July is ending with a swirl of corporate social responsibility/sustainable development big ideas and actions with serious long-term implications.
First, it was auto companies defying their U.S. president on key environmental issues. Then, in rapid order, came a major international consumer company planning to sell off is brands that “hurt the planet or society”; and a successful financier promoting corporate governance undermining shareholder primacy.
Ford, BMW North America, Volkswagen Group of America and Honda have made an environmental deal with California, and 13 other states have indicated they will sign on. Essentially, the companies are committing to auto emission standards that set an average fleet mileage goal of 52.5 miles per gallon by 2025. President Trump’s plan would lower the goal to 37 m.p.g.
A New York Times editorial on these decisions “When the Polluters Are Cleaner Than the Government”emphasized a few points of particular interest to advocates of corporate social responsibilities, including this presumption.
“In a remarkable retort on Thursday … Ford Motor Company and three foreign automakers — which together represent 30 percent of the American market – announced that their interests lie more with the planet, or at least with those who care about saving it, rather than with the president.”
However, on a more realistic plane, and with reference to the essentials of sustainable development, this:
“Is some of this automotive environmental embrace driven as much by profit potential as by concern over climate change? Probably, and that would be a good thing. If sustainability produces a good return on investment – as it should – then corporations would be irrational to ignore it.” [Emphasis added]
A few days later: “Unilever warns it will sell off brands hurt the planet or society” – that The Guardian headline is supported with these excerpts:
“Unilever [a long time champion of sustainable development ] has warned that it will sell off brands that do not contribute positively to society… Alan Jope, Unilever chief executive… ‘Can these brands figure out how to make society or the planet better in a way that lasts for decades?’ … Unilever points to the success of its trophy sustainable brands … which are growing much faster than the rest of the business.”
And in the category of big, provocative ideas this inflammatory headline for a serious suggestion that binding ethical rules be incorporated into companies’ by laws: “A plan to take on ‘Sociopaths in the Boardroom”
According to New York Times columnist Andrew Ross Sorkin, former financier Jamie Gamble is proposing “that every company devise a set of ethical rules to be part of their bylaws , a move that would potentially open them up to shareholder lawsuits should they fail to stick to those rules.” These rules — admittedly with serious potential unintended consequences – would relate to relationships with employees, communities, customers, environment and future generations.
This may surprise a few folks: “Shareholder primacy” is a relatively new concept in capitalism. That’s according to the highly-respected Professor Mervyn King, former Judge of the Supreme Court of South Africa. Last year, in an address tracing the evolution of corporate governance over the centuries, here’s what he said about court decisions in the early 20th century: “Shareholders were [then] given primacy of place in regard to all other stakeholders involved in the business of the company: suppliers, creditors, financiers, employees, advisers, etc.”
Of course, shareholder primacy is now well entrenched in corporate law, strategies and tactics.
But with ideas such as Benefit Corporations, questions of how a company pursues profits – and the ranking of stakeholder interests – is gaining attention within the corporate social responsibility/sustainability community.
This week was quite illustrative.