Unless your CEO was one of the 100 or so who attended, you could be forgiven for missing the Forum for Corporate Conscience last week.
The three-day event, held at the Ballantyne Resort Hotel in Charlotte over the weekend, brought together CEOs from around the country—Duke Energy, Goodrich and Wachovia were among the event’s supporters—at the invitation of former Bank of America chairman and chief executive Hugh McColl, who says he came up with the idea for the gathering even before the recent business scandals that made even more relevant.
Not relevant enough, however. Of 30 print media stories to mention the Forum—according to a Dow Jones Interactive News Service search—more than 20 appeared in the local Charlotte Observer. The forum attracted no attention from major news media, despite its CEO attendees and some high-profile speakers. Moderated by presidential advisor David Gergen, the forum featured speakers such as financier Warren Buffett, novelist and social commentator Tom Wolfe, children’s rights advocate Marian Wright Edelman, and business leaders including Sir Mark Moody-Stuart, former chairman of Royal Dutch/Shell Group and Paul Hawken, founder of Smith & Hawken.
It’s a shame the forum was so lightly covered, because it addressed issues that are critical to the future well-being of the American capitalist system, and featured CEOs and others—including some of corporate America’s harshest critics—constructively seeking ways to restore the public’s faith in business and business leaders.
And it ended with a pledge by attendees to do more to address issues such as excessive executive compensation, social justice, work-family balance, and the environment.
McColl says he was inspired to create the conference after reflecting on on some of the decisions he made as CEO at Bank of America and its predecessor company, North Carolina National Bank, and on some of the things he might do differently.
“Needing to cut healthcare costs in the 1980s, North Carolina National Bank declared our office buildings would be smoke-free. It was economically compelling and clearly in our employees’ best interest. And it was morally and ethically the right thing to do. But it was controversial in North Carolina where tobacco was king.
“The resulting firestorm saw us attacked by the tobacco industry and its representatives. Facing substantial pressure, we backed down, something I still regret.”
McColl says CEOs worry that if they take a controversial stand, it could cost their companies business. He says others are concerned about a more subtle and insidious consequence: that the CEO might be “kicked out of the ‘fraternity’ or not invited to join the country club.”
But he also understands the role an obsessive focus on shareholder value can play in distorting a company’s larger responsibilities.
“Any CEO’s judgment—and ultimately behavior—can and will be distorted by too narrow or obsessive a focus on a single issue, no matter how big or important,” says McColl. “Take the 1990s when corporate America focused on stock price to the virtual exclusion of all else. The object of that obsession? The opinions of securities analysts, a nearly maniacal determination to achieve earnings forecasts, shedding thousands of jobs - chasing the reward of the Market and presuming the marketplace cared as much as the company did about a sparkling Wall Street image.
“The lunacy is that no one made corporations behave this way. They consciously chose to. No one—or not enough people—said, ‘This is wrong. This is crazy.’ So the momentum built to a frenzy as CEOs micro-managed earnings rather than managing business. The madness continued as executive compensation was linked tighter still to stock price to reinforce short-term earnings decisions. Individual executives and their actions were touted as the sole reason for a company’s success in the market and in general. The shareholder audience seemed to be the only one that mattered.”
McColl would like to see corporate leaders focus on a broader range of stakeholders, and says such a focus would pay off over the long term.
“Companies clearly are responsible to multiple audiences—associates, customers, shareholders and the community-at-large—whose interests frequently compete and may be at odds. CEOs must balance them to create and sustain value in a principled atmosphere and lead by example. We didn’t know it then, but we do now: in business there’s a ‘triple bottom line’ that has to be achieved: social, environmental and economic.”
The Business Roundtable, which changed its definition of the responsibilities of corporations—away from the stakeholder model in favor of the narrower shareholder model—in the mid 90s, believes balancing those competing interests is too difficult a job for business leaders and boards of directors. (“The notion that the board must somehow balance the interest of stockholders against the interests of other stakeholders fundamentally misconstrues the role of directors,” said the Roundtable, in a 1997 report. “It is, moreover, an unworkable notion because it would leave the board with no criterion for resolving conflicts between the interests of stockholders and of other stakeholders.”)
McColl has little patience for such a view.
“Being CEO is not always a comfortable occupation, nor is it meant to be. Real leadership often requires taking an unpopular stance and sticking with it because it is the right thing to do. Failure to stand for what is right is to fail at the very definition of ‘leader’: to show the way by going in advance.”
The conference itself featured disparate points of view. Consumer activist Jeremy Rifkin, for example, focused on what he described as three major crises facing humankind: global warming, the chasm between rich and poor, and Middle East violence. All, he said, are exacerbated by humankind’s dependence on oil, and all can be solved by a greater commitment to hydrogen fuels.
A more pragmatic perspective came from Sir Mark Moody-Stuart, incoming chairman of Anglo American, a global mining conglomerate, and the former chairman of Royal Dutch/Shell, who argued that corporations must consider the wider needs of their customers, and that contributions to their communities are as important as economic performance and environmental records.
“This isn’t a matter of morality,” he told the audience. “It’s just a matter of good business.” Having learned some lessons about working in developing countries from Shell’s experience in Nigeria, he said companies could no longer look the other way as regimes they did business with oppressed their own people. “You have to ask yourself, is it the act of a friend... to walk on the other side of the street when a crime is being committed because it ain’t your responsibility? Maybe it’s not our responsibility. But it sure as hell is our problem when things go wrong.”
Billionaire investor Warren Buffet, meanwhile, saw executive compensation as the most pressing issue of the day.
“It’s the right topic at the right time and the right audience,” he told attendees in a wide-ranging speech that lasted more than an hour. “I think the acid test is going to be CEO compensation. What happened with CEO compensation in the last 10 years is clearly what the American investor is upset about. The CEO gets very rich, stays very rich and [investors] get poor, and there has been a lot of that going around.”
After listening to the luminaries, attendees broke into group of 20 to discuss some of the major themes of the conference, including executive compensation, leadership, justice, environment, community and family, and by Sunday had published a White Paper addressing each of these issues, with a preamble that stated: “We as business leaders share these aspirations for the sustainability, responsibility and values of our corporations and the world.”
On the economic front, the attendees agreed that “executive compensation during the 1990s has raised serious concerns about the extent to which compensation is insufficiently related to long-term value creation” and challenged CEOs to establish meaningful minimum holding periods for top executives’ stock grants and stock obtained by exercising options; to require top executives to hold a substantial amount of company stock; and to base top executives’ compensation on “specific short- and long-term performance benchmarks, both financial and non-financial.”
The group also called from greater transparency in corporate reporting. “Corporate reporting should enable all stakeholders, including investors, to make more informed decisions about companies’ behavior and economic value. We urge industries to develop measures of comparability and corporations to report more comparable, financial, non-financial, and qualitative information related to both economic performance and corporate sustainability.”
On the leadership front, the group pledged “to demonstrate that sustainability maximizes shareholder value and can only be achieved with a long-term focus. We will engage our stakeholders on corporate sustainability and the triple bottom line, set targets and measure progress using a framework such as the Global Reporting Initiative. We believe that a short-term focus on earnings does not support sustainability.”
Corporations, they added, should promote social justice through internal policies and practices; philanthropy and interaction with citizens; engagement with multi-stakeholder organizations; and through interaction with government at all levels
“The alarming and shameful number of disadvantaged children in America and around the world jeopardizes the sustainability of our social and economic systems,” said the White Paper. “We will embrace policies in our companies, support actions in our communities, and advocate at every level of government for adequate resources to ensure the health and educational needs of children.”
In the environmental arena, the group accepted that environmental degradation, including global warming, “poses a serious and imminent threat to our biosystem and our economic system” and pledged to “act responsibly by reducing greenhouse gas emissions and other environmental impacts” and to work with non-governmental organizations to craft consensus solutions to environmental problems.
“We know that strong communities and thriving businesses are mutually interdependent, and that businesses have a responsibility to address the most critical social issues in the communities where they operate,” says the White Paper, challenging corporations “to partner with other community stakeholders to identify and systematically address the most pressing social issues in those communities.”
Finally, the companies said they were “committed to creating environments within our companies that encourage, support, and facilitate our employees’ desires for meaningful work, family and personal lives.” Every attending CEO pledged to personally review existing HR policies and practices to identify gaps and opportunities for improvement.
It’s a shame that the Forum for Corporate Conscience was so under-reported by the mainstream media, because this group of CEOs showed more leadership in a weekend that the retrograde Business Roundtable has shown over the past two years, and demonstrated a clear understanding that the issues confronting corporate America today won’t be solved without a commitment to change on the part of its CEOs.