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Discussion and future implications
..................................................................................12 socially conscious
Additional Resources and
Voices extension More think strategy There's growing evidence that com-
panies are embracing CSR practices -
.................................................................................. 13
can also be profitable - whether it's reducing factory and
transportation pollution, using natu-
ral materials for packaging or treating
By Edward Iwata workers fairly — because they
USA TODAY believe such strategies can be prof-
USA TODAY Snapshots® itable and socially responsible.
Mix ing ads and social issues Activists have argued for decades
Is it acceptable for companies to involve a cause or that companies, as good corporate "All of a sudden, corporate responsi-
issue in their marketing?
citizens, are morally obligated to bility is an idea whose time has
adopt socially responsible business arrived," says Julie Fox Gorte, chief
practices. On their end, companies social investment strategist at the
say they exist to sell products, make Calvert Group, which manages
Yes No
72% 23% money and please shareholders — socially responsible mutual funds.
not to save the world. "We're seeing more companies who
Not
sure 5% think it's not just a philosophy, but
Source: Cone Corporate Citizenship study of 1,033
respondents. Margin of error ±3 percentage points. But those clashing views may be good for business, too."
finding common ground, say busi-
ness experts on the movement Study shows value
known as "corporate social responsi-
bility," or CSR. Christine Arena, a San Francisco busi-
By Dar ryl Haralson and Alejandro Gonzalez, USA TODAY ness consultant and author of The
High-Purpose Company, says more
© Copyright 2008 USA TODAY, a division of Gannett Co., Inc. All rights reserved.
AS SEEN IN USA TODAY’S MONEY SECTION FEBRUARY 14, 2007, 3B
rewarded employees with good work climates and high- renowned for its R&D that created products such as the
er pay and benefits ultimately saw stronger sales and synthetic fiber nylon — decided to pour billions of dol-
stock prices, plus less employee turnover. lars into safe, environmentally friendly products.
"It's a virtuous cycle," Rynes says. "As a company For instance, DuPont and British food refiner Tate & Lyle
becomes more socially responsible, its reputation and make Bio-PDO — a corn-based chemical used in cosmet-
financial performance go up, which causes them to ics, detergents and material in carpeting and clothing —
become even more socially responsible." at a $100 million plant in Loudon, Tenn.
Clearly, CSR isn't going away. Since 1990, DuPont has cut greenhouse gas emissions by
72% and air carcinogen emissions by 92% at its facilities
"Some still think CSR is a distraction," Orlitzky says. "But worldwide, says Dawn Rittenhouse, DuPont's director of
more business strategists now believe that social
responsibility has economic value." sustainable development.
Hundreds of corporations churn out annual "CSR But DuPont, like other companies that claim to be social-
reports" that tout their social consciences and business ly responsible, still faces some issues.
practices. Investors poured $179 billion in 2005 — up
from only $12 billion a decade earlier — into socially DuPont faces lawsuits alleging that perfluorooctanoic
responsible mutual funds, reports the Social Investment acid (PFOA), a chemical compound used in the making of
Forum. Businesses and environmental groups are even Teflon, poses public health risks and contaminates drink-
joining forces. ing water — charges denied by DuPont.
Last month, the U.S. Climate Action Partnership — a new
alliance that includes GE, DuPont, Alcoa, Caterpillar, Two years ago, DuPont agreed to a $16 million settle-
Duke Energy, Environmental Defense and the Natural ment with the Environmental Protection Agency after it
Resources Defense Council — urged lawmakers and the was accused of failing to report data on PFOA, a likely
White House to reduce greenhouse gas emissions and carcinogen. DuPont later volunteered to halt by 2015 all
hasten technology research. PFOA emissions from its plants.
DuPont's transition Beyond the legal fights, DuPont keeps plowing new
ground. The company vows to make $2 billion a year in
Many CSR experts point to DuPont, the $27 billion revenue by 2015 from 1,000 products that save energy
chemical manufacturer in Wilmington, Del., as a compa- and reduce pollutants.
ny evolving successfully from the old smokestack indus-
try era into the environmentally aware 21st century. "What's good for business," Rittenhouse says, "must also
be good for the environment and for people worldwide."
DuPont used to rely heavily on fossil fuels to make paint,
plastics and polymers. But in the 1990s, DuPont —
In June, for instance, one-third of Yahoo shareholders — nance analyst for the Service Employees International
upset over the Internet giant's poor stock and earnings Union (SEIU).
performance and former CEO Terry Semel's $108 million
pay package — voted against re-electing one or more Business leaders argue that some activist shareholders
Yahoo directors. The high "no votes" were believed to be overstep their legal bounds. State corporation laws give
a big factor in Semel's resignation as CEO, although he directors and management, not shareholders, the power
remains board chairman. to run companies, says John Castellani, president of the
Business Roundtable, an organization of U.S. executives.
Better relations
"At a certain point," Castellani says, "executives become
This year's proxy season also shows that relations so distracted by these issues to the detriment of produc-
between shareholders and companies clearly are ing shareholder value."
improving, with more corporations and investors seek-
ing common ground on issues. Businesses also argue that some labor and environmen-
tal activists advance their political agendas, rather than
"It's staggering — there's definitely a sea change going address broader corporate-governance issues.
on," says Carolyn Kay Brancato, governance director at
The Conference Board, a business-research organization. David Hirschmann, senior vice president at the U.S.
"Companies are taking shareholders' issues much more Chamber of Commerce, warns that too much sharehold-
seriously than they used to." er power will lead to divided boards and directors
beholden to special-interest groups.
There are several reasons for that:
Nonetheless, shareholders and business officials say
uIn the post-Enron era, companies have strengthened there have been several breakthroughs this year, includ-
their oversight because of tougher anti-fraud and ing:
accounting laws, the federal crackdown on corporate
crime, and court rulings that say directors can be held uMajority voting proposals. In one of the most hotly
liable in shareholder class-action lawsuits. debated proxy issues over the past decade, shareholders
have pressed companies to adopt majority voting for
uMore investors and companies realize that corporate- directors to be elected to board seats.
governance, labor and environmental issues are main-
stream investment issues, not "fringe nuisance propos- For decades, board directors were elected by a simple
als" that surface at annual meetings, says Howard plurality vote, or whoever received the largest number
Sherman, CEO of the GovernanceMetrics International of votes. Activist shareholders contend that the plurality
research firm. system made it difficult to oust lame directors, and that
it's more democratic to choose directors by a 51% major-
"These issues have financial impact and can affect port- ity vote.
folio returns," Sherman says.
So this year, activist shareholders — such as the United
uFaced with Congress and the Securities and Exchange Brotherhood of Carpenters and Joiners of America pen-
Commission imposing new rules and regulations, a sion fund — filed 140 resolutions with companies, urging
growing number of executives and directors prefer to shareholders to approve majority voting.
meet privately with shareholders over corporate-gover-
nance issues. To the surprise of shareholders, more than half of those
companies agreed to voluntarily adopt majority voting,
"Rather than wait for something to be mandated, smart so shareholders withdrew their resolutions, according to
companies implement best practices voluntarily and on Bowie at ISS.
their own timeline," says Tracey Rembert, senior gover-
"This is absolutely unprecedented, for so many proposals agreed to reduce their greenhouse gas emissions or
to be withdrawn," Bowie says. report on their energy-efficiency plans.
Following the lead of Colgate-Palmolive, Pfizer and oth- The resolutions that went to a shareholder vote garnered
ers, more than 400 U.S. companies have adopted majori- a record 22% support, says Ceres, a coalition of large
ty-voting policies — "a very healthy trend," says shareholders and environmental groups. No longer are
Sherman of GovernanceMetrics. environmental resolutions ignored as tree-hugger issues,
says Ceres President Mindy Lubber.
uSummit talks. Shareholders and business leaders are
cooling the fiery rhetoric and forming several working At her group's first conference on global warming in
groups to hash out the most troublesome proxy issues, 2003, turnout was low. Now, the conferences are
from out-of-control executive pay to the shareholders' jammed with senior executives furiously taking notes.
"majority-vote" issue.
"Climate risk," Lubber says, "is a fundamental economic
High-powered shareholders and corporate leaders issue that affects shareholder value, the strength of com-
recently signed "The Aspen Principles," an agreement to panies and the fiduciary duties of corporate board mem-
work closely on executive pay and other issues. The par- bers and large investors."
ties included the AFL-CIO labor federation, the Business
Roundtable trade group for executives and the Council of uOut-of-control pay. As pay keeps rising for CEOs,
Institutional Investors. shareholders keep pushing to cap excessive salaries and
stock packages for executives whose companies perform
In another big summit in New York this summer, 150 poorly.
shareholders, executives and directors met in conference
rooms at the Latham & Watkins law firm to air their Last year, shareholders were outraged over sky-high
views — and possible solutions — on shareholder resolu- compensation and retirement pay to former CEOs at
tions seeking to cap sky-high pay to executives. Home Depot, Pfizer and other companies.
What's more, pharmaceutical giant Pfizer said recently So this year, a record 124 pay-related resolutions by
that it will meet yearly with large shareholders to dis- shareholders received average support votes of 30% to
cuss corporate-governance and pay issues. 43% at Apple, Hewlett-Packard and other companies,
according to ISS.
Dozens of companies have called Pfizer to ask about its
plans, according to Margaret Foran, senior vice president The resolutions sought to link executives' pay to their
of corporate governance at Pfizer. performance, to give shareholders advisory votes on pay
and to halt the controversial practice of backdating stock
"People are coalescing around issues," Foran says. options.
"They're looking at the pros and cons in good faith."
Aflac, the health-insurance firm in Columbus, Ga.,
uGlobal warming resolutions. A record 43 global-cli- became the first major U.S. company to voluntarily give
mate resolutions were filed by Trillium Asset shareholders an advisory vote on executives' pay, start-
Management, Calvert mutual funds, the SEIU and the ing in 2009.
North Carolina state treasurer with energy, auto, home-
building and financial companies. In a statement last spring, CEO Dan Amos said that
shareholders, as owners of the company, "have the right
Shareholders withdrew one-third of the resolutions after to know how executive compensation works."
the companies — ConocoPhillips, Toll Bros. and others —
Q: Skanska hires all over the world. Does it hesitate Q: Do you make less than if you ran an $18 billion com-
more to add workers in Sweden because it's hard to fire pany in the USA?
them?
A: I made $3 million last year at today's exchange rate.
A: It's more expensive, not more difficult, because laws The dollar is falling, so it looks better than it actually is. If
require more compensation. If I add a thousand more I ran a company of this size in the U.S., it would be signif-
people and the cycle turns down, it's going to cost me a icantly higher.
lot to get rid of them. However, that is a moot point
because we have an acute shortage of construction Q: At least you don't have to deal with all the negative
workers in Sweden. We're trying to entice people to publicity that high-paid U.S. CEOs put up with.
come here.
A: Scrutiny is more intense in Sweden. In the U.S. they
Q: Where in the world do you find the most productive object to obscene payouts, $60 million, $120 million.
workers with the best work ethic? They don't make noise about a guy who makes a crum-
my $10 million or $20 million. In Sweden they object to
A: We have 12,000 projects, so I see vast differences in everything.
productivity. But I can't attribute it to a country or a cul-
ture. I attribute it to the management on a project. Q: The USA is not very popular globally. Any advice for
Productivity is not the willingness of the workers but U.S. companies operating abroad?
how good and demanding the supervision is.
A: Europeans respect and admire the U.S. economic
Q: It must be awkward to have labor union members at prowess and success. We are unpopular because of for-
Skanska's board meetings. eign policy and political reasons. People don't view busi-
ness nationalistically, although big business has a bad
A: There isn't an us-and-them mentality. It's the oppo- image to the man on the street in all countries. What I
site. The board members representing the employees are would advise any American is not to come to Sweden or
supportive of the company and management. In the five any country and try to tell everyone that Americans
years I've been CEO we have not had one issue where have all the answers. Even if you go from New York to
the union members and the rest of the board were at West Virginia, I don't think it's a good idea to tell every-
odds. body how smart you are and how dumb they are. It's
Q: Norway has a law that requires 40% of directors be human nature that people will resent that.
women. Would that be OK too?
It's also on the official agenda. Today, former vice presi- About 35 million Americans regularly buy green prod-
dent Al Gore will be here to speak on what advertisers ucts, according to research group Mintel.
and ad agencies can do to "raise awareness of the cli-
mate crisis around the world." And research shows many folks will pay more for eco-
friendly goods or services, says Adamson.
Gore's seminar follows a discussion on Wednesday host-
ed by global ad giant Havas that examined good and bad Adamson and other marketing experts warn, however,
attempts at green marketing. that when it comes to touting an eco-friendly message,
marketers had better be ready to back it up — or face
Also here, the non-profit ACT Responsible group of ad backlash from consumers.
and media pros sponsored an exhibition of socially
responsible ads with a large section for green ads. "You've got to show that there's substance behind what
you say," says Hamish McLennan, global CEO of ad
On a lighter note, Alice Audouin, sustainable develop- agency Y&R, which is hosting the Gore seminar.
ment director at Havas Media in France, will lead a group "Otherwise, it could backfire."
of ad industry women in swimsuits on a cleanup of litter
on the Cannes beach on Saturday. She says they aim to Dozens of marketers — including oil companies and
show that social responsibility can be fun and even automakers — have been criticized in the media and on
"sexy." blogs for what appears to be more hype than action on
the green front. There's even a term for playing up an
eco-friendly stance when a company may actually be
doing, on balance, more harm than good to the environ-
ment: "greenwashing."
Joanne Bradford, chief media officer at MSN, says she is "Ecomagination is a business initiative first and fore-
well aware that tying with a green issue comes with most," says Judy Hu, general manager for corporate
scrutiny. Microsoft's MSN is lead media sponsor of the advertising. "We aren't being charitable. We're doing
upcoming series of Live Earth concerts to raise aware- something that makes good business sense."
ness of global warming.
uTimberland. The apparel and shoe company last fall
began using shoe boxes of 100% recycled material and
Microsoft has touted its success in reducing fuel emis- introduced a so-called nutritional label, similar to food
sions, and Bradford says her team has worked to cut labels, that list such things as the shoe's environmental
paper use. But she is open about the limitations on a impact in areas such as renewable energy.
person or company going completely green: "We're just
trying to be thoughtful about it. There are all sorts of lit- This spring, Timberland also added Green Index tags to
tle things that you can do every single day." five shoe lines. The tags give environmental ratings for
each based on the impact on the climate of making the
In posting online content, MSN also has to balance its product, chemicals used to make it and its organic,
green focus. renewable and recycled materials contents.
"Whether you're buying natural ingredients for your skin uPepsiCo. It has made a companywide commitment to
care or deciding what type of fuel economy you want environmental action such as using more solar energy at
with your car, we want to provide you with that infor- its facilities, recycling water and purchasing renewable
mation," she says. "But I don't think you'll see everything energy credits that subsidize develop clean sources such
we do be green. It's not going to be the all-green auto as wind power.
channel, because people want options."
Pepsi is a sponsor for the July 7 Live Earth concerts.
Others greening their image: Concertgoers who turn in Pepsi containers at stores at
the concert venues get credit toward buying recycled
uNedbank. In one of the most direct examples of green products. For instance, at Giants Stadium in New Jersey,
marketing, this South African bank took the Grand Prix people can turn in cans and bottles for a messenger bag
in the outdoor ad competition at Cannes this week for its made from recycled material.
Power to the People billboard. The sign has 10 solar pan-
els, each generating 135 watts of electricity, that are uEMP. The Lithuanian electronics recycler won a Silver
powering the kitchen of a nearby primary school. Lion for media planning with a campaign encouraging
people to turn in for recycling old electronics sitting
unused in attics and garages.
uGE. It began its Ecomagination campaign two years
ago. The made-up word represents GE's commitment to EMP worked with Universal McCann to place old TVs on
spend more than $1.5 billion developing eco-friendly buses, with a message about how much space they
polices and products, from clean coal technology to waste.
energy-efficient washing machines and light bulbs, by
2010. The campaign also included e-mailing of videos showing
funny ways people get rid of old electronics. They got
The Ecomagination campaign of TV, print and Web exe- substantial pass-along distribution and showed up on
cutions, by BBDO in New York, will get nearly 100% of video-sharing websites.
GE's corporate ad budget this year.
1. Choose a company that you do business with on a regular basis. Examine their economic, social, and environ-
mental policies. What changes might they make to one or more of these areas that would increase their social
impact while preserving or increasing shareholder revenue?
2. Review USA TODAY and find a featured entrepreneur that has created a business model that most exemplifies
the ideals of corporate social responsibility.
4. Yaron Brook says, “Corporate altruism is not only destructive, it is immoral.” In light of Bill Gates’ recent call for
"creative capitalism" that uses market forces to address poor-country needs and his decision to grant $306 mil-
lion to develop farming in poor countries, what points might be made in support of Brook’s viewpoint? What
points could be made against her position?
5. Why do businesses exist? What is the purpose of a business, or, ultimately, any economic system? Explain your
philosophy.
6. At what point does “greenwashing” (the term for playing up an eco-friendly stance when a company may actu-
ally be doing, on balance, more harm than good to the environment) become an impediment to overall business
performance, and a reason for you, as an individual, to take your business elsewhere? Explain.
Future Implications:
1. Given the choice between government responsibility for bettering the social ills of the world and CSR, which
holds the most hope for a more just, peaceful and healthier future? Provide a solution that would utilize both.
2. Discuss the role that increasing affluence, changing social expectations and globalization will play in the impor-
tance of CSR in the future. What other changes in business practices are likely to result from these issues?
3. Stuart Graham contends, “The future is that there will be no letup in the demands of shareholders for financial
performance. There will also be no letup in the demands of society that businesses behave responsibly.” Are these
two goals mutually sustainable? Why or why not?
4. In a speech at the World Economic Forum in Davos, Switzerland, Bill Gates called for a "creative capitalism" that
uses market forces to address poor-country needs that he feels are being ignored. "We have to find a way to make
the aspects of capitalism that serve wealthier people serve poorer people as well." To what degree should compa-
nies with fewer resources and profits than Microsoft have a responsibility to address the social ills of the United
States and/or the world? Debate this issue with your peers.
1. Review each of the following issues on the Voices website at voices.usatoday.com : stem cell research, health care,
and energy. Choose one of the topics and make recommendations for specific changes to that industry that would
improve its economic, social, and/or environmental policies, while preserving profitability.
3. Viewing your college or university from a business perspective, what steps have been taken by the administration,
faculty and/or students to promote environmental sustainability? Share the best solutions at:
usatodayeducate.com/best_practices/going_green.cfm. What additional changes could be made to ensure the eco-
nomic, encironmental and social sustainability of your school as an institution?
Additional Resources:
The Corporate Social Responsibility Initiative at The John F. Kennedy School of Government is a multi-disciplinary
and multi-stakeholder program that seeks to study and enhance the public contributions of private enterprise. It
explores the intersection of corporate responsibility, corporate governance, public policy, and international devel-
opment. It bridges theory and practice, builds leadership skills, and supports constructive dialogue and collabora-
tion among business, government, civil society and academics.
Celebrating its 20th anniversary, Business Ethics is now an exclusively online magazine offering information, opin-
ion and analysis of critical issues in the field of corporate responsibility.