There are three main ways to encourage directors and shareholders to take greater account of CSR, says Roger Cowe
CSR has come a long way in the past few years, but it is still beset by
confusion over one rather important element – money.
First, there is the question of money or morals. Former Amnesty
International Business Group chairman Sir Geoffrey Chandler has argued
eloquently that we must not get caught up in the question of whether
the right behaviour pays. From this point of view, companies ought to
do the right thing simply because it is the right thing.
In some respects I think this argument is absolutely right. Firms ought
to respect human rights, shun unacceptable working conditions, avoid
bribery and so on, regardless of whether they can make more money by
doing so.
The trouble is that this moral position only
provides guidance on the big issues. UN declarations and ILO standards
help to set the boundaries. But they don’t help deal with the vast
majority of serious business decisions managers have to make – such as
closing branches, or making (entirely legal and popular) products which
pollute or damage human health. That’s where money comes in.
For all the talk of morality and corporate values, it is money that
makes the business world go round. At the highest level, shareholders
rule the roost. That is a fact of City life, which is demonstrated with
increasing frequency. So boards have to pursue shareholder value.
Money also rules inside the company, from the executive corridors to
the factory floor. Whether it is share options or bonus schemes,
managers’ decisions are influenced by the factors which will influence
their pay and progress through the company. It doesn’t mean that
managers are immoral, or will do bad things in pursuit of riches
(although that does happen, as we have seen recently at Enron). But it
does mean that exhortation is likely to be less effective in changing
behaviour than melding CSR with management systems.
But
this focus on money raises another danger – the belief that everything
that needs to be done can be done by businesses pursuing shareholder
value. It isn’t true, and that is why we have a mass of law (in the
developed world) protecting employees, consumers and society at large.
I have no doubt that the most effective way of achieving worthwhile
change, at the individual or corporate level, is by making it
worthwhile in a financial sense. But there are many areas where that
cannot be made to happen, which is where we have to step over the
boundary into regulation and legislation. So this particular triple
bottom line consists of morality, which sets the framework,
self-interest, which drives behaviour, and regulation, which takes
effect where self-interest fails.
Roger Cowe is a business journalist specializing in CSR. He is editor of No Scruples? to be published by Spiro Press in July
