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Business ethics: is a crisis necessary to implement change?

It is rare for two global crises to occur in such quick succession.  The banking and financial services industry, once heralded for its social responsibility and support of community issues, is under fire for seriously mishandling their financial responsibilities of late.  On the oil industry front, BP, once the darling of progressives for their “Beyond Petroleum” re-branding based on green considerations, has suddenly fallen from grace due to their bungling of the oil disaster in the Gulf.  Has the era of Corporate Social Responsibility (CSR) reached another tipping point in its development?

The practice of CSR principles gained a substantial foothold in major multinational corporations over the 1980’s and 90’s.  International standards embodying “triple bottom line” thinking, i.e., People, Planet and Profit, have encouraged managements of high profile companies to promote the public interest in their decision-making.  Many companies have now adopted new corporate governance standards while using them to advantage in the press.  The information revolution has brought about a more conscience-focused mindset, demanding transparency and more ethical business processes that foster a commitment to non-economic social values.  International executives have put aside their forex charts and focused their efforts on community growth and development.

However, it also appears that a crisis is the only mechanism for precipitating new action plans when it comes to CSR issues.  The last crisis of conscience was eight years ago.  The Enron scandal shocked and rewarded us with Sarbanes-Oxley legislation in 2002, a full employment act for auditors and CSR professionals alike for many years to come.  One high profile firm, Arthur Andersen & Co., departed the stage, as did Lehman Brothers in 2008, as the current banking crisis unfolded on the scene.  Discouragingly enough, when senior management of Goldman Sachs were asked how our system of corporate governance could be fixed to prevent a recurrence of the current banking debacle, the Senate Hearing room was filled with stunning sounds of silence, suggesting the executives’ complete lack of regret or acceptance that their behavior was in any way questionable.  Where were the CSR executives when we needed them?

The present BP scandal exacerbates the debate once more.  The company’s image is in shambles.  Over $100 billion in wealth has disappeared from its market capitalization.  The corporation is a take-over candidate at best.  The “weight” of construction shortcuts, taken by all industry participants, has now fallen upon BP’s shoulders.  Hearings, reports and reform legislation will surely follow.  Once again, a new attempt will be made to legislate corporate integrity and morality.

In a recent survey of 130,000 Facebook members in ten of the world’s most developed economies, only 25% of those polled actually felt that the world’s largest multinational corporations have a “values-driven” approach in their decision-making process.  Small to medium-sized firms faired better with a 40% rating.  Regardless of the progress made in the past few decades, the CSR movement must still confront a wide gap between the public’s and their own perception of their contribution to improved corporate conduct.

Are we about to witness a new and improved wave of corporate consciousness?  Jeffrey Hollander, a corporate leader and advocate for progressive values in business, recently wrote, “When companies shift their value proposition from selling desirable products to solving difficult social and environmental problems, whole new opportunities arise.”  Companies would receive welcomed praise if they independently embraced the positive aspects that their activities could have on people and the planet.  Unfortunately, it appears that international crises must occur to force accountability in the corporate sphere where profit still dictates the rules of conduct.

Image: business-ethics.com

Message received by Covalence | Country: Global | Company: BP,  Goldman Sachs |  Source: Vincenzo Desroches

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