Where’s the Line ?

Writing on the Boston College Center for Corporate Citizenship website, Executive Director, Bradley K. Googins, finds that, what with the meltdown in finance, corporate social responsibility is at a crossroads.

“It is clear the failure of an unregulated financial system that almost brought the house down will no doubt be followed by aggressive legislation and regulation as an antidote to calm the fears,” writes Googins. “Already there have been discussions by congressional leaders and others about using this new window to mandate new measures to address climate change, implement safeguards for food, toys and prescription drugs from China, and expand health care insurance mandates.”

He goes on to say: “So here we are at a crossroad for capitalism and corporate citizenship. The trust in a self-regulating system has been lost and the role of lobbying by the business community has been put in a very different light.”

“However, equally dangerous might be a swing of the pendulum too far toward regulation and mandates. We know already that regulations can serve as a disastrous drag on innovation and markets.”

How can business avoid draconian regulations that could stifle growth? Googins offers the following:

• Engage in “a very active dialogue in the business community, and between the business community and those of government and civil society.”
• “Create a new form of global capitalism that reflects blended values with a new respect for the role of government in providing a stronger oversight that its citizens can trust will ensure their interests are protected.”
• Restore “faith to damaged and disillusioned employees, customers, suppliers and communities… guided by active leadership, and infused with basic virtues such as humility, authenticity and accountability.”

In all, Googin concludes, these should “increase the value of capitalism to realize its potential to create a just and sustainable world.”

What do you think?

Those familiar with the online classified ads site, Craigslist, know that you can get just about anything you want on it. Even naughty things. The site has a whole section dedicated to those advertising “erotic services.” These include escorts, erotic dancers, dominatrixes and sometimes even outright prostitutes.

Until Thursday, Nov. 6, advertising erotic services on Craigslist was free. But, as part of a deal with some 40 state attorneys general trying to crack down on the promotion of illegal activities online, the site has opted to charge a fee for erotic services ads. Craigslist CEO, Jim Buckminster, said the move “raises the accountability for people posting to the category.”

That sounds like a bit of a pipe dream, but the move does come hard on the heels of the rejection by the voters of San Francisco — where Craigslist is based — to decriminalize prostitution.

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Working with the Reputation Institute, the Boston College Center for Corporate Citizenship has released a ranking of the top 50 companies in the U.S. “that the public distinguishes for corporate social responsibility.”

The rankings were based on data from the Reputation Institute’s 2008 Global Pulse study, which Where’s the Line? wrote up yesterday. “Although the survey was taken before the Wall Street collapse, the U.S. findings show that corporate governance — ethics and transparency — are increasing in their importance to overall corporate reputation,” Philip Mirvis, senior research fellow for the Boston College Center for Corporate Citizenship, said in a statement.

Who were the Top 50 and how did they score?

1. Google (80.84)1 Google 80.84
2. Campbell Soup (Co. 79.55)
3. Johnson & Johnson (79.46)
4. Walt Disney (79.11)
5. Kraft Foods Inc. (76.89)
6. General Mills (75.96)
7. Levi Strauss & Co. (75.38)
8. UPS (75.15)
9. Berkshire Hathaway 74.99
10. Microsoft  (74.83)
11. Intel (74.67)
12. 3M  (74.66)
13. FedEx (74.65)
14. Anheuser-Busch Cos. (74.58)
15. Sara Lee (74.15)
16. Apple (74.03)
17. General Electric (73.64)
18. Publix Super Markets Inc. (73.56)
19. Honda of America (73.52)
20. Deere & Company (73.41)
21. Adobe Systems (73.39)
22. Xerox (73.18)
23. New Balance (73.13)
24. Toyota Motor Corp. (73.00)
25. Texas Instruments (72.87)
26. Colgate-Palmolive (72.67)
27. Green Mountain Coffee Co. (76.61)
28. Marriott International (72.51)
29. Advanced Micro Devices (72.30)
30. IBM (71.99)
31. The Coca-Cola Company (71.79)
32. Whirlpool Corp. (71.76)
33. Aflac (71.68)
34. Office Depot (71.39)
35. TIAA-CREF (71.32)
36. PepsiCo (71.22)
37. Nokia (71.12)
38. Hewlett-Packard (71.03)
39. Timberland Company (70.98)
40. Eastman Kodak (70.96)
41. Cisco Systems (70.96)
42. Costco Wholesale (70.91)
43. Sun Microsystems (70.70)
44. Lowe’s Cos. (70.54)
45. Walgreen (70.47)
46. Fidelity Investments (70.44)
47. Express Scripts (70.32)
48. Deloitte & Touche (70.12)
49. Dell (70.08)
50. Boeing (69.88)

(Companies were rated on a scale of 0-100.)

The Question: Do you work now, or have you ever worked, at any of these companies? If so, how does the reality inside the company stack up against its public perception?

The Reputation Institute, a New York-based corporate reputation consultancy, has released its list of the world’s “most reputable” companies. The Reputation Institute surveyed 600 companies in 27 countries and rated each according to its RepTrak reputation methodology. The 60,000 people who participated in the study answered questions about a company’s perceived corporate citizenship, its governance and its appeal as a place to work. The companies were scored on a 0 to 100 scale.

The Top 10 Most Reputable

1. Toyota (Japan)
2. Google (U.S.)
3. IKEA (Sweden)
4. Ferrero (Italy)
5. Johnson & Johnson (U.S.)
6. Tata Group (India)
7. Kraft Foods (U.S.)
8. Novo Nordisk (Denmark)
9. Grupo Bimbo (Mexico)
10. Migros (Switzerland)

This intelligence comes to us via Ethics World.

L’Oreal is sponsoring a new master’s degree program in “law and business ethics” at the University of Cergy-Pontoise in France, according to a recent posting in EthicsWorld.

According the the post, the international cosmetics giant has developed the new graduate degree course in association with France’s ESSEC Business School, the U.K. Institute of Business Ethics and the U.S. Ethics & Compliance Officers Association.

“This is the first diploma of its kind in Europe,” said Emmanuel Lulin, L’Oreal’s director of ethics. “Business ethics is a complex subject which needs to be addressed with humility and determination. The global leaders of tomorrow are those companies who have integrated ethics into their strategic planning but also their every-day business practices.”

But one has to wonder about a company whose advertising is designed to make women feel nervous about their looks endowing business ethics program. Some might think it a form of CSR-washing. Is it? You tell us.

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In a blistering new opinion on the Wall Street meltdown, the Wharton School’s Knowledge@Wharton takes on the popular and long-held corporate shibboleth that tying shareholder interests to individual executive incentives is always good for a company, its partners and its customers. In fact, says the article, it’s at “the root of the leadership debacle that has rocked the financial services sector.”

“We ought to start thinking about whether this idea is really working,” says Wharton prof, Peter Cappelli, in Eyes on the Wrong Prize: Leadership Lapses That Fueled Wall Street’s Fall. “It seems to work for the people in charge, but is it really working for the company? It’s certainly not working in the broader society. The shareholders and the executives who have shares in the company are in trouble, but this is spilling over into the economy in a way that I haven’t seen before.”

What do you think? What should exec comp be tied to if not shareholder value?

Some are saying that the financial crisis signals “the end of Wall Street.” Does it also signal the end of the traditional, liberal concept of ethics that have dominated in the West for the past two centuries?

Even before the meltdown, University of Exeter sociologist, Edward Skidelsky, writing in the U.K. journal, Prospect, was suspicious of modern liberal ethics, based as they are on the “rights and obligations” model of John Stuart Mill and not on pre-modern, native virtues like “courage, temperance, prudence and justice,” and such old fashioned notions as “humility” and “charity.” (By “liberal,” Skidelsky refers to classical liberalism and not the set of current political beliefs and policies espoused by the political left and decried by the right.)

In Mill’s reckoning, notes Skidelsky, “neither one person, nor any number of persons is warranted in saying to another human creature of ripe years, that he shall not do with his life for his own benefit what he chooses to do with it.”

Building on Mill’s thought, writes Skidelsky, modern liberal ethics have left us with an essentially de-moralized society, one in which anything is permissible, provided it is not against a law already predisposed to permissiveness.

In short, we are society without inherent virtue; one in which Wall Street’s Masters of the Universe feel no compunction whatever about drawing down Croesus-like compensation packages, inventing “new financial instruments, creating a financial Frankenstein the likes of which we had never seen” — and which no one but the quants who devised them understand — selling high-interest, “subprime” mortgages to suckers with credit ratings so bad they can’t even finance a car and dissembling to authority when called to account.

After all, they were just doing their own thing and it was all legal, right?

Skidelsky advocates a return to pre-modern, virtue ethics. Maybe he has a point. After all, if Wall Street’s Gordon Gekkos had been able to keep their greed in check, tempering it with, say, thrift, humility, prudence and charity, would we be in this mess? Or would the new Romans merely give lip-service the virtues the way our current crop of Masters of the Universe do to “rights and obligations?”

(Image by keysofvirtue via Flickr, CC 2.0)

American business has long had a bad habit of lavishly rewarding executive failure, and “the government” has often been accused of “meddling” in the affairs of business to the detriment of the national economy.

But Tuesday Uncle Sam stepped in opened up a can of righteous whup-ass in the Fannie Mae and Freddie Mac debacle (don’t call it FannieGate), with the Federal Housing Finance Agency notifying former Fannie CEO, Daniel Mudd, and former Freddie CEO, Richard Syron, that they would not be receiving the approximately $24 million in “golden parachute” payments called for in their contracts. Syron would have gotten between $12 million and $14 million in exit pay; Mudd, $7 million to $9 million.

Whether the feds can manage Fannie and Freddie out of their current crises remains to be seen, although at this point it’s hard to imagine it screwing the pooch worse than Syron and Mudd.

No matter. The question is, should private enterprise follow the government’s lead and amend their executive contracts to include a “failure clause” that would nullify or reduce exit payouts if the exec fails meet a set of stated goals?

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“Hardly a day goes by without yet another twist or turn in the credit crisis that has engulfed the U.S. financial system for more than a year,” writes former Wharton dean, Russell Palmer in an insightful op-ed piece in Knowledge@ Wharton.

Bear Stearns, one of the country’s largest underwriters of mortgage bonds, has been swallowed up. Venerable institutions such as AIG, Wachovia, Lehman Brothers, Merrill Lynch and Citigroup have brought new CEOs on board. Media reports suggest that the world’s biggest financial institutions have absorbed more than $300 billion in asset write-downs and credit losses even as home foreclosures are at record high levels and Wall Street has laid off thousands of employees…

What caused the crisis? In my view, greed was the underlying factor. Wall Street hedge funds and others are looking for any financial machination that they can find to hype their financial returns. The whole mortgage fiasco is just the latest example. The dot-com bubble of the late 1990s was another instance. Anyone with any sense knew that during the dot-com mania, you couldn’t sustain high prices for stocks on companies that had no current earnings, only losses. It was a bubble, just like the Tulip Mania that investors lived through during the 17th century. With the present subprime crisis, the people originating the mortgages had to know that the higher the risk on the mortgage terms, the greater exposure there was to the mortgage going to foreclosure. So did the people who bought the mortgages, securitized the mortgages, and so on.

It takes courage to state what, deep down, most everyone knows to be the truth when few are willing to utter it. “Speak the truth and shame the devil,” as Rabelais said. Dean Palmer has dared uttered that truth, and put his finger squarely on the crux of the issue: simple human greed all around was the single most important factor in the sub-prime fiasco.

In short, the sharks selling the mortgages thought that they could get a lot out of the little people, while the little people closed their eyes, hoping that they would pay a little and get a lot.

Who’s to blame?

(Crooked house image by alincolnt via Flickr, CC 2.0)

In this new BNET video, James O’Toole, co-author of “Transparency: How Leaders Create a Culture of Candor” argues that while many organizations talk up the idea of transparency, true transparency is still elusive. O’Toole explores the concept, answering questions like: What does it mean to be transparent? Why is it so important? What steps can businesses take to embrace it?

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