nova-scotia/search-shubenacadie-residential-school-site-1.6053292">residential schools</a>, there have been <a href="https://nationalpost.com/news/canada/first-nation-calls-on-catholic-church-to-apologize-for-residential-schools-and-release-records-on-kamloops">renewed calls</a> <a href="https://www.ctvnews.ca/canada/catholic-community-leaders-call-on-pope-francis-to-apologize-for-residential-schools-1.5461469">for the Pope</a> to apologize for residential schools and for the Catholic Church to <a href="https://www.cbc.ca/news/canada/north/church-apology-residential-schools-nwt-1.6059151">release its records</a>. </p>
<p>The story has also turned public scrutiny on how the Catholic Church has responded to other calls <a href="https://www.ctvnews.ca/canada/how-has-the-catholic-church-addressed-residential-school-abuses-and-what-is-expected-now-1.5463009">to apologize and be accountable to victims in cases of sexual abuse</a> both in <a href="https://www.ecaglobal.org/survivors-call-out-pope-francis-over-the-discovery-of-215-indigenous-residential-school-children-buried-without-dignity">residential schools and throughout the church</a>. </p>
<p>In 2020, I received a <a href="https://news.smu.ca/news/2020/7/22/saint-marys-research-in-psychology-management-and-history-receives-federal-funding">federal grant</a>
to study the Catholic Church as an organization that can be engaged in potentially contradictory practices to their principles, mission and values. This includes examining the content of websites and electronic documents — including safe and responsible ministry policies, protocols and codes of conduct — of the 18 Catholic archdioceses across Canada. Chiedza Chigumba, a doctoral student at Saint Mary’s University, is working with me as a research assistant on the project. </p>
<p>The guidelines on clergy sexual abuse issued by the Canadian Conference on Catholic Bishops, which were updated in 2018, state that “<a href="https://www.cccb.ca/wp-content/uploads/2019/04/Protecting_Minors_2018.pdf">victims must come first</a>.”</p>
<p>But preliminary research has provided some evidence of how parts of the church are trapped within defensive and legalistic language in their policies and codes of conduct related to preventing, addressing and reporting sexual abuse.</p>
<p>A main implication is that not only is it time for church leaders to better walk the talk of <a href="https://www.usccb.org/beliefs-and-teachings/what-we-believe/catholic-social-teaching/option-for-the-poor-and-vulnerable">putting the needs of the vulnerable</a> and victims first, it is also time to change the tone of the talk.</p>
<p>The church must move towards a victim-focused and <a href="https://www.cdc.gov/cpr/infographics/6_principles_trauma_info.htm">trauma-informed</a> language and corresponding practices of accountability dedicated to acknowledging and transforming a church culture of denialism, complicity, conformity and protectionism. </p>
<figure class="align-center ">
<img alt="People stand outdoors holding signs, one of which says 'Ending Clergy Abuse,' in front of a basilica." src="https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=467&fit=crop&dpr=1 600w, https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=467&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=467&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=587&fit=crop&dpr=1 754w, https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=587&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/406053/original/file-20210613-73826-1b0ih1n.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=587&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Members of Ending Clergy Abuse, a global advocacy network, stand in front of St. Peter’s Square at the Vatican in 2019.</span>
<span class="attribution"><span class="source">(AP Photo/Alessandra Tarantino)</span></span>
</figcaption>
</figure>
<h2>Devastating effects</h2>
<p>Much of my earlier research involved studying business from a critical perspective, <a href="https://doi.org/10.1023/B:BUSI.0000013852.62017.0e">often involving case studies</a> of <a href="https://doi.org/10.1177/000765030104000405">irresponsible corporate practices</a>. </p>
<p>In 2010, as a practising Catholic, I blew the whistle when I learned a priest who was convicted of sexually abusing boys in the 1990s in Newfoundland was participating in ministry with young children in a Nova Scotia parish.</p>
<p>After this, I decided to explore ways in which <a href="https://doi.org/10.1080/14766086.2018.1469427">religious organizations are both unique from and similar to non-religious organizations</a> in contexts of responsible leadership. </p>
<p>Clergy sexual abuse and its coverup have resulted in devastating effects for direct victims: children, <a href="https://apnews.com/article/pa-state-wire-ap-top-news-ny-state-wire-sexual-abuse-by-clergy-religion-98682d772911617510dbfb0632c87b03">young seminarians</a>, <a href="https://theconversation.com/the-catholic-church-is-headed-for-another-sex-abuse-scandal-as-nunstoo-speak-up-111539">nuns and</a> <a href="https://aqpv.ca/wp-content/uploads/doyle_mars2011.pdf">other vulnerable</a> adults, as well as families and communities. </p>
<p><a href="https://www.pulitzer.org/winners/boston-globe-1">Investigative research</a> has found that church leaders’ response to sexual abuse charges have often prioritized concern about <a href="https://doi.org/10.1111/j.1540-6210.2010.02205.x">reputation and assets</a> <a href="https://www.rmit.edu.au/news/all-news/2017/sep/report-lifts-lid-on-catholic-church-and-child-sex-abuse">over well-being and healing of victims of abuse</a>. </p>
<h2>Trauma-informed</h2>
<p>In archdiocesan communications and policies pertaining to sexual abuse, we have noted a broadening and sanitizing of sexual abuse. Of the 10 archdioceses we have studied, only one has “Reporting Clergy Sexual Abuse” on its home page. Information on sexual abuse is most often found under a tab for “Safe Environment” on archdiocesan websites.</p>
<p>Policies mention a legal obligation to contact civil authorities when reporting sexual abuse of a minor and some mention deferring an internal investigation until after a civil investigation is completed. However, some archdiocesan webpages and policies continue to <a href="https://romancatholic.kingston.on.ca/safe-environment-policy">list only church phone numbers</a> to report misconduct <a href="https://www.archwinnipeg.ca/media/human-resources/2020-12-8_PolicyforProtectionofChildren.pdf">instead of, or in addition to</a>, providing outside contact numbers for police or child services. </p>
<p>By contrast, the Archdiocese of Vancouver recently started <a href="https://rcav.org/safe-environment/reporting-abuse">using an independent third-party to report abuse by clergy</a>.</p>
<p>In most Canadian archdioceses we have studied so far, <a href="https://en.archoc.ca/documents/2021/5/210503%20Protocol%20for%20Alleged%20Misconduct%20-%20EN-1.pdf">internal investigations and resolutions continue to be carried out by a church official</a>. </p>
<p>An obvious barrier to victims and others suspicious of abuse is in not knowing if reporting systems are safe and effective. </p>
<h2>Some gains but transparency lacking</h2>
<figure class="align-left ">
<img alt="" src="https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=647&fit=crop&dpr=1 600w, https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=647&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=647&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=813&fit=crop&dpr=1 754w, https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=813&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/406054/original/file-20210613-73475-1b6a55d.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=813&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The narrative is more often focused on church crisis rather than a crisis for the abused.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Darryl Dyck</span></span>
</figcaption>
</figure>
<p>Many policies now include a statement of commitment to pastoral support for victims. However, we found that some policies and protocols appear to be buried in a place where people consulting other guidelines for pastoral services might not come across them, such as under a tab for “<a href="https://www.halifaxyarmouth.org">Admin Services</a>.”</p>
<p>Very few archdioceses mention a specific person or office dedicated to victim assistance.</p>
<p>In addition, there is little to no information on care and assistance to secondary victims, such as families and communities. None of the archdioceses we have studied so far include a policy on public transparency to notify the surrounding community of credible or substantiated allegations. </p>
<p>As well, the narrative is more often focused on church crisis rather than a crisis for the abused. In the Canadian Conference on Catholic Bishops <a href="https://www.cccb.ca/wp-content/uploads/2019/04/Protecting_Minors_2018.pdf">2018 guidelines on protecting minors from sexual abuse</a>, the word crisis was used in reference to the church or the accused priest in all but one of 40 occurrences. </p>
<p>We also found a common narrative of collective responsibility and collective blame within church language. However, a focus on collective responsibility and penance can distract from individual leader accountability — and also from prioritizing justice and care for the victim-survivor. </p>
<h2>Recent changes</h2>
<p>The <a href="https://press.vatican.va/content/salastampa/en/bollettino/pubblico/2021/06/01/210601b.html">recent changes</a> announced this month <a href="https://www.nytimes.com/2021/06/01/world/europe/vatican-priests-sexual-abuse.html">to the Vatican’s Code of Canon Law</a> (the official rules and regulations of the Catholic Church) on abuse, and a new <a href="https://www.cccb.ca/media-release/new-canadian-reporting-system-for-sexual-abuse-or-cover-up-by-a-catholic-bishop-furthers-the-commitment-of-the-catholic-church-in-canada-to-protect-minors-and-vulnerable-persons-from-sexual-abuse/">system recently announced by the Canadian Conference for Catholic Bishops on reporting sexual abuse or coverups</a> have some positive elements, such as expanding the scope of <a href="https://www.cbc.ca/news/world/vatican-updates-law-criminalize-abuse-adults-1.6048626">abuse to vulnerable adults</a>. However, to date, <a href="https://www.thetablet.co.uk/news/14218/abuse-law-overhaul-disappoints-survivors">survivors and advocates</a> have said these <a href="https://www.cbc.ca/news/canada/windsor/catholic-church-unveils-sexual-abuse-reporting-system-1.6018920">changes are disappointing</a>.</p>
<p>Developments in the global church, such as German Cardinal Reinhard Marx <a href="https://www.americamagazine.org/faith/2021/06/09/cardinal-reinhard-marx-resignation-catholic-church-germany-240824">recently offering his resignation, accepting personal and institutional responsibility for the systemic failures of the Catholic church in preventing sexual abuse</a>, represent a sign of accountability and truth, but also highlight the urgent need for reform. </p>
<figure class="align-center ">
<img alt="A man in a priest's collar and with a beard speaks with some reporters and a crowd." src="https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=397&fit=crop&dpr=1 600w, https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=397&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=397&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=499&fit=crop&dpr=1 754w, https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=499&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/406040/original/file-20210613-13-k7fihi.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=499&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Cardinal Reinhard Marx, left, in Rome, meets with members of Ending Clergy Abuse in 2019.</span>
<span class="attribution"><span class="source">(AP Photo/Alessandra Tarantino)</span></span>
</figcaption>
</figure>
<h2>Looking ahead</h2>
<p>We will provide a full review of archdiocesan policies once this research is completed. However, it is already apparent the following is needed: centring victim representation and consultation in all relevant processes; appointing a dedicated office for victim assistance; listing civil authorities as first contacts when reporting abuse; and implementing transparency policies.</p>
<p>Our preliminary research also points to the need for <a href="https://www.commonwealmagazine.org/who-represents-laity">lay people</a> — church members <a href="https://www.vatican.va/archive/compendium_ccc/documents/archive_2005_compendium-ccc_en.html">who aren’t clergy</a> — to work towards safer and more accountable Catholic communities.</p>
<p>Lay-led organizations such as <a href="https://www.votf.org/">Voice of the Faithful</a> and <a href="https://www.catholicwhistleblowers.com/">The Catholic Whistleblowers</a> draw on <a href="https://www.vatican.va/archive/hist_councils/ii_vatican_council/documents/vat-ii_const_19651207_gaudium-et-spes_en.html">their Catholic faith and teachings</a> to seek to empower lay Catholics.</p>
<p>The research also suggests how a need for <a href="https://www.ctvnews.ca/politics/trudeau-calls-on-catholic-church-to-take-responsibility-for-residential-schools-1.5456612">greater public accountability</a> from the Catholic Church is connected to the need to <a href="https://www.macleans.ca/news/canada/one-priests-message-to-the-church-shut-your-mouth-and-just-listen">change internal church norms</a> <a href="https://www.theglobeandmail.com/canada/article-members-of-catholic-community-call-on-leadership-to-address">and relationships</a> — and to raise awareness of the wider society’s urgent quest for justice, truth, healing and reconciliation.</p><img src="https://counter.theconversation.com/content/162417/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Cathy Driscoll receives funding from SSHRC.
Cathy Driscoll is Co-chair of Development and Peace - Caritas Canada Halifax-Yarmouth Council</span></em></p>Research on how the Catholic Church has responded to sexual abuse shows it’s not only time for the church to walk the talk, but to change the talk away from a defensive legalistic approach.Cathy Driscoll, Professor, Department of Management, Saint Mary’s UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1573832021-03-19T13:52:53Z2021-03-19T13:52:53ZDanone’s CEO has been ousted for being progressive – blame society not activist shareholders<figure><img src="https://images.theconversation.com/files/390395/original/file-20210318-21-p9ywue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Mmmmmm. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/los-angeles-california-usa-12-june-1425790226">Il.studio</a></span></figcaption></figure><p>Danone’s chief executive and chairman, Emmanuel Faber, <a href="https://www.reuters.com/article/us-danone-management-idUSKBN2B60PN">is to step down</a> after activist shareholders called for his removal. In particular Artisan Partners and Bluebell Capital Partners, which together <a href="https://www.just-food.com/news/us-investor-artisan-partners-return-to-attack-on-danone_id145285.aspx#:%7E:text=In%20a%20letter%20to%20the,both%20currently%20held%20by%20Faber%2C">own less than 6%</a> of the Paris-based food giant, <a href="https://www.reuters.com/article/us-danone-m-a-bluebell-idUSKBN29N1VL">explicit requested</a> the board find a replacement.</p>
<p>They <a href="https://www.ft.com/content/2df158fb-357a-499a-b51c-025b4f1d5c97">blame Faber</a> for “a combination of poor operational record and questionable capital allocation choices”. <a href="https://www.ft.com/content/2df158fb-357a-499a-b51c-025b4f1d5c97">Bluebell</a> said that Faber’s Danone “did not manage to strike the right balance between shareholder value creation and sustainability”. </p>
<p>It was well known that for the chief executive of Danone, whose brands include Actimel, Alpro and Evian, the goal was to balance purpose with profit. “<a href="https://fortune.com/2020/07/07/for-danones-ceo-stakeholder-capitalism-is-a-fact/">Stakeholder Capitalism is a Fact</a>” was the title of a Fortune Magazine article published about him in July 2020. This was encapsulated in Danone’s logo, with a child looking up at a star next to the strapline, “One Planet. One Health”.</p>
<p>Unfortunately Danone’s share performance has been very weak compared to rivals Nestlé and Unilever. Danone is perceived to have cared more about people, the planet and social responsibility than its shareholders, and Faber is paying the price. If we measure a strategy’s success by the extent to which the shareholders accept it, “One Planet. One Health” has been a failure.</p>
<p>To many <a href="https://www.linkedin.com/search/results/content/?keywords=danone%20stakeholder%20capitalism%20&origin=CLUSTER_EXPANSION">it seems unfair</a> that old-fashioned capitalism, targeting short-term gains, has been defeated here by the idea of a new form of stakeholder capitalism in which companies pursue the interests of employees, society and future generations, at the expense of investors. They are partly right but partly wrong, and even insofar as they are right they are blaming the wrong people. Let me explain. </p>
<h2>Shareholders and the long term</h2>
<p>Doing what shareholders want is not incompatible with other stakeholders – rather, the opposite. Long-term shareholders are more long-termist than any other stakeholders in an organisation. Customers can take their business elsewhere; employees can change jobs when they do not share the company’s values. </p>
<p>Yes, there are so-called “short-term” shareholders. But they are not the majority of pension funds and mutual funds who hold most publicly traded shares and want to preserve the long-term value of a company. </p>
<p>Even institutions focused on short-term gains require stupid investors on the other side. If Artisan wants to hold Danone’s stock for just months, it will have to sell to someone. And if the stock has been inflated via a short-termist strategy, who will buy it?</p>
<p><strong>Food giants’ share performance</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=345&fit=crop&dpr=1 600w, https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=345&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=345&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=434&fit=crop&dpr=1 754w, https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=434&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/390404/original/file-20210318-13-1y0c67b.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=434&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Danone = blue, Nestlé = orange, Unilever = turquoise.</span>
<span class="attribution"><a class="source" href="https://uk.tradingview.com/chart/UajHAaVc/">Trading View</a></span>
</figcaption>
</figure>
<p>It is worth reflecting on Nestlé here. In July 2018, activist shareholder Daniel Loeb from US investor Third Point Management sent an <a href="https://www.10xebitda.com/wp-content/uploads/2020/03/Third-Point-Nestl%C3%A9-Presentation-July-2018.pdf">angry letter</a> to Nestlé’s chief executive, Mark Schneider, following a similarly dismal share performance. </p>
<p>Schneider, a newcomer to the largest consumer goods company in the world, had implemented a strategy based on diversifying away from Nestlé’s traditional business of coffee and chocolate into health science. <a href="https://www.reuters.com/article/us-nestle-thirdpoint-loeb-analysis-idUSKBN1JS2P8">Third Point wanted</a> Nestlé to sell off certain businesses, while arguing that it should take on more debt to take advantage of low interest rates. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Nestle logo with an ice cream" src="https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/390401/original/file-20210318-21-7upzuw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Nestle’s CEO changed tack to avoid being wafered.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/logstor-denmark-august-23-2017-nestle-1034893138">ricochet64</a></span>
</figcaption>
</figure>
<p><a href="https://www.euronews.com/2019/02/21/hedge-fund-third-point-praises-nestle-chief-in-letter-to-investors">Schneider complied</a> with this supposedly short-termist plan, and the share price has risen 32% since July 2018. In contrast, Danone is down 2% over the period, while Unilever has only gone up 3%. Today everybody at Nestlé, <a href="https://www.flagstaffbusinessnews.com/employees-love-working-nestle-purina/">including customers and employees</a>, is extremely happy with the changes imposed by Third Point. Seen in this light, perhaps we should be congratulating Danone’s activist shareholders. </p>
<h2>Sustainability</h2>
<p>If you want to do more for other stakeholders, such as future generations, the underlying problem is the rules of governance. They <a href="https://www.begbies-traynorgroup.com/articles/director-advice/understanding-a-company-directors-fiduciary-duties-and-consequences-of-failing-these-duties">stipulate that</a> shareholders’ interests must be given top priority by company directors. I remember an executive summit in Copenhagen a couple of years ago where the chief executive of a top European company, replying to concerns about the firm’s environmental policy, candidly said that if he made it greener, “my profit margin would fall 3% per year, my stock price would fall 15%, and I would get fired”. </p>
<p>Stakeholder capitalism ultimately needs enforced by politicians, and politicians are chosen by people. If western democracies are mostly run by political parties fostering traditional capitalism, it is our fault – it is because most people do not want to be sustainable.</p>
<p>Danone is not the last company whose shareholders are going to rebel when the company does not create value for them. If we want a new form of capitalism, but expect executives to change the system without politicians changing national and international regulation, we have two choices.</p>
<p>The first is that companies cater to different shareholders: if you want to have a higher purpose than profit, appeal to investors who are willing to lose money to preserve society and the environment. </p>
<p>Incidentally, don’t kid yourself that you can rely instead on investment giants like Blackrock who run index funds that exclude companies that don’t meet criteria around sustainability, while <a href="https://www.cnbc.com/2020/07/17/stakeholder-capitalism-set-to-become-more-and-more-important-says-blackrocks-fink.html">claiming that</a> stakeholder capitalists will be the winners of the future. </p>
<p>These institutions manage other people’s money, and transfer the burden of sustainability to the ultimate holders of the shares. Shareholders in the new capitalism will be those willing to sacrifice personal financial gains for a social benefit. Are you one of them?</p>
<p>The second choice is to rely on innovative executives to come up with new business models that find a way to generate shareholder returns while being sustainable. This is not easy. Most business models that I see either impose the cost of sustainability on shareholders by achieving lower returns, or on suppliers by paying them less, or on customers in the form of higher prices. </p>
<p>Only a few create truly sustainable business models. For example <a href="https://www.vestergaard.com/">Vestergaard</a>, a Swiss-headquartered company, patented a product to provide clean water to rural populations in Africa which was financed by selling carbon credits. <a href="https://hbr.org/2014/10/capture-more-value">In such a model</a> customers, users, suppliers, owners and government authorities won. A chief executive running a business like that should be safe from being removed for caring too much about sustainability.</p><img src="https://counter.theconversation.com/content/157383/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Arturo Bris does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Emmanuel Faber was trying to pursue a form of stakeholder capitalism.Arturo Bris, Professor of Finance, International Institute for Management Development (IMD)Licensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1304352020-01-29T17:05:35Z2020-01-29T17:05:35ZEmployees want genuine corporate social responsibility, not greenwashing<figure><img src="https://images.theconversation.com/files/312182/original/file-20200128-81403-1emk2se.jpg?ixlib=rb-1.1.0&rect=0%2C424%2C5901%2C3498&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Employees want their companies to be genuine in their embrace of corporate social responsibility, and have no appetite for self-serving efforts. </span> <span class="attribution"><span class="source">(Unsplash)</span></span></figcaption></figure><p>Described as the “<a href="http://cup.columbia.edu/book/democracy-past-and-future/9780231137409">moral face of globalization</a>,” corporate social responsibility (CSR) initiatives focused on solving societal and environmental concerns are increasingly expected by society, especially younger generations. </p>
<p>Millennials are particularly principled, with some studies suggesting they <a href="https://www.gallup.com/workplace/238073/millennials-work-live.aspx">care more about purpose than a paycheque</a> when it comes to work. <a href="https://hiring.monster.ca/employer-resources/workforce-management/employee-retention-strategies/corporate-social-responsibility-canada/">A report by Hewitt and Associates</a> found that “corporate social responsibility can improve (the) … bottom line, in part by giving … the most engaged employees a reason to stay and work harder.”</p>
<p>That means organizations have an additional reason to engage in CSR — it has a positive impact on their own employees. </p>
<p>In fact, companies that engage in CSR report positive consequences on important outcomes such as the <a href="https://doi.org/10.5465/amj.2011.0848">appeal of the organization to job applicants</a>, employee <a href="https://doi.org/10.1080/09585190701570866">commitment to the organization</a>, <a href="https://doi.org/10.5840/beq20143206">job satisfaction</a> and <a href="https://doi.org/10.1177%2F0149206311419662">job performance</a>.</p>
<h2>Don’t fake it</h2>
<p>But companies should take notice of additional emerging research — <a href="https://doi.org/10.1111/apps.12081">employees don’t respond well</a> if they believe their organization is using CSR to give a false impression of virtue. </p>
<p>Organizations therefore must be careful to engage in CSR for the right reasons. Employees make <a href="https://doi.org/10.1111/apps.12081">judgments about why their organizations engage in CSR</a>, and they distinguish between authentic efforts and <a href="https://www.investopedia.com/terms/g/greenwashing.asp">what’s known as greenwashing</a> — CSR that is more focused on appearances than true commitment to a cause. </p>
<p>These judgments are so powerful that they affect employees’ characterizations of the organization as a whole. </p>
<p>Specifically, when employees judge their organizations’ engagement in CSR as authentic, they tend to describe it as a “giver.” Employees see these organizations as being driven by values such as helpfulness and compassion. </p>
<p>In contrast, when CSR is judged as inauthentic and self-serving, employees tend to characterize the organization as a “taker.” Employees of these organizations are more likely to see them as being driven by a focus on dominance and doing better than competitors. <a href="https://doi.org/10.1016/j.indmarman.2010.02.004">Employees trust organizations that engage in genuine CSR</a> but distrust those that engage in greenwashing. </p>
<h2>Bottom line advantage</h2>
<p><a href="https://doi.org/10.1007/s10551-017-3673-5">Research I conducted</a> with <a href="https://www.csun.edu/management/sigalit-ronen">organizational behaviourist Sigalit Ronen</a> of California State University, <a href="https://sprott.carleton.ca/2016/sprott-mourns-professor-carol-ann-tetrault-sirsly/">sustainability researcher Carol-Ann Tetrault Sirsly</a> of Carleton University and <a href="https://telfer.uottawa.ca/en/directory/professors/bonaccio-silvia">workplace psychologist Silvia Bonaccio</a> of the University of Ottawa sought to delve deeper into these findings to understand the impact of CSR on employees.</p>
<p>Specifically, we focused on important employee attitudes and performance at work, and sought to understand the underlying mechanism leading to employees’ positive reactions to CSR judged as authentic only. We also looked at whether the importance employees attach to CSR explains these findings (spoiler alert: it doesn’t, really). We instead found that employees’ judgments of the motives underlying CSR initiatives explain important workplace outcomes.</p>
<p>We found that how employees feel about their companies’ CSR initiatives has an influence on important workplace attitudes, including trust in top management, pride in the organization, job satisfaction and the meaning they ascribe to their work in a positive way. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C6000%2C3979&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/312076/original/file-20200127-81369-afg7yx.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Employees don’t like inauthentic CSR efforts by their companies.</span>
<span class="attribution"><span class="source">(Shutterstock)</span></span>
</figcaption>
</figure>
<p>Their perceptions were also related to job performance, including whether employees focused on doing well on tasks, going out of their way to help others or not engaging in behaviours that were counterproductive and detrimental to the organization. This behaviour was only present when CSR initiatives were judged as genuine.</p>
<p>We found that when employees view their organizations as engaging in CSR for genuine reasons, they feel that they work in a place that is compatible with their values and shares their goals. We call this type of compatibility <a href="https://doi.org/10.1111/j.1744-6570.1996.tb01790.x">person-organization fit</a>. </p>
<h2>Employees care about authenticity</h2>
<p>Organizations should pay attention to our results. </p>
<p>In fact, we found positive outcomes resulted from genuine CSR and negative outcomes stemmed from greenwashing, regardless of whether employees personally cared about CSR. </p>
<p>We expected employees who find organizational engagement in CSR to be important would react positively and strongly when judging their organization as genuine in their efforts, and negatively when not. But we were surprised to find similar results when employees did not attach high importance to CSR.</p>
<p>Even if employees don’t care about a particular cause to begin with, they will react to the reason they believe their organization is choosing to engage in that cause. After all, “<a href="https://psycnet.apa.org/doi/10.1037/0033-2909.117.1.21">people care less about what others do than about why they do it </a>” — and employees, apparently, have little appetite for inauthenticity.</p>
<p><em>The author would like to acknowledge the work and friendship of the late Carol-Ann Tetrault Sirsly of Carleton University. She passed away in 2016.</em></p><img src="https://counter.theconversation.com/content/130435/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Magda B.L. Donia does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Even if employees don’t care about a particular cause to begin with, they will react positively or negatively to the reason they believe their organization is choosing to engage in that cause.Magda B.L. Donia, Associate Professor, Telfer School of Management, L’Université d’Ottawa/University of OttawaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1270092019-11-17T13:13:07Z2019-11-17T13:13:07ZMcDonald’s upheaval is a stern reminder to CEOs about ethics<figure><img src="https://images.theconversation.com/files/302046/original/file-20191117-66973-1x0jyoj.jpg?ixlib=rb-1.1.0&rect=0%2C145%2C5913%2C3960&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">McDonald’s CEO Steve Easterbrook was terminated by his board after admitting to a consensual relationship with another company employee. </span> <span class="attribution"><span class="source">(Alyssa Schukar/AP Images for McDonald's)</span></span></figcaption></figure><p>The board of directors of McDonald’s recently <a href="https://www.bbc.com/news/business-50283720">announced it was terminating the employment of chief executive officer Steve Easterbrook</a> because he “demonstrated poor judgment” involving a consensual relationship with another company employee. </p>
<p>The process followed by the board in arriving at their decision appears impeccable. Once made aware of the situation by their general counsel, a highly reputable outside law firm was retained to investigate. </p>
<p>Following a three-week investigation, the board held what are described as “lengthy discussions and meetings” to consider the independent inquiry and ultimately voted unanimously to remove the CEO.</p>
<p>The factors underlying the board’s decision were described as a combination of a violation of a longstanding company policy forbidding employees having relationships with direct or indirect reports at all levels, as well as concerns that the CEO had demonstrated poor judgment regarding personal affairs and corporate conduct.</p>
<p>Following his termination, <a href="https://time.com/5717218/mcdonalds-ceo-leaves-relationship/">Easterbrook stated in an email</a> to employees: </p>
<blockquote>
<p>“Given the values of the company, I agree with the board that it is time for me to move on.”</p>
</blockquote>
<h2>CEOs are powerful</h2>
<p>The role of CEO is very powerful, and it should be. The CEO is expected to articulate strategic direction, build a strong leadership team, manage significant risks and deliver results that fulfil the expectations of many powerful stakeholders, including investors, customers, employees, communities and regulators.</p>
<p><a href="https://hbr.org/2017/05/what-sets-successful-ceos-apart">The job of a CEO at a major corporation like McDonald’s is extraordinarily demanding</a> — few people have the combination of intelligence, insight, leadership skills and stamina to fulfil it effectively.</p>
<p>At the same time, the CEO only possesses authority and influence to the extent that these have been delegated by the board. For corporations in both Canada and the United States, the authority to “manage the affairs of the corporation” is legally invested in the board. </p>
<p>Many corporate governance experts view the most important task of the board as the <a href="https://www.mckinsey.com/featured-insights/leadership/the-ceo-guide-to-boards">selection and oversight of the CEO</a>. Boards that get that right are highly likely to be successful. Those that get it wrong are usually doomed to substandard performance if not outright failure.</p>
<h2>‘Imperial’ CEOs</h2>
<p>There always is, and always has been, a risk of the board allowing and enabling the emergence of an “imperial” CEO. The risk of this occurring was greater in the past, when the norm was for the roles of CEO and board chair to be filled by the same person. </p>
<p>Today in Canada, that practice is virtually extinct among major publicly traded corporations. Interestingly, the transition away from the practice has been notably slower in the U.S., where <a href="https://www.cnbc.com/2019/11/05/its-not-just-boeing-more-companies-are-splitting-ceo-and-chairman-roles.html">47 per cent S&P 500 companies</a> still have a joint CEO/board chair. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7951%2C5304&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C7951%2C5304&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/301867/original/file-20191114-26259-1lycicu.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">CEOs are brand ambassadors.</span>
<span class="attribution"><span class="source">Andre Hunter/Unsplash</span></span>
</figcaption>
</figure>
<p>However, that can’t explain the situation at McDonald’s, where the roles have been separated for some time.</p>
<p>The McDonald’s policy forbidding personal relationships with direct or indirect employees at any level has a very sound rationale (and for the CEO, that means all employees).</p>
<p>When one party to a relationship is in a position of direct or indirect authority over the other, it’s impossible to know with certainty the extent to which the subordinate engaging in the relationship is either consciously or unconsciously acting out of deference or fear. And what if the subordinate partner in the relationship begins getting preferential treatment at work?</p>
<p>There are also <a href="https://www.bloomberg.com/graphics/2018-me-too-anniversary/">many examples</a> of situations where people in positions of authority have used the power and authority of their positions to coerce subordinates into sexual relationships. </p>
<p>That does not appear to be an issue in this case, where both parties described the relationship as consensual. There have been no allegations of sexual harassment.</p>
<h2>A question of judgment</h2>
<p>And that brings us back to the issue of judgment. Easterbrook should have known better. As <a href="https://corpgov.law.harvard.edu/2019/01/23/purpose-profit/">CEO, he was the embodiment of the corporation to all stakeholders</a>, including employees. As such he was the most potent role model for the values of the organization and the person whose actions had the greatest impact on the culture of the organization. </p>
<p>The attitudes and behaviour of employees are impacted much more strongly by the actions of their bosses than by their words. And the CEO is the most visible and powerful role model of all.</p>
<p>CEOs are the literal and symbolic heads of their organizations. They are the ambassador for the values their organizations espouse and view as fundamental to their success. </p>
<p>They cannot afford to jeopardize their ability to fulfil the trust placed in them by the many stakeholders impacted by their behaviour and performance by engaging in activities inconsistent with those values.</p>
<p>[ <em>Like what you’ve read? Want more?</em> <a href="https://theconversation.com/ca/newsletters?utm_source=TCCA&utm_medium=inline-link&utm_campaign=newsletter-text&utm_content=likethis">Sign up for The Conversation’s daily newsletter</a>. ]</p><img src="https://counter.theconversation.com/content/127009/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Hugh Arnold does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The attitudes and behaviour of employees are impacted much more strongly by the actions of their bosses than by their words. And the CEO is the most visible and powerful role model of all.Hugh Arnold, Adjunct Professor of Organizational Behaviour, University of TorontoLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1028342018-09-10T10:38:54Z2018-09-10T10:38:54ZIf Trump were a CEO, his board would have fired him by now<p>The Trump White House has endured a lot of bad publicity in its short lifespan, but recent disclosures may be among the worst. </p>
<p>On Sept. 4, an <a href="https://www.washingtonpost.com/politics/bob-woodwards-new-book-reveals-a-nervous-breakdown-of-trumps-presidency/2018/09/04/b27a389e-ac60-11e8-a8d7-0f63ab8b1370_story.html?utm_term=.a39684b9e878">early account</a> of Bob Woodward’s new <a href="http://www.simonandschuster.com/books/Fear/Bob-Woodward/9781501175510">book</a> revealed the “nervous breakdown” unfolding within the Trump administration. Then, the next afternoon, a “senior official” went public – albeit anonymously – with an op-ed piece in <a href="https://www.nytimes.com/2018/09/05/opinion/trump-white-house-anonymous-resistance.html?action=click&module=Opinion&pgtype=Homepage">The New York Times</a>. </p>
<p>What we’ve learned is that many of the president’s top aides “are working diligently from within to frustrate parts of his agenda and his worst inclinations,” such as by stealing a document from his desk. A “quiet resistance” is trying to prevent Trump from taking actions “detrimental to the health of our republic.” </p>
<p>As a <a href="http://www.damore-mckim.northeastern.edu/faculty/s/spector-bert">business professor</a>, I find myself wondering how this might play out in the highest ranks of a public corporation if they were anywhere near this chaotic. In my view, its board, faced with similar behaviors, would say to its CEO: “You’re fired!”</p>
<h2>Off the rails?</h2>
<p>The latest insights into this apparently “off-the-rails” administration are entirely consistent with revelations offered from <a href="https://us.macmillan.com/books/9781250158062">other</a> <a href="http://www.simonandschuster.com/books/Unhinged/Omarosa-Manigault-Newman/9781982109707">less credible</a> sources. </p>
<p>While they are certainly shocking and cause for intense concern, no one should be surprised given Trump’s background.</p>
<p>In the first month of Trump’s term, I wrote an article for The Conversation noting how Trump’s experience as the head of a private, family-owned business <a href="https://theconversation.com/white-house-in-turmoil-shows-why-trumps-no-ceo-72393">ill-prepared him</a> for the demands of the presidency. </p>
<p>That’s because leaders of privately held companies do not face the governance constraints that impose limits on the behaviors of CEOs who run public corporations. Private company CEOs have no independent board of directors to answer to, no requirements of transparency imposed by the Securities and Exchange Commission and no requirement for outside accounting oversight. </p>
<p>While private, family-run businesses can be models of effective governance, we know little of real substance about the Trump Organization. His <a href="https://www.npr.org/2018/03/19/595025070/sworn-to-secrecy-trumps-history-of-using-nondisclosure-agreements">obsession with secrecy</a> makes any true assessment impossible. </p>
<p>We do know Trump was accountable to no one. He surrounded himself with his children and people – including his once-loyal “fixer” <a href="https://www.nytimes.com/2018/05/05/business/michael-cohen-lawyer-trump.html">Michael Cohen</a> – who served only him. </p>
<p>His one attempt at leading a public corporation, operating within the governance constraints imposed by law and regulation, proved to be an <a href="https://www.washingtonpost.com/business/economy/as-its-stock-collapsed-trumps-firm-gave-him-huge-bonuses-and-paid-for-his-jet/2016/06/12/58458918-2766-11e6-b989-4e5479715b54_story.html">unmitigated disaster</a> – for public investors, anyway. </p>
<h2>The board steps in</h2>
<p>Public companies are governed differently. And boards of directors, half of whose members must be independent, take their <a href="https://files.arnoldporter.com/practica_lawyer_skinner.pdf">legally established responsibilities</a> seriously. </p>
<p>For example, their fiduciary responsibility requires directors to act in the best interests of the corporation. Their supervisory role involves oversight of the CEO and other officers. And their duty of care obligates close and regular attention to the functioning of the corporation. </p>
<p>With these duties in mind, boards have ousted CEOs – or, more commonly, forced them to resign. </p>
<p>Often, boards simply lose faith in the strategy the CEO is pursuing. That’s <a href="https://www.crn.com/news/mobility/231601009/the-hp-compaq-merger-partners-reflect-10-years-later.htm">what happened</a> at Hewlett Packard when the board fired Carly Fiorina in 2005, a few years after the disastrous acquisition of rival computer maker Compaq <a href="https://www.politico.com/magazine/story/2015/09/carly-fiorina-ceo-jeffrey-sonnenfeld-2016-213163">destroyed half</a> of HP’s market value. </p>
<p>But boards have also been known to step in – and <a href="https://www.strategy-business.com/feature/Are-CEOs-Less-Ethical-Than-in-the-Past?gko=50774">are doing so at an increasing pace</a> – when the personal behavior of the CEO crosses a line and threatens to harm the company’s well-being. </p>
<p>For example, in early 2017, Uber’s financial performance under founder Travis Kalanick seemed just fine. But board members <a href="https://www.bloomberg.com/news/features/2018-01-18/the-fall-of-travis-kalanick-was-a-lot-weirder-and-darker-than-you-thought">were growing alarmed</a> by the results of an internal employee attitude survey and shocked when a smartphone video captured Kalanick shouting at his Uber driver. By March he was gone – not fired but clearly forced to step down.</p>
<p>And just a few months ago, the tenure of another iconic founder, Papa John’s very own John Schnatter, <a href="https://money.cnn.com/2018/07/11/news/companies/papa-johns-pizza-john-schnatter/index.html">came to a similar end</a>. There were no complaints about business performance. The issue was his use of racially charged language, which led the board to force him out of the chairman’s seat – only a year after he lost the CEO role for other disruptive behavior.</p>
<p>A key point in these examples is that even though the executive’s behavior triggered the removal, the company’s financial performance was still at the top of directors’ minds. For example, Papa John’s <a href="https://www.cnbc.com/2018/08/07/papa-johns-reports-2q-2018-earnings.html">sales plunged</a> when word spread of his use of a racial slur. Bad behaviors by the CEO will eventually reflect poorly on the company and hurt its performance.</p>
<p>The reality is that boards can lose confidence in their CEOs for many reasons. When that happens, governance rules demand that they take action in the best interests of the corporation.</p>
<p>And this is where the importance of <a href="https://www.sec.gov/rules/sro/nasdaq/2013/34-68640-ex5.pdf">independent board members</a> – who have no ties to the CEO or another employee of the company – comes in. They regularly review the CEO’s performance and are responsible for hiring <a href="https://www.sec.gov/rules/final/33-7919.htm">outside auditors</a> to ensure appropriate and reliance internal control systems. </p>
<p>Finally, even when a a board fails in its duties, <a href="https://corpgov.law.harvard.edu/2018/02/01/the-changing-face-of-shareholder-activism/">shareholder activists</a> and large institutional investors can – and <a href="https://www.mckinsey.com/business-functions/strategy-and-corporate-finance/our-insights/how-activist-investors-are-transforming-the-role-of-public-company-boards">increasingly do</a> – demand accountability.</p>
<h2>The real surprise</h2>
<p>What is stunning to me in light of recent disclosures is what they reveal about the apparent weakness of governance mechanisms within the federal government. </p>
<p>That’s not to say such mechanisms don’t exist. The Founding Fathers wrote explicit <a href="https://nccs.net/blogs/our-ageless-constitution/checks-and-balances">checks and balances</a> into the U.S. Constitution. Congress was meant to act as a <a href="https://www.press.uchicago.edu/Misc/Chicago/749396.html">co-equal branch</a> to mitigate possible overstepping and abuses by the chief executive. But there has been a complete <a href="https://www.theatlantic.com/politics/archive/2017/10/republicans-in-congress-youve-got-another-chance/544466/">collapse of constitutional oversight by Congress</a>. </p>
<p>Presidents cannot be fired, exactly. But in extreme cases, they can be removed. The U.S. Constitution offers two mechanisms to do just that. Article 3, Section 3, Clause 1 says a president can be impeached by the House and removed by the Senate for “<a href="http://www.crf-usa.org/impeachment/high-crimes-and-misdemeanors.html">high crimes and misdemeanors</a>” – however lawmakers choose to define them. </p>
<p>And the <a href="https://theconversation.com/what-the-25th-amendment-says-about-presidents-who-are-unable-to-serve-102825">25th Amendment</a> allows the vice president and a majority of the Cabinet to declare the president “unable to discharge the powers and duties of his office,” which would ultimately require two-thirds majorities of both houses of Congress to sustain – an extraordinarily high hurdle, for good reason.</p>
<p>These mechanisms, however, ultimately depend on the willingness of Congress to accept something like a corporate board’s fiduciary and care responsibilities. Even without going through the slow process of impeachment, presidents can also be pressured to resign, in the same way a board insists that a CEO “voluntarily” leave. <a href="https://www.washingtonpost.com/wp-srv/national/longterm/watergate/articles/080974-3.htm">That’s what happened</a> to Richard Nixon in 1974 when impeachment and conviction became a virtual inevitability. </p>
<p>A last mechanism the U.S. has is something like the independent auditor. His name is Robert Mueller. And in my view, it’s the only institutional governance mechanism working – so long as Mueller is not summarily fired, as the <a href="https://www.nytimes.com/2018/04/10/us/politics/trump-sought-to-fire-mueller-in-december.html">president wishes</a>. </p>
<h2>The importance of rules</h2>
<p>I don’t want to suggest that public corporate governance is perfect. </p>
<p>Too often, the <a href="https://scholarship.law.upenn.edu/cgi/viewcontent.cgi?article=1009&context=fisch_2016">interests of private investors</a> are placed above the many other stakeholders whose communities and lives are affected by corporate decisions. Safeguards are too often evaded.</p>
<p>But my point is the rules are there, and they do often work. </p>
<p>And much is at stake. When the governance of a corporation goes off the rails, millions, perhaps even billions of dollars can be lost, jobs destroyed, retirement funds wiped out. When it concerns the governance of a country, particularly one with a nuclear arsenal, then the dangers are real and present.</p>
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<p><a href="http://aom.org/">Bert Spector is an Academy of Management Scholar</a></p>
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<p class="fine-print"><em><span>Bert Spector is an Academy of Management scholar.</span></em></p>The allegations raised in a book on the Trump administration by Bob Woodward and an anonymous op-ed would be enough to get most CEOs fired.Bert Spector, Associate Professor of International Business and Strategy at the D'Amore-McKim School of Business, Northeastern UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/947362018-04-11T01:29:06Z2018-04-11T01:29:06ZMark Zuckerberg’s Facebook apology is the linguistic equivalent of ‘shit happens’<p>A corporate apology echoes the words we are so familiar with from our everyday lives – but it is a distinct beast. It happens under the glare of media and is issued by an office holder in a complex management structure, to a mass and impersonalised audience. </p>
<p>And its contents may be subject to legal proceedings. It may also be couched in words which create the veneer of an apology without a detailed admission of guilt. </p>
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Read more:
<a href="https://theconversation.com/why-the-business-model-of-social-media-giants-like-facebook-is-incompatible-with-human-rights-94016">Why the business model of social media giants like Facebook is incompatible with human rights</a>
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<p>This week, two high profile CEOs have issued public apologies on behalf of their corporations. Facebook CEO Mark Zuckerberg <a href="https://www.washingtonpost.com/news/the-switch/wp/2018/04/10/transcript-of-mark-zuckerbergs-senate-hearing/?utm_term=.630cbe748f9d">apologised at a US Congress hearing</a> for failing to protect the personal data of millions of users in the Cambridge Analytica scandal.</p>
<p>The Commonwealth Bank of Australia’s newly ascended CEO, Matt Comyn, started his first day in the job with <a href="http://www.abc.net.au/news/2018-04-09/cba-commonwealth-bank-new-boss-sorry-for-past-failures-on-day-1/9633300">an internal email</a> apologising to the bank’s employees, and taking responsibility for the bank’s “mistakes”. </p>
<p>Meaning is a complex process, and not at the beck and call of individuals. It depends not only on what we say, but what we don’t say, and what we do or don’t do.</p>
<p>It also depends on who we are in the scheme of things. Corporate CEOs are required by law to act in the best interests of shareholders. </p>
<p>So a corporate apology is always connected to the benefits it brings to the company. It is not a personal apology, it is a form of institutional positioning.</p>
<h2>Say it like you mean it</h2>
<p><a href="https://www-sciencedirect-com.simsrad.net.ocs.mq.edu.au/science/article/pii/S0749597815000540?via%3Dihub">One small study of corporate apologies</a> focused on the relationship of facial expressions used during an apology to reactions from share markets. Using a sample of 29 corporate apologies, two researchers carefully analysed the minute muscle movements of the apologisers. </p>
<p>Apologies accompanied by the display of positive or neutral emotion were associated with decreased investor confidence as (expressed by negative stock market returns). The effects persisted up to three months after the apology. </p>
<p>This research provides some tips for corporate CEOs - make sure your emotional display shows sufficient remorse for your actions. Otherwise you and your company may have a price to pay.</p>
<p>So how about the Zuckerberg and Comyn apologies? Cleverly, both frame their statements in terms of a lack of action. Zuckerberg said “But it’s clear now that we didn’t do enough”, while CBA’s Matt Comyn told his employees “We have not done enough to protect our customers”. </p>
<p>But like that glass that can be either half-full or half-empty, this is just a linguistic trick. Facebook’s cover-up of the theft of data by Cambridge Analytics can be either construed as a failure to act, or as a form of action. Ditto for the CBA.</p>
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<a href="https://theconversation.com/does-mark-zuckerberg-have-too-much-power-at-the-helm-of-facebook-94003">Does Mark Zuckerberg have too much power at the helm of Facebook?</a>
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<p>Construing your failure as a lack of action affords an important rhetorical benefit: it means you don’t have to lay bare the details of what you have done. It allows you to apologise in vague and general terms, protecting yourself and your shareholders from the brutal details of your company’s transgressions. </p>
<p>So engaging in money laundering or funding terrorist organisations can just be “mistakes we made”. Generic apologies lack an essential part of the definition of an apology, the frank acknowledgement of the offence. </p>
<p>And upping the ante with more statements about taking responsibility, as Zuckerberg has just done before Congress doesn’t fill this gap:</p>
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<p>…I’m sorry. I started Facebook, I run it, and I’m responsible for what happens here. </p>
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<p>In fact, Zuckerberg is using a lovely linguistic trick, a grammatical option called “middle voice” which you shouldn’t fall for. In the grammar of middle voice, an event is construed as if it happens under its own steam. No-one has responsibility for it taking place.</p>
<p>Hypothetically, imagine he said “I’m responsible because I didn’t disclose the company’s complicity in the theft of people’s private data”. This is a frank acknowledgement. </p>
<p>But instead, Zuckerberg says he’s responsible for “what happens”. But “what happens”, like the expression “shit happens”, makes it seem like things happened without anyone, like Zuckerberg, actually doing anything.</p>
<h2>What follows an apology</h2>
<p>Zuckerberg’s apology, <a href="https://www.wired.com/story/why-zuckerberg-15-year-apology-tour-hasnt-fixed-facebook/">one of many he’s made</a>, has more in common with the ancient Greek word <em>apologia</em> from which our word apology descends. An <em>apologia</em> was a speech in defence of one’s actions. </p>
<p>Zuckerberg is busy trying to rescue Facebook’s reputation by announcing actions the company will now take. </p>
<p>But his apology already has a stench about it. <a href="https://newsroom.fb.com/news/2018/04/new-elections-initiative/">Zuckerberg is commissioning</a> “independent research” on the role of social media in elections, as well as democracy more generally. The team to oversee the research includes a number of billionaires’ foundations, including the Charles Koch foundation. <a href="https://www.rollingstone.com/politics/news/inside-the-koch-brothers-toxic-empire-20140924">The Koch brothers</a> have their own reputations for interfering in US elections.</p>
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<p>Zuckerberg has put the fox in charge of the social media henhouse, hardly the action of someone truly contrite. Meanwhile, Comyn’s apology was quickly overshadowed <a href="http://www.afr.com/business/banking-and-finance/financial-services/austrac-steals-comyns-thunder-20180409-h0yj5p?logout=true">by an AUSTRAC allegation</a> that the company knowingly dealt with customers it suspected of money laundering.</p>
<p>Saying sorry is not so hard, but meaning it is another story altogether.</p><img src="https://counter.theconversation.com/content/94736/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Annabelle Lukin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A corporate apology is always connected to the benefits it brings to the company. It is not a personal apology, it is a form of institutional positioning.Annabelle Lukin, Associate Professor in Linguistics, Macquarie UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/829052017-08-28T06:57:03Z2017-08-28T06:57:03ZThe market for virtue: why companies like Qantas are campaigning for marriage equality<p>Qantas CEO Alan Joyce <a href="http://www.abc.net.au/news/2017-08-21/same-sex-marriage-alan-joyce-yes-campaign-support/8826682">has said</a> he will “be out there strongly campaigning for a Yes vote” in the upcoming <a href="https://theconversation.com/same-sex-marriage-reform-heads-for-the-snail-mail-82183">marriage equality postal ballot</a>. Dozens of other corporations have signed the <a href="http://www.australianmarriageequality.org/open-letter-of-support/">Australian Marriage Equality open letter</a>.</p>
<p>But companies aren’t being altruistic when they back causes like marriage equality. <a href="https://link.springer.com/article/10.1007/s10551-006-9210-6">Research shows</a> that executives pursue <a href="https://untilweallbelong.com/about-the-cause">ethical behaviour</a> because they think there is a business case for it. This is called the “<a href="https://www.brookings.edu/book/the-market-for-virtue/">market for virtue</a>”, in which businesses aim to improve their public image or ward off regulation in exchange for ethical behaviour.</p>
<p>But there is <a href="https://link.springer.com/article/10.1007/s10551-011-0867-0">little evidence</a> that social responsibility initiatives necessarily result in positive outcomes for businesses. In fact, it may result in worse outcomes for society as a whole, as businesses put their resources behind causes that are already popular and ignore pressing issues such as inequality and stagnating wage growth. </p>
<h2>The market for virtue</h2>
<p>Alan Joyce <a href="https://www.businessinsider.com.au/alan-joyce-isnt-the-kind-of-society-we-live-in-the-point-of-economics-2017-3">is explicit</a> when he defends Qantas’ support, stating that “there is an economic argument for marriage equality”. <a href="http://www.theaustralian.com.au/national-affairs/policy/joyce-declares-strong-business-case-for-marriage-equality/news-story/59ec290b8551c2a66f5700e957078b11">Elsewhere</a> Joyce has said there is a business case for supporting marriage equality, citing a <a href="https://www.humanrights.gov.au/sites/default/files/document/publication/20170227_Missingout_Customer%20Diversity.pdf">Deloitte Australia study</a>. </p>
<p>The Deloitte study found that LGBT customers, as well as those from an indigenous background or who have a disability, were three times more likely than other customers to avoid an organisation if it had a bad reputation on “diversity issues” – such as being treated with respect and fairness.</p>
<p>A quarter of respondents to the Deloitte study said an organisation’s stance on marriage equality influenced their buying decisions. This was over 40% among younger people. </p>
<p>Both Joyce’s remarks and the study, which was created in partnership with several businesses, back up <a href="http://onlinelibrary.wiley.com/doi/10.1111/ijmr.12142/abstract">findings</a> of a review of the research on corporate ethics. Irrespective of whether real benefits are realised, businesses justify ethical practices on the basis that it will result in reduced costs, increased profitability and growth, or some other competitive advantage. </p>
<p>The best-case scenario is where business see benefits for themselves in a cause like marriage equality. Still, the commercial possibilities remain central to decision-making.</p>
<p>We can see this in the fact that businesses are backing marriage equality only now that it has <a href="https://www.theguardian.com/australia-news/2017/aug/21/most-support-marriage-equality-and-80-plan-to-vote-in-survey-guardian-essential-poll">majority support</a> in Australia. This is good news for those of us who support marriage equality, at least because it is a sign that Australians are behind it. </p>
<p>But from a corporate perspective the ethics around this issue haven’t changed over the years. But the business case – as it can be justified by the Deloitte study – is now receiving backing from the consulting industry, so companies are leaping on board.</p>
<p>Backing marriage equality is an easy proposition for businesses. It costs very little to send out a press release or have prominent executives support the cause. And as the Deloitte study points out, having a good reputation on this issue promises positive impact on employees and customers, especially the younger demographics who will make up the majority of consumers in the future. </p>
<p>Another example of this is so-called “<a href="https://theconversation.com/greenwashing-can-you-trust-that-label-2116">greenwashing</a>” – where companies expend more effort appearing to be “green” than actually implementing environmentally friendly policies. Here, ethics are not driving the decision-making. Rather, they are being used as a way of marketing that the company is acting for the greater good. </p>
<p>In both cases, ethical pursuits, even if business leaders support them personally, are not the justification of the policy. Instead, ethics are being used as a signal to create a positive image among customers and regulators. </p>
<h2>The flipside of corporate politics</h2>
<p><a href="amj.aom.org/content/early/2016/09/08/amj.2014.0691.short">Research</a> also shows that executives’ own beliefs affect what causes businesses pursue. This adds an ideological dimension to the activism – executives are more likely to back a cause they strongly believe in.</p>
<p>This may explain why Alan Joyce and Qantas are so prominent on this issue – Joyce is <a href="http://www.abc.net.au/news/2017-08-25/alan-joyce-calls-for-businesses-to-support-same-sex-marriage/8842332">openly gay</a> and his personal contributions to the campaign show that his support is genuine.</p>
<p>But this is single issue politics, and executives and businesses have a narrower range of interests than society as a whole. While the corporate support of marriage equality is positive, on a broader scale the risk is that as businesses <a href="http://journals.sagepub.com/doi/abs/10.1177/0007650313511778">become political actors</a> the limits of their interests will increasingly shape public debate. </p>
<p>Unsurprisingly, for example, tax avoidance is <a href="http://onlinelibrary.wiley.com/doi/10.1111/ijmr.12142/abstract">rarely mentioned</a> in the Corporate Social Responsibility reports produced by major corporations, despite its importance in education, health care and poverty elimination. Instead, corporations focus on other forms of nominally ethical behaviour such as environmental and diversity programs.</p>
<p>So while Joyce may be on the right side of history in this instance, he is shaping the national political agenda in ways that combine his personal beliefs with the interests of his employer, while leaving out important issues like taxation, income inequality and insecure work.</p><img src="https://counter.theconversation.com/content/82905/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carl Rhodes does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Research shows that companies will back ethical causes only if they know they will benefit from the stance.Carl Rhodes, Professor of Organization Studies, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/826782017-08-22T01:59:29Z2017-08-22T01:59:29ZCan corporate America afford to walk away from President Trump?<figure><img src="https://images.theconversation.com/files/182858/original/file-20170821-4964-mcbfge.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Merck CEO Ken Frazier, seated next to Trump, was first to resign from his manufacturing council.
</span> <span class="attribution"><span class="source">AP Photo/Evan Vucci</span></span></figcaption></figure><p>After campaigning as the candidate <a href="https://www.usnews.com/news/articles/2016-09-30/does-donald-trumps-business-background-matter">best able to work with business</a>, President Donald Trump has shown he is anything but. </p>
<p>A <a href="https://www.cnbc.com/2017/08/16/jj-and-united-tech-ceos-resign-as-trump-dissolves-2-major-business-councils.html">stream of resignations</a> from high-level business counsels hit a crescendo recently when Trump <a href="http://www.nbcnews.com/politics/donald-trump/trump-dissolves-business-advisory-councils-after-ceos-depart-n793216">was forced to disband</a> two executive councils. The widespread and public defections were in protest over his unwillingness to unequivocally condemn racism and intolerance over the <a href="https://www.nytimes.com/2017/08/13/us/charlottesville-virginia-overview.html?_r=0">violence in Charlottesville, Virginia</a>. </p>
<p>As an expert in organizational communication and leadership, I saw the dismissal of the councils as a dramatic and important moment in the relationship between top business leaders and the president. But does it spell the demise of the often difficult partnership between President Trump and corporate America? </p>
<h2>A permanent breach?</h2>
<p>CEOs like Merck’s Ken Frazier <a href="https://www.forbes.com/sites/matthewherper/2017/08/14/what-you-should-know-about-ken-frazier-the-ceo-who-just-resigned-from-trumps-council">rightly voted their conscience</a> when they began to abandon Trump’s American Manufacturing Council and the Strategic and Policy Forum. Frazier, the <a href="https://www.marketplace.org/2017/08/14/business/merck-executive-resigns-presidents-council-and-trump-lashes-out">first to resign</a>, said he felt “a responsibility to take a stand against intolerance and extremism.”</p>
<p>The Wall Street Journal, however, <a href="https://www.wsj.com/articles/trump-business-advisory-council-to-disband-1502904005">was quick to point out</a> that many companies have stopped short of saying they would refuse to work with the White House in the future. </p>
<p>Indeed, despite the heated rhetoric, one thing is clear: Corporate America wants and needs to work with the administration, while the president benefits from a healthy relationship with America’s CEOs.</p>
<p>So if they both need each other, the question becomes how this increasingly tenuous relationship will play out.</p>
<h2>Managing a tense relationship</h2>
<p>CEOs from companies as diverse as <a href="http://www.timesunion.com/7day-business/article/GE-s-Immelt-others-won-t-have-to-worry-about-11823697.php">General Electric</a> and <a href="http://www.npr.org/sections/thetwo-way/2017/08/14/543384974/merck-ceo-resigns-from-a-trump-business-council-citing-his-conscience">Under Armour</a> resigned their positions on the councils and condemned the president. Despite this, their companies will continue to need to press their vast legislative and regulatory agendas with the White House. </p>
<p>Pretty much every U.S. company has a vested interest in economic and global affairs and the policy choices of the U.S. government. In recent days, some CEOs have <a href="https://www.wsj.com/articles/trump-business-advisory-council-to-disband-1502904005">told reporters</a> that they regret – now that the councils have disbanded – not having a direct role to play and a collective voice in policy matters. </p>
<p>Others, such as Apple’s Tim Cook, <a href="https://www.cnbc.com/2017/08/17/apples-tim-cook-disagrees-with-donald-trumps-take-on-neo-nazi-violence-in-charlottesville.html">show how it’s possible</a> to publicly disagree with the president over some issues, such as equality, immigration and climate change, yet continue to influence the course of areas like tax reform and LGBTQ rights in private.</p>
<p>This may well be the new way of doing business with Washington.</p>
<p>In general, it is generally not in the best interests of the country to have a schism between the president and corporate America. <a href="https://www.economist.com/news/briefing/21711500-tradition-politicians-intervening-business-corporatisms-long-history-america">History shows</a> that there have often been tensions between government and business, yet both sides have generally been able to work collaboratively during critical times. </p>
<p>During Barack Obama’s first term, for example, <a href="http://fortune.com/2015/12/15/obama-ceo-white-house/">there was tension</a> between the White House and corporate America over issues such as regulation and his response to the financial crisis. Later in Obama’s presidency, however, business leaders worked closely with him to goad Congress into dealing with fiscal issues like the debt ceiling more responsibly to avoid hurting American’s credit rating or the stock market. </p>
<h2>Learning the value of corporate values</h2>
<p>What Trump – and perhaps his party as well – needs to learn is that values such as diversity and inclusion are very important to companies and their customers. </p>
<p>CNBC’s John Harwood <a href="https://www.cnbc.com/2017/08/17/3-ways-trumps-gop-could-be-bad-for-us-business.html">recently identified</a> three issues that hinder the Republican Party’s relationship with U.S businesses: economic policy, GOP competence and values. On the last point, Harwood argues the “GOP’s embrace of cultural conservatism conflicts with corporate America’s <a href="https://theconversation.com/when-did-che-guevara-become-ceo-the-roots-of-the-new-corporate-activism-64203">embrace of diversity</a> and tolerance.”</p>
<p>American companies <a href="http://fortune.com/2016/12/05/diversity-inclusion-workplaces/">have found that promoting these values</a>, both internally and externally, increases revenue, <a href="https://www.scientificamerican.com/article/how-diversity-makes-us-smarter/">motivates employees</a> and fosters innovation. </p>
<p>That’s not something companies want to walk away from, nor should they. It is incumbent on this president, who has touted his ability to understand business, to not only face this fact but also to take it to heart. </p>
<p>Americans expect their president to be the moral leader of the United States, and as such, he must stand firmly for American values. When he fails to do so, CEOs have a responsibility to stand up for those values and to call out the president’s failures, as they just did.</p>
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<span class="caption">A notes and flowers form a memorial in Charlottesville, Virigina, where Heather Heyer was killed during a white nationalist rally.</span>
<span class="attribution"><span class="source">AP Photo/Cliff Owen</span></span>
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</figure>
<h2>Is there hope after Charlottesville?</h2>
<p>So how will this historic and dramatic breach between a Republican president and the business community be closed?</p>
<p>In a word: carefully. </p>
<p>Businesses will have little choice but to continue to interact with the White House on some level but in a way that <a href="https://www.washingtonpost.com/news/on-leadership/wp/2017/08/15/in-trumps-white-house-a-plum-appointment-for-ceos-has-become-a-reputation-risk?utm_term=.c20652ed0621">acknowledges how devastating and dangerous</a> dancing with this administration can be. It won’t be business as usual. In the short term, look for most of the engagement to happen on the staff level and through intermediaries such as lobbyists and lawyers. </p>
<p>Meanwhile, the president would be wise to remember that good leaders are often good listeners. Kevin Sharer, the former CEO of Amgen, for example, identified listening as <a href="http://www.mckinsey.com/global-themes/leadership/why-im-a-listener-amgen-ceo-kevin-sharer">the most critical skill</a> for effective leadership, a sentiment I hear echoed continually from business leaders in my ongoing work on identifying the most critical skills for successful leadership.</p>
<p><a href="https://www.washingtonpost.com/news/posteverything/wp/2017/08/03/can-donald-trump-grow-up-in-office/?utm_term=.7273f4df7231">Pundits suggest</a> that Donald Trump will always be Donald Trump, without change. Yet doing so has consequences, as the <a href="http://www.latimes.com/politics/washington/la-na-essential-washington-updates-members-of-a-white-house-panel-on-arts-1503065476-htmlstory.html">recent defections</a> of CEOs and members of the Council of Arts and Humanities, established in 1982 under President Ronald Reagan, clearly show. </p>
<p>As these decisions show, principled business (and other) leaders will not turn their back on the values they have embedded into their organizations. They will continue to speak out when those values are challenged. </p>
<p>President Trump must now recognize and embrace the values of diversity, equality and inclusion and work collaboratively with leaders from business and government.</p>
<p>This is imperative if he hopes to be effective. CEOs, lawmakers and the American public – including myself – will be watching with keen interest.</p><img src="https://counter.theconversation.com/content/82678/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Neal Hartman does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Trump’s reaction to the violence in Charlottesville, Virginia, prompted business leaders to sever ties with two White House councils.Neal Hartman, Senior Lecturer in Managerial Communication, MIT Sloan School of ManagementLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/789832017-06-27T22:52:54Z2017-06-27T22:52:54ZMemo to Gordon Gekko: Ethics, not greed, boost profits<figure><img src="https://images.theconversation.com/files/172565/original/file-20170606-3681-6693lt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">United States Sen. Elizabeth Warren questions Wells Fargo CEO John Stumpf, foreground, during congressional hearings into allegations that bank employees opened millions of unauthorized accounts to meet aggressive sales targets.</span> <span class="attribution"><span class="source">(AP Photo/Susan Walsh)</span></span></figcaption></figure><p>Stories involving business ethics appear regularly in the news. Some report good deeds, but most allege scandalous corporate behaviour. While these may seem like examples of businesses choosing money over morals, that’s a false choice. Unethical behaviour is not only embarrassing from a public relations standpoint, it can also be unprofitable for firms and their investors.</p>
<p>One ongoing scandal, both in Canada and the United States, involves banks selling unwanted financial services to their customers. The story began south of the border with <a href="http://www.npr.org/tags/162594783/wells-fargo">Wells Fargo</a>. The bank admitted in September 2016 that thousands of its employees had created more than two million accounts without customer permission.</p>
<p>The problem arose after management set overly aggressive sales targets. Employees <a href="https://theconversation.com/how-wells-fargo-encouraged-employees-to-commit-fraud-66615">felt pressured</a> to open accounts regardless of customer need. Some ex-employees claim they were fired for refusing to play along.</p>
<p>Regulators fined Wells Fargo US$185 million and its CEO resigned, but the fallout continues. The bank cancelled executive bonuses and demoted several managers. A customer <a href="http://www.reuters.com/article/us-wells-fargo-accounts-idUSKBN1882UV">lawsuit</a> is seeking compensation of US$142 million. Lawyers speculate that employees may have created 3.5 million unauthorized accounts.</p>
<h2>Canada’s banks face similar allegations</h2>
<p>In March, CBC News began reporting an eerily similar Canadian story. <a href="http://www.cbc.ca/news/business/td-bank-employees-admit-to-breaking-law-1.4016569">Hundreds of TD Bank employees</a> complained about unrealistic sales targets. They too felt pressured to sell needless services. Similar stories emerged from other banks and even <a href="http://www.cbc.ca/news/business/credit-union-employees-say-sales-targets-too-high-1.4109076">credit unions</a>. A <a href="http://www.cbc.ca/news/politics/finance-committee-hearings-banks-practices-1.4122617">parliamentary committee</a> is set to investigate this month.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=392&fit=crop&dpr=1 600w, https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=392&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=392&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=493&fit=crop&dpr=1 754w, https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=493&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/172307/original/file-20170605-16895-eb4krw.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=493&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Creditors took over the Trump hotel in downtown Toronto.</span>
<span class="attribution"><span class="source"> (The Canadian Press/Graeme Roy)</span></span>
</figcaption>
</figure>
<p>Dubious ethics are not limited to banking. Investors in Trump Hotel in Toronto won a lawsuit last fall against its developer, Talon International, and its manager (a Donald Trump company). The investors claimed they had been deceived. Instead of earning handsome profits, they had suffered losses. The hotel went into receivership, and <a href="https://www.thestar.com/business/2017/03/31/torontos-trump-tower-sells-for-298m.html">creditors took it over</a> in March.</p>
<p>Trump “University” in the U.S. also faced <a href="https://theconversation.com/the-truth-about-for-profit-colleges-and-trump-university-60585">allegations of deception</a>. Its seminars promised real estate investment “secrets” from Trump “experts”. Its students sued because the seminars apparently involved neither secrets nor experts. New York’s attorney general called it “straight-up fraud” and sued too. Trump eventually agreed to reimburse US$25 million. A judge <a href="http://www.npr.org/sections/thetwo-way/2017/03/31/522199535/judge-approves-25-million-settlement-of-trump-university-lawsuit">approved the settlement</a> in March.</p>
<h2>Greed is good? Not really</h2>
<p>Other recent scandals involve mortgage applications at <a href="http://www.cbc.ca/news/business/home-capital-faq-1.4090098">Home Capital</a> in Canada and <a href="http://www.reuters.com/article/us-bumble-hldg-pricefixing-idUSKBN1841Z0">tuna price-fixing</a> in the United States.</p>
<p>These businesses seemingly followed Gordon Gekko’s “<a href="http://www.imdb.com/video/screenplay/vi3774546201">greed is good</a>” mantra from the film Wall Street. They’re doing what’s profitable rather than what’s right. In this context, investors might think they have no choice but to tolerate bad behaviour to get good returns.</p>
<p>However, unethical behaviour does not merely disgust the public and result in bad customer service. A <a href="http://link.springer.com/article/10.1007/s10551-014-2437-8">study</a> here at the Goodman School of Business revealed that it also harms companies and investors. Brock University’s <a href="https://brocku.ca/goodman/faculty-research/centres-institutes/cpagoodman-institute-for-international-issues-in-accounting-iiia/">Institute for International Issues in Accounting</a> funded the study.</p>
<p>The probe examined 541 multinational corporations over a three-year period. It compared their financial performance, stock market returns and <a href="http://www.ethicalquote.com/">ethical reputations</a>, including how companies treat their employees, customers and communities.</p>
<p>Perhaps surprisingly, the research revealed that investors by default expected decent, though not perfect, corporate ethics. Perhaps tellingly, investors held lower expectations of American firms than of firms elsewhere.</p>
<h2>Share prices rise when ethics in play</h2>
<p>More importantly, companies with improving ethics tended to have clearer financial reports and better financial performance. Conversely, transparency and profitability suffered when reputations fell.</p>
<p>Those reputational changes also affected investors. Share prices rose an average of 1.1 per cent within just three days after ethical ratings improved. Conversely, they fell 1.6 per cent when reputations dropped.</p>
<p>Put simply, when corporations paid attention to ethics, their finances improved. When investors paid attention to corporate ethics, their returns improved.</p>
<p>Consider some concrete examples. <a href="http://www.cbc.ca/news/business/td-bank-stock-pprice-1.4019822">TD’s stock fell</a> 5.5 per cent the day after news broke about the bank’s aggressive sales tactics. That cost shareholders about $7.2 billion.</p>
<p>At Wells Fargo, share prices slid for weeks, dropping 13 per cent over the month of September. That’s more than $30 billion lost by investors. Another month passed before the stock began to recover.</p>
<p>Bad ethics isn’t always due to sales targets and Gordon Gekko-ish bosses. Sometimes a company’s operating practices encourage it.</p>
<h2>Analytics should benefit customers</h2>
<p>For example, consider <a href="http://www.theglobeandmail.com/report-on-business/rob-commentary/how-technology-has-turned-tellers-into-sellers/article34297345/">banking software</a> that statistically analyzes customer data. It can prompt employees about financial services to offer each customer. If the only goal is to boost bank fees, then such data analysis becomes a “<a href="https://weaponsofmathdestructionbook.com/">weapon of math destruction</a>” against customers.</p>
<p>However, <a href="https://www.informs.org/Explore/Operations-Research-Analytics">data analytics</a> is not inherently evil. It can be mutually beneficial.</p>
<p>Operations researchers recently helped <a href="https://doi.org/10.1287/opre.2016.1556">redesign</a> a Turkish bank’s investment sales software. Now the computer only suggests new products that increase customers’ investment returns or reduce their portfolio risks. This win-win approach benefits both the bank and its customers.</p>
<p>Our school’s research also suggests a new priority for regulators. Investors at least sometimes reward ethical firms and punish unethical ones. So let’s require companies to report more about their ethics-related practices. How are they treating employees, suppliers and customers? Are they respecting their communities and the environment?</p>
<p>Publicize these business practices, whether admirable or deplorable. Shine a little light into the corporate shadows. More information will enable investors and other stakeholders to make informed choices, and express those choices in terms that businesses understand: money.</p><img src="https://counter.theconversation.com/content/78983/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Unethical corporate behaviour isn’t just embarrassing from a PR standpoint, it can also be unprofitable for firms and their investors.Michael J. Armstrong, Associate professor of operations research, Brock UniversityFayez A. Elayan, Professor of Accounting and Finance, Brock UniversityLicensed as Creative Commons – attribution, no derivatives.