OP ED: Managers must emphasize CSR's value in '05

The past is instant prologue. That is the lesson public affairs pros should take with them from 2004 as they step gingerly into the new year. Consider what we learned over the past 12 months.

The past is instant prologue. That is the lesson public affairs pros should take with them from 2004 as they step gingerly into the new year. Consider what we learned over the past 12 months.

Corporate reputation is eroding faster than ever. Not since the excesses of the Gilded Age that produced 1929's stock-market collapse and the Great Depression "have we witnessed so much reputation fallout in the corporate section," says Dr. Charles Fombrun, executive director of the Reputation Institute. What to do? Sarbanes-Oxley has made the corporate world more transparent, but it has not made it more immediately lovable or trustworthy. There is still a deplorable tendency to try to spin companies out of their problems. The public, however, has grown weary of spin. It recognizes it as easily as it does the most famous brands. The Wall Street Journal's Ronald Alsop sums it up: "After learning about scandal after scandal and losing big chunks of their investments, the public is demanding one thing above all else: Tell us the truth. Americans tend to be forgiving when companies confess their sins and do their penance." The C-suite must get serious about corporate social responsibility (CSR); it doesn't work without support from the top. An analysis in the Financial Times last month began: "Corporate social responsibility has never been more prominent on the corporate agenda. It is the subject of articles in the business press and a favorite topic at meetings of the World Economic Forum. Yet the broad view from civil society is that business's performance on CSR has never been worse." Adds the FT analysts: "For all the attention to CSR, with few exceptions, the only group that has seen any substantial benefit appears to be the CSR alchemists, the consultants who promise CSR to all comers." For all the outrage consultants will voice in defending their contributions to CSR, the writers make a valid point about how CSR is viewed by many top corporate executives. "CSR, in most companies," they say, "is in a ghetto; it is [frequently] a marginalized and marginal activity, often left to a dedicated department with the task of getting the message out about a company's good works." What to do? Look to companies like Starbucks and Unilever for guidance. As the FT writers emphasize, they are succeeding in CSR because their managements see identifying and fulfilling societal expectations as crucial to their business models; they are "not pursuing business as usual, with some CSR initiative hastily bolted on." All indicators point to 2005 as a potential record year for shareholder activism. Look at the figures: In 2002, when scandals at Enron and others erupted, shareholders brought 802 proposals to vote at company meetings, the Investor Responsibility Research Center reports. In 2003, the total jumped to 1,082. By mid-2004, it stood at 1,147. Shareholder proposals - once thought of as voices crying mid-forest - also are receiving more votes. A record 161 won majority support from shareholders, and, as The Christian Science Monitor notes in a report that was recently released, that record could be broken when final results are announced. What to do? Prepare for boarding. Shareholder activists' successes in one area will inevitably lead to adventurism in other corporate arenas. The gap between boardroom pay and that of other employees is set to widen, despite the fact that boardrooms have shown more restraint in bestowing huge rewards to corporate heads. FT reports that early numbers from 70 large companies indicate that base salaries actually fell 2% last year to an average of $1.2 million, while annual bonuses rose 8% to $2.8 million. Pearl Meyer & Partners, a compensation consultancy, believes independent directors set tougher performance targets because of embarrassment over the big bonuses given to CEOs at the end of 2003, when a rapid recovery in profits surprised people. CEO pay, FT notes, is now more than 500 times that of the average US worker, whose pay raise is "unlikely to top 5% this year." The US Bureau of Labor Statistics provides more telling data: In 1978, CEOs were earning 44 times more than the average worker. Two years ago, it was 301 times more. What to do? Gather your company's executive pay statistics for the year and be prepared to offer the board justification of your bosses' compensation if the press comes calling. Excessive executive pay is a blot on corporate image that has defied erasure or camouflage for years. Openness is the only way to go.
  • Wes Pedersen is director of communications and PR at the Public Affairs Council.

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