“The excesses of the recent past have made many question the very institutions — like banks, regulators, and capital markets — that make the system work. They see a system biased in favor of the very few at the expense of the great many. How do we find common ground and secure the blessings of the free market for us and our posterity?”
COMMIT!Forum session on “Crony Capitalism” October 2, 2012
Trust in the marketplace is at an all-time low. Formerly esteemed financial, government, and corporate institutions have become publicly reviled in recent years and viewed with great suspicion. The collapse of Enron in 2001, the bankruptcy of the 4th largest investment bank in the world, Lehman Brothers, and the seemingly endless parade of scandals that continue to follow have darkened the economic landscape for companies and executives who believe in doing business with integrity. All corporations have become suspect to increasingly pessimistic investors and consumers. Finding a way to inspire public and private confidence is the challenge for modern business leaders.
The session at the COMMIT!Forum on “Crony Capitalism” asked: How do we as corporate citizens and business leaders reverse this trend of corporate mistrust? David Jones, CEO of Havas, says that in today’s transparent social media world, “Doing good business is good business.” Yet how do we define “doing good business” in today’s economy?
In the old days (pre 2008), “good business” was simply a numbers game. Meeting or exceeding your expected earnings, attracting new investment, generating huge profits was all that was required to be a good company. In the past four years, the market demands you do more: To be viewed as a good company, you must be a good company.
The emphasis on performing profitably still exists, yet corporate leaders are being asked to profit with accountability and transparency – not easy in the wake of a profits at any cost ethos. The bottom line is not triple anymore; it has become one integrated goal: profits with purpose. Purpose assumes that a company is acting responsibly toward the planet and people. That mandate includes environment sustainability, workplace equity, community outreach, and customer integrity.
Sustainability no longer simply applies to greening your business activities; it is an inclusive process of responsible management towards environment and society as a whole. Treating people well at the expense of the planet, or vice versa, no longer suffices. The transparent economy necessitates that companies accomplish both goals in the pursuit of profit.
What is the risk for a company if you don’t act with integrity? The low volume of market investment and the lack of general economic liquidity answer that question. You risk losing substantial market share. The collapse of major financial institutions in recent years reminds leaders that the entire health of a company is at stake in the absence of transparency and accountability. This summer’s LIBOR scandal reveals that it is only a matter of time before a company’s misdoings are exposed.
The best policy is prevention. No matter how many laws are created to rein in an out-of-control corporate leadership, recent history shows that there will never be enough laws to stop bad behaviour. Someone will always think of clever ways around them. Good companies that are actually run well pay the highest price with the often onerous bureaucracy of complex and restrictive regulation. So where does that leave us as conscientious business leaders in today’s economy?
It brings us back to a very old-fashioned concept: values-based business. Act your values; don’t just talk about them. The common phrase: “Be the change you want to see in the world” applies to global corporations as well. Former Federal Reserve Chairman Alan Greenspan famously declared, “Business is fundamentally based on trust.” A decade later, his words rang profoundly true. Our society has paid a high price for ignoring this truth. Yet we can still reverse the trend by walking our talk.
The change comes from within. Individuals hold the key to that transformation. The mandate comes from top corporate leadership down and dictates the future of business. Every CEO and senior executive with a socially responsible conscience has the power to reverse the trend of failed business trust. Responsible leaders need to ask themselves, how do I want my company to be seen in the eyes of the public in five years, ten years? If you operate from integrity, you are half way there to achieving it.
Founder/CEO Good Business New York – New York’s award-winning sustainable business news