There was big news in Corporate Social Responsibility, or CSR leadership, last summer. The CEOs of more than 180 major companies signed a document announcing that big corporations should no longer focus exclusively on maximizing shareholder profits. Jamie Dimon, Chair of the Business Roundtable and CEO of JPMorgan Chase, presented a statement that business leaders should focus on delivering value to all their stakeholders — to customers, employees, suppliers, and local communities, as well as their shareholders.
When I wrote about it at the time, I saw it as a shocking shift in how businesses would measure their success. But I was also skeptical. One of the main drivers of change in a business is what gets measured. So I said:
“Watch what the CEOs do about measuring their companies’ success. If they focus solely on stock price, then their statement was just window-dressing. They and their companies will continue to emphasize short-term shareholder value above all else. But if their quarterly reports and analyst calls start highlighting other measures, then perhaps they really mean to change the game. It should be interesting.”
The 2020 scramble for CSR leadership
Today, the world is very different. But one thing is the same. Once again, CEOs are talking about changing how they do business. In response to COVID-19, calls for racial justice, and the many other societal pressures coming to a head, many business leaders are heavily emphasizing their commitment to safety and equity.
But do they mean it?
How ethical leadership turns a CSR plan into action
A recent article in The Wall Street Journal suggests two ways to determine whether CEOs and their companies are truly committed to making changes.
First, watch whether the CEOs treat their commitments as a major change in corporate strategy. One really good indicator: Did the CEOs consult their Boards of Directors before making those announcements? In many cases, you will find they have not. Why not? Perhaps the CEOs don’t see the statement as requiring a major change in how the company operates. Perhaps they believe the company was already meeting the new standards. Because without consulting their Boards, no CEO will make a commitment to a significant company shift.
Second, watch whether the Board-approved corporate governance guidelines of these companies change. In the case of last year’s Business Roundtable statement, neither of the two leaders — Chase and Johnson & Johnson — changed their guidelines, which continue to clearly state that the focus of management is the interests of shareholders.
I would add a third way to judge whether CEOs mean what they say. As I said before, watch what gets measured and rewarded. I recently wrote about how companies can increase their successful recruitment of diverse talent. One of the most powerful tools is making the bonuses of senior executives contingent on meeting explicit targets for diverse hiring. CEOs who are serious about change will create compensation plans that reflect their new focus.
In a time of disruption like this one, great leaders know that credibility, transparency, and trustworthiness are more essential than ever. It will be interesting to see who steps up and who is just massaging the message.
If you are interested in ensuring that your company’s public statements are backed by a real commitment to change, we can help. Contact us at firstname.lastname@example.org