Managers hear it from consultants and activists, and they hear it increasingly from customers: “do good in the world, don’t just do business.” But investors, too, are calling on companies to be upstanding and ethical citizens, and that means scruples can seriously affect your access to equity capital. Thomas Kostigen, a columnist for MarketWatch, says that shareholders representing $10 trillion of investments are pushing to change the definition of shareholder value to include measures of ethical behavior — both in social and environmental terms. In a recent MarketWatch article, Kostigen cites new research by Opinion Research for Pepperdine University’s Graziadio School of Business that gives more weight to the importance of ethics in corporate management:
[...] investors are split on how well corporate boards are doing at ensuring their companies are managed ethically. The Pepperdine study shows slightly more than half say they are doing very well or fairly well — but only 9% say very well — while 42% say they are doing either fair or poor. Yipes. Less than 10% of the investors surveyed say they are happy with the ways in which the companies they are invested in are managed?
If that isn’t cause for divestment, I don’t know what is. The biggest hurdle these companies have to overcome is communication [of their ethical conduct policies, practices, and activities.] It’s time for companies to get smart and listen — to shareholders, employees and customers alike. “Clearly, investors are looking at more than the balance sheet and sales projections when it comes to investments,” said Linda A. Livingstone, dean of the Graziadio School of Business and Management. “Corporate board leadership that is centered on values and ethical behavior plays an important role in how investors evaluate options.”
When it comes down to business, your company’s reputation as an upstanding corporate citizen can help you win in both your customer markets and the capital markets.
