Like it or not, the Sarbanes-Oxley Act of 2002 (SOX) is the law of the land. And at this point, SOX is, in many ways, yesterday's news.
Compliance among US public companies is virtually universal - even some non-public companies have embraced the principles - and it has become the gold standard of corporate governance.
But a big problem with SOX is that it focuses almost solely on the investor and leaves out the other crucial stakeholders. It also spawned the myth that accountability begins and ends with SOX compliance and that it is acceptable to manage an enterprise solely for the benefit of its shareholders.
It's time to move past SOX. There is an opportunity - some would say an obligation - for companies to extend the idea of accountability beyond just investors and to acknowledge through words and deeds that they hold themselves accountable to all stakeholders.
I should note that this multi-stakeholder focus is not just a nice idea. It's good for business.
Corporations that pay appropriate attention to all of their stakeholders historically perform better in the long term, as has been documented in recent studies from Washington University, New York University, and Arthur D. Little, whose research concluded, "Over an 11-year period... 'stakeholder-balanced' companies show four times the sales growth and eight times the employment growth of companies that focus solely on shareholders."
Even without independent validation, it seems obvious that people - whether employees, customers, regulators, or investors - will look more favorably on a corporation that can articulate what it has done to ensure its employees are treated fairly and have equal opportunity to advance; how it gives back to the communities it serves; what processes are in place to ensure customers receive the best quality goods and services; and how it delivers appropriate transparency for investors. Thanks to online resources, it's easier than ever to assess a company's performance and to make purchasing decisions accordingly.
To my knowledge, there hasn't been a great hue and cry for regulation that would make corporations more stakeholder-balanced. But the public's expectations of corporations have evolved, and today, a single-minded focus on "maximizing shareholder value" is a dangerously narrow strategy.
With public sentiment about corporate America at an all-time low, some companies will move defensively toward a stakeholder-balanced approach to mitigate criticism. But history favors the companies that adopt a more proactive approach. Twenty-five years ago, most corporate executives viewed the call for workplace diversity as a problem. The names of those few companies who saw it as a platform for differentiation and a way to highlight the values of their organizations now populate the lists of best places for women or minorities to work.
The question is: What far-sighted companies will see the stakeholder-balanced approach as the differentiating strategy it can be?
Chris Atkins is MD of global corporate practice at Ogilvy Public Relations Worldwide.