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It’s Gut Check Time On Corporate Purpose

It’s Gut Check Time On Corporate Purpose

Words matter. Imagine if the collective leadership of U.S. business ignored the protests against racial injustice or, even worse, followed the lead of the U.S. President to urge that “when the looting starts, the shooting should start.”

The strong, supportive words so publicly spoken in support of racial equity by corporate America will ring cheap and hollow, however, if they are not followed by correspondingly strong action. Some have done so but most have not (yet). I propose one action that is within reach of every company and could set the stage for meaningful progress: embrace transparency.

First, some context. In the flush, pre-pandemic times of 2019, 181 CEOs of the Business Roundtable, an association of many of the largest U.S. companies, committed to a redefinition of the corporate purpose. Previously, the group had endorsed the principle of shareholder primacy—that corporations exist principally to serve their shareholders. Instead, the CEOs committed to lead their companies for not only the benefit of shareholders but also for customers, employees, suppliers and the communities in which they operate. They made three commitments that are especially relevant to this moment, and framed them to be on par with generating long-term shareholder value.

  • Fostering employee diversity, inclusion, dignity and respect
  • Supporting the communities in which they operate
  • Protecting the environment through sustainable practices

But, with mounting economic, geopolitical and business uncertainties sapping attention and resources, the true measure of these CEOs’ convictions is now put to the test. Were these cheap and hollow words or true commitments? If true, how will they be kept, given that they involve wickedly complex issues that can’t be solved by any one company?

Instead of waiting for a grand plan before proceeding, corporations should take this moment of heightened urgency to commit to one actionable step: transparently measure where they currently stand and commit to report on future progress every time they report on earnings.

Fostering Employee Diversity, Inclusion, Dignity and Respect

While many companies say the right words on equity, few have been be transparent about their performance and progress. Intel is one of the few companies that has publicly disclosed detailed diversity and pay information. “It’s difficult to really fix what you aren’t being transparent about,” said Barbara Whye, Intel’s chief diversity and inclusion officer. The chipmaker is making itself “very vulnerable,” she said, to “do the right things,” and she hopes her peers will follow and share pay information, too. Doing so publicly and voluntarily would be a dramatic expression of corporate commitment to equity, given that the Trump administration reversed earlier plans to report even confidential data to regulators.

Data from Intel's diversity and pay disclosure.
Data from Intel’s diversity and pay disclosure. SOURCE: INTEL

Few would be surprised if full disclosure of diversity and pay data revealed racial and gender disparities at many companies. Establishing a baseline is critical for understanding where we really stand, and what changes need to be made. 

Supporting Communities in Which Corporations Operate

Another ripe opportunity is to measure the status of and interaction with communities in which companies operate. For example, a study by Rush University Medical Center of its surrounding community on the West Side of Chicago revealed a 16-year life expectancy gap of community residents compared with wealthier areas just six miles away. 

The analysis led to West Side United, a collaboration with other hospitals and stakeholders within the same community to address the root causes of this gap and aim for 50% reduction of the death gap by 2030. Six medical systems and other partners are now focused on creating internships and college apprenticeships for neighborhood students, hiring and advancing community residents, increasing local purchasing and providing grants to accelerate small businesses. They have defined a detailed set of metrics to drive their work and publicly measure their progress.

(Disclosure: I am an advisor to the American Medical Association, which is a West Side United community partner.)

Protecting the Environment Through Sustainable Practices

A corporation’s progress on protecting the environment is perhaps the most complex issue to measure. A good next step would be to embrace transparency on corporate environmental impact, similar to what Intel did with its diversity and pay data. 

One straightforward way to do this is to willingly participate in the Non-Disclosure Campaign organized by CDP, a UK-based profit that runs an independent platform for companies to disclose their performance related to climate change, water security and deforestation. It is a move that would be supported by investors as well, as more than 500 investors with more than $100 trillion in assets have asked companies to participate. Globally, more than 8,000 companies have done so, but many more—including more than a thousand high impact global companies have not.

Corporations could also follow the lead of Nike, which recently went beyond just reporting and set a comprehensive, and very public, goal to “Move to Zero” in their carbon emissions and waste. These metrics are used to shape decision making in many aspects of Nike strategy and operations including energy, supply chain, manufacturing, materials and products.

In business, only what gets measured matters and has a chance to get done. Yes, metrics can get gamed. But, let’s face it: few things capture management attention like progress against metrics that must be reported on a quarterly basis to boards of directors, industry analysts and the press.

Done right, metrics define the job to be done and those responsible for doing it. They enable internal and market-based accountability through, for example, incentive-based compensation and external competition. These factors are what ultimately drive organizations to apply their ingenuity and resources to deliver results, as is happening at Intel, Rush University Medical Center and Nike. 

By taking the brave step towards transparency on employee diversity and pay, community impact and environmental sustainability, corporate leaders would demonstrate their lasting commitment to building a better future along all three dimensions.

Original article from Forbes.

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