What It Takes – and Why It Usually Doesn’t
Social responsibility costs money, so how do corporate boards reconcile the demand to increase shareholder value with the price of protecting the environment and concern with the safety of workers. Most don’t try very hard, according to the Harvard Business Review.
“Recent surveys suggest that no more than 10% of U.S. public company boards have a committee dedicated solely to corporate responsibility or sustainability.” An interview with Jill Ker Conway, Chair of Nike’s committee, shows what it would take – and why it so seldom happens.
As Phil Knight its former CEO put it, Nike was once synonymous with “slave wages, forced overtime, and arbitrary abuse.” But in 2001, he endorsed Conway’s suggestion for a board committee to oversee social responsibility, and asked Conway to serve as chair. “She accepted on the condition that Knight attend every meeting—her way of making sure that the committee would not be marginalized.”
It needs to be said that Conway is a very impressive person who grew up under harsh conditions in the Australian outback and rose through academic ranks in the U.S. to become president of Smith College, (stories she chronicled in her The Road to Coorain and True North.) She knows how to fight, and clearly was not going to settle for a symbolic role. With that determination, she got the CEO to agree.
But getting the CEO to attend meetings was just the beginning of recruiting the committee members she needed to be effective. She concluded, rightly, that since the inevitable arguments against sustainability and increased responsibility were based on cost, she needed the CFO on board. She also needed members of her committee steeped in innovation to find creative ways around obstacles. Essentially she had to get the entire company behind the effort, willing to engage such thorny issues as dealing with suppliers dispersed throughout the globe, with factories in third world countries where safety standards are lax and easily subverted.
HBR tells us how truly difficult and unique the depth of the challenge that Conway took on with Nike: “corporate responsibility issues are consistently ranked at the bottom of some two dozen possible board priorities.”
In an interview attached to the article, though, she reveals a critical aspect of her success. In response to the question did she think the company’s “ownership structure” had any bearing on how the company took up the issue, she responded: “I’m absolutely certain it has had an effect.”
“When . . . I trekked around the world trying to recruit other consumer products companies with the same kinds of supply chains to join us. The only ones that had any interest were those with significant family ownership. I don’t think executives of a typical public corporation have that same feeling of moral responsibility that the principal founder or owner has.” (See, “Sustainability in the Boardroom.”)
So when she got Nike’s founder Phil Knight to agree to her terms, she had won half the battle. To be sure, she had to carefully engage the rest of the company to make it work, and as the HBR piece makes clear that was not a piece of cake.
But that finding also makes clear how entrenched and inevitable the opposition will be in corporations. Profit and “shareholder value” are the dominant preoccupations among boards. It’s how they measure performance.
It takes something like a family’s preoccupation with its legacy to counterbalance that mindset.