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| Best Practices: On the Board |
Paragon or Pariah?
Amy Braunschweiger
10/01/2005
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While accounting scandals and other episodes of
financial malfeasance have put corporate directors on high alert, they have also
served to raise the level of distrust harbored by investors, the media and other
influential groups when talk turns to corporate citizenship. Nongovernmental
organizations (NGOs) and other advocacy groups have become more systematic in
pursuing companies they see as social scofflaws and have allied themselves with
consumer organizations to target offending brands. According to a report shared
by Bain & Co.’s James Allen at the World Economic Forum last winter, 40
percent of the 60 largest global companies have been confronted by NGOs and
consumer groups over social concerns. Press coverage of corporations’ social
sensitivities has surged since 1999, Allen notes.
The largest, most visible
companies make the most attractive targets. Stakeholders vilified Nike for its
suppliers’ use of sweatshop labor. They hammered Chiquita for its labor
practices. De Beers has been targeted for allegedly selling diamonds mined in
war-torn parts of Africa, while consumer groups blamed McDonald’s for a rise in
obesity. These same multinationals have fought back by implementing stricter
social policies and making detailed disclosures on issues such as worker safety
and natural resource use. Many of these companies have shown amazing resiliency
in the face of criticism by throwing their substantial weight behind campaigns
to bolster brand image. “Bigger companies move more slowly, but nonetheless,
they have much greater resources,” points out Suzanne Hopgood, who serves on the
board of Acadia Realty Trust and until recently was chairman for Del Global
Technologies. Despite their size, or perhaps because of it, these conglomerates
have become adroit at responding to customer perceptions, she adds, when it
comes to social ills such as child labor policies or obvious pollution problems.
Consumers may actively decry these practices, but few bring their
consciences to the cash register by boycotting products, according to Allen’s
report. His research, however, does show a correlation between company growth
and how enthusiastically consumers recommend it to friends. While customers may
shelve their complaints when it is time to buy, the same people likely hesitate
to openly endorse its products. This helps explain why today Nike talks frankly
about improvements in the conditions of its overseas factories, and Chiquita’s
website touches on the safety of its Latin American workers. Meanwhile, De Beers
issues guarantees that its diamonds are conflict-free, and McDonald’s Happy
Meals now provide the option of apple slices instead of French fries.
Chip
maker Intel has become what many activists consider a poster child for corporate
social responsibility. Intel has an entire department dedicated to working with
social groups. This interaction with shareholders, as well as stakeholders such
as governments and NGOs, has reaped a wealth of opportunities for the company,
explains Dave Stangis, the director of corporate responsibility who reports both
to the head of public affairs and to Intel’s corporate secretary. “When you’re
in a community and you’re trusted, and you’re open to communicate, you build up
a bank account of reliability,” he says. Because of this trust, Intel has
received, with little hassle, permission to expand onto new land and, in some
cases, has gotten more flexible permitting, Stangis notes. “There are huge
time-to-market advantages.”
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