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| Best Practices: On the Board |
Paragon or Pariah?
Amy Braunschweiger
10/01/2005
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When General Electric announced plans last spring to voluntarily stem
greenhouse gas emissions from its plants, those hoping to firmly install a
social conscience into corporate America gave a victorious yelp. Days later, the
company, whose products generate nearly one-third of the world’s electricity,
released its first Citizenship Report, 76 pages detailing the firm’s actions on
everything from political contributions to employee firings. Some criticized the
company and its directors for caving in to pressures from environmentalists, but
GE says it made the changes for economic reasons. It foresees tougher
environmental regulations in the future, and it also owns interests in
alternative energy sources like wind turbines.
By entering the social realm,
GE and its board made a strong statement—namely, that it believes profits and
growth are connected to its record as a corporate citizen. GE pulled its
directors squarely into the fray by forming a Public Responsibilities Committee,
joining other conglomerates such as JPMorgan Chase and British Petroleum, which
have formed similar director committees to address social issues.
TOP VIEW
Fund managers, shareholders, advocacy groups and the media are scrutinizing
companies’ environmental, social and other progressive agendas. Board members
who understand the potential pitfalls of corporate responsibility and possess
the skills to help firms navigate these increasingly treacherous issues are fast
becoming indispensable at the conference table. |
With the
advent of such subcommittees among these global conglomerates, board members at
many companies are busily discussing issues surrounding the environment, worker
safety and other hot buttons with representatives from socially responsible
investment funds that screen their holdings according to progressive criteria.
Granted, not all board members have dipped their toes into social waters. But
today fund managers, individual investors and the public at large are holding
corporate directors to standards as exacting as any they have seen in their
careers. And an increasing number of directors recognize that perhaps the most
insidious risks may lie in the social domain.
Julie Tanner, corporate
advocacy coordinator for the socially responsible fund Christian Brothers
Investment Services, has worked diligently to secure face-to-face meetings with
corporate board members. She addressed the board of McDonald’s to urge members
to adopt a more frequent reelection policy for directors. She also spoke with
the directors of energy company American Electric Power (AEP) about global
warming. Interestingly, these discussions did not originate in the boardroom.
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