Internal Corporate Reform

INTERNAL CORPORATE REFORM

By Roland Watson

At this point, rather than move on to our other options as activists, such as the creation of pressure through exhibiting consumer preferences, we should consider the idea of internal reform: the ways in which companies can be encouraged to reform themselves. To begin, we can expand on an observation made earlier about the corporate club, that there are many good corporations but that they inevitably support the bad. As activists, what we want to do is disrupt - to end - this support. Using the tactic of divide and conquer we want to break this bond. And, we want to do it by persuading the good corporations that it is actually in their best interests to drop their support of the bad. Then, with the good corporations as our allies, we can use them to pressure the bad both directly, as in corporate trade organizations, and indirectly, by setting a positive example, which sooner or later the bad will feel compelled to emulate.

For this, an excellent starting point would be for such good corporations to establish an executive level position of ombudsman or ethics director. Indeed, in the modern world it truly is in their best interests to do so. The penalties to which corporations are starting to be held, as with Exxon, Dow Corning (over their breast implants), and with the companies in the tobacco industry, are now so great as to threaten company survival itself. (It is notable, though, that while Exxon has paid its $1 billion government fine related to the1989 Valdez accident, it is still contesting the $5 billion jury penalty imposed in 1994.)

Such a position represents the widest scope of what is already accepted and organized as risk management. Furthermore, it can be viewed as a proactive approach to insurance. All major companies, starting with the Fortune 500 in the U.S., should be persuaded to create such a position, which can be summarized via the following outline "job description."

Title:

Executive Vice President - Risk Management

Objectives:

To ensure that the company fulfills a positive social purpose, including to all groups and publics on whom it has an impact. To minimize company financial liability, first and foremost by proactively avoiding any actions which would expose it to such liability.

Reports:

To the Chief Executive Officer, and to an independent Board of Directors committee of which the CEO is not a member. [To the extent that such a position can be made immune to CEO and other executive pressure, this dual reporting should accomplish it.]

Specific responsibilities:

- Promulgation of a corporate statement of ethics, defining all publics and groups affected by the company, directly in its ongoing course of business, and indirectly through other consequences of the business, and establishing standards of behavior regarding each. [This requires a "social audit."]

- Distribution of the statement to every company employee, and to all such publics and groups.

- Enforcement of the statement's terms, including through the implementation of an internal whistleblower system.

- Chief company spokesperson in its relations with these publics, including direct responsibility for all of the traditional functions of public, corporate, government and investor relations, and consultative responsibility with marketing and advertising, and employee and labor relations.

- Independent oversight of technology development (R&D); all company surveillance, including of employees; and all business environmental consequences.

- Working with the financial controller, the development of measurement systems to quantify all social and environmental costs incurred by the company.

- Periodic reporting of such costs to the CEO and the Board of Directors.

- All other company risk management functions.

- All company insurance programs.

- All company philanthropy.

As presented, the power of this position would be so great that it would be a match for the traditional core business departments of production, sales and marketing, and finance. Also, it would be the main ally for employees who are being compelled by their bosses to act unethically. The actions of such a senior executive, and his or her staff, over time should transform - improve - the entire ethical basis of a company's culture, including reducing its climate of fear. Furthermore, with the position's establishment in a handful of major companies, the common trait of risk-aversion and pack behavior should lead to its creation in many others.

(Many companies have established the position of "ethics officer," and also "chief privacy officer." However, most of these jobs are low level, and they also seem designed to reduce external pressure on the company, rather than to fulfill a sincere desire to do right.)

This type of strategy constitutes a top-down approach. The other alternative, which should also be pursued, is from the bottom-up, meaning positive change instigated by the employees themselves. There are actually a number of different steps which should be taken here, including arranging greater cooperation between activists and workers, and also encouraging whistleblowers. In addition, a more subtle effort should be initiated through educational reform. Specifically, activists should approach business schools and persuade them to include Business Ethics as a degree requirement. Secondly, parents, through their oversight of the public school system, should demand that the pursuit of liberal arts - the right to obtain a general education - is maintained. The idea here is that young people must be taught that there is more to life than a career, and competition, and more to their schooling than preparing for a job. They must be given the education that they need to fight this form.