Our guest author today is Stanley Litow, Professor at Duke and Columbia Universities, where he teaches about the role of corporations in society, and the author of The Challenge for Business and Society: From Risk to Reward. He formerly led Corporate Social Responsibility at IBM, where he was twice selected as CEO of the Year by Corporate Responsibility Magazine.
America's political climate is, in a word, toxic. The left and the right, which usually agree on nothing, seem to agree on one thing: animosity toward the sins of the private sector.
It's remarkable how American businesses are now portrayed as a major cause of many of our society’s ills: income inequality,the looming skills gap, education’s failure to prepare workers for the jobs of the future, and a shredded social safety net. That's the main reason that many prominent American business leaders of the Business Roundtable spoke out last week about businesses’ need to make a commitment to all stakeholders, not just their shareholders. It’s a necessary step, in my view. The new awakening, which many companies have already been embarking upon, demonstrates a willingness not to just placate their shareholders but recognize a corporation's responsibility to the broader community, a stable environment, improved schools and their employees. This is an imperative for communities but also for the business bottom line.
What, exactly, is a responsible company?
A responsible company is one that operates at the nexus between business and society. The first step in claiming this high ground is for corporations and their leaders to stop staying silent and instead be willing to speak out publicly and forcefully on issues connected to a strong society. Many corporate leaders are conflicted about the degree to which they can make any public statement without drawing heat from a polarized public. We've seen contentious issues, such as gun violence, white nationalism, immigration or “bathroom bills” targeted at the LGBTQ community, weighed in boardrooms as corporate leaders consider what a public stand could do to their bottom line. While some business leaders are disturbingly silent, others, such as the CEOs of the KIND health bar company, Dick's Sporting Goods company and Columbia Sportswear company, all spoke out after the recent spate of horrific violence in Texas and Ohio, backing the need for gun safety and an end to white nationalism. WalMart and others have joined in is as well.
Does speaking out have a risk? Perhaps. But those who spoke out after the violence in Charlottesville saw little negative impact. Quite the contrary. And while there may be some risks in speaking out, there are even bigger risks in remaining silent, alienating both consumers and employees. Clearly, silence is no longer golden. But speaking out, while important, is just step one. Next and far more important is the need to back up speech with action.
Perhaps we can learn something from history. In America's civil rights struggle, some private-sector leaders not only spoke out, but backed up their speech with actions. In President Kennedy's Plan for Progress, nearly 300 business leaders met periodically at the White House and made public commitments to change their hiring practices regarding people of color, backing it up with regular releases of data on their progress. Within two years, on average, the hiring of African American employees in these companies had increased by 13 percent. A decade earlier, before passage of the Civil Rights Act, the IBM Corporation opened a manufacturing facility in Kentucky, but only after the governor was forced to agree that the plant could be racially integrated, thus leading to school integration in the city of Lexington. The lesson: concrete actions, not just talk, have helped to solve hiring and work environment issues. And this was understood not only as good policy, but good business as well.
Other progressive labor practices, combining speech with action, can also be seen in history. In an era when companies led by “Robber Barons” were known to exploit workers’ lives and livelihoods, other companies took a different path. Macy's began its free employee health care program in 1870, and American Express started the first pension plan in 1875. By 1905, close to 500 companies offered a week of paid vacation. One hundred years ago, the founder of Kodak gave one-third of all his stock holdings to his employees. These progressive actions took place long before government mandates, and at the same time that other business leaders exhibited a total lack of regard for ethics and decency. Thus, at the end of World War II, when America began to make high school mandatory, state governments did so with some strong vocal support from the private sector.
What is the lesson for CEOs and other business leaders of today? First and most importantly, back up your words with specific concrete actions, including metrics for your company’s performance. This includes improved labor practices, addressing both wages and benefits where diversity based on race, ethnicity and gender are paramount. But you should also include investments in workplace skills through tuition reimbursement and investments in improving the skills of the existing workforce, as opposed to only considering employee replacement. A more skilled and productive workforce can be grown, not just recruited. Relatedly, corporate responsibility also requires that a high national priority be placed on education through both words and deeds.
Improving our schools and colleges is a responsibility of all walks of society, not just educators. Don't let the controversies over standards, charters and choice make you shy away from supporting public education. Our schools need our support and close partnership. As the debates during the presidential campaign heat up, educational issues can't begin and end with support for college affordability (though many existing programs, such as Pell Grants and College Work Study, could benefit greatly from more funding support in the current Congressional session). Strong backing from the private sector could only help. But college affordability must go hand in hand with investments that can address the challenge of boosting rates of college readiness and college completion. This will require specific tangible investments in school improvement at the elementary, secondary and public higher education levels. Support for public school funding at the federal, state and local levels, targeted at the school to college to career pipeline, would greatly benefit from vocal support from private sector leadership, as well as close involvement that spurs needed public spending for public-private partnerships. The same is true of the need for equitable teacher salaries and investments in teacher professional development.
Finally, while business should speak out and follow up with actions, the rest of us can't stay on the sidelines. In this era of quick-hit Tweets and short attention spans, we need to encourage every community to demand that actions match up with nice words. Government should continue to regulate bad business behavior, but should break new ground in encouraging higher quality business performance by rewarding and recognizing exemplary behavior. That is, we should push businesses and governments at all levels to set a much higher bar and encourage companies to exceed it. And this can begin with support for public education. There are risks in any action, but in this case the rewards for both business and society are far greater. Now is the time for action.