Archive for the ‘public relations’ Category
Loblaw Companies Limited, the company that owns the Joe Fresh retail clothing line, has announced that it will pay compensation to the families of victims of last week’s factory collapse in Bangladesh. Details are sparse at this point, but it’s an interesting development.
The move will of course garner the company plenty of praise. Some of that praise will be offered only grudgingly, by those who will see it as the least that can be done by a money-hungry corporation in the habit of squeezing profits out of the labour of Bangladeshis with few other options. But still, there will be praise. For it is easy to see the good in a transfer of wealth from a multibillion dollar Western corporation to several hundred exceedingly poor families. Any plausible amount of compensation will be trivial to the company, but an enormous boon the those in Bangladesh who were affected.
But I for one still have questions, in particular questions about what is motivating the move. As I’ve said, the move will do a lot of good, but there are many different principles that might underlie any given action that does good. And we typically care not just about outcomes, but about principles too. Upon what principle is Loblaw compensating the victims in Bangladesh?
Cynics are already assuming that the move is pure PR, aimed at deflecting criticism (however unfair) and dissociating the Joe Fresh brand from the grimy reality of developing-country sweatshops. That’s one possibility.
It might also be that the company sees such payment as a form of charity. The building collapse last week resulted in horrible human suffering. Most big companies donate to charitable and humanitarian causes. And even if Loblaw doesn’t see itself as responsible for the collapse, it must see a connection, emotionally at least, and so the families of the dead are an especially apt target for the company’s charity.
But for me, the word “compensate” raises questions. That word can mean many things. But in contexts like this, it is perhaps most naturally read as referring to payments aimed at offsetting a loss, payments from someone who is either responsible for that loss or who at least for some reason owes such a payment. “Compensation” is not quite the same as “restitution,” of course. The latter word clearly implies culpability. But still, the word “compensation” seems to imply a level of regret, if not guilt. Is that what the company is implying? After all, Loblaw could have opted simply to say “We’re going to help those affected,” or even more neutrally, “We’re going to send money.” But “compensation” is the word the company itself is using. Is that really what they mean? And if so, why specifically do they think they owe compensation? What level of responsibility do they take — do they plan on taking — for the actions of subcontractors on the other side of the planet?
This is more than mere semantics; it’s about the principles underlying corporate behaviour. If, as seems inevitable, we are to regard corporations as entities capable of taking action, and of meriting praise or blame, then we need to be able to talk about what motivates them, and to ask them about the principles upon which they act. In a way, to seek a principled explanation in a situation like this is even more demanding than simply to ask that the company pay up. As I’ve already noted, the money in this case is a drop in the bucket. Giving voice to a set of values and principles upon which corporate behaviour is based is a lot harder than writing a cheque.
Energy company Kinder Morgan ran head-first into the complex ethics of public consultation last week. The company shut down an information session in Victoria, British Columbia, in response to what the company is calling “vandalism” of some of its on-site signs. The so-called “vandals” tell a slightly different story: they say all they did was peacefully replace the company’s signs with their own placards.
Public consultation is a regular part of business for many companies these days, especially those in the energy and extractive industries. In some cases, public consultation is required by legislation; in other cases, it’s just good business sense. But none of that means that all companies are going to be at ease with the process. To say that public consultation is common is not to say it is easy. For starters, the word “public” is too broad to provide clarity about what the process even amounts to. You’re not really going to consult the entire public. So who should you consult? The activist public? The educated public? The elected or appointed representatives of the public?
For that matter, how do you even label the process? Without harping too much on words, consider the difference in attitude implied by the terms “public consultation,” “public information,” and “public engagement.” The public’s perception of the process is liable to vary considerably depending on the way the process is labeled, never mind what it implies about the role the thing is going to play in a business’s operations.
From an ethical point of view, public consultation has two distinct objectives. First, consultation is a sign of respect, a way of saying to concerned individuals and groups, “We think you matter.” The other ethically-significant reason for public consultation is to gather input that might actually affect decision-making. Unanticipated concerns can easily come to light; asking people what they care about can be much more effective than guessing. These twin objectives — expressing respect and seeking information — provide hints as to how the process needs to go.
Of course, the information gathering goal is the easy part. Give people a microphone and they’ll talk. A company still needs to make an effort to get the right people in front of the mic, but that’s not rocket science.
The harder part is how to show respect, especially when the project at hand is a controversial one over which tempers are likely to flare. Like, say, a pipeline. And that’s where Kinder Morgan ran aground, in a mutual failure of respect. It’s not nice to mess with someone’s signs, but it behooves a company to respond to such things by taking the high road. After all, a company in the energy sector needs to not just show up; it needs to be good at this stuff. In public consultation, the kind of sophistication that befits a first-rate company means more than glossy handouts. It means being able to roll with the punches, because sometimes that’s what respectful dialogue requires.
It was recently reported that Vancity Investment Management is divesting its shares in beleaguered Canadian oil company, Enbridge.
Enbridge has made the news repeatedly over the last few years because of leaks in its pipelines. Not unrelatedly, the company has faced opposition from native and environmental groups with regard to its planned pipeline across northern Alberta and British Columbia. The combination of errors in its past and risks in its future is apparently just too much for Vancity, and perhaps for other socially- and environmentally-conscious investors.
This new announcement is, on the surface at least, a good example of the connection between ethics and business. It is often pointed out that, in order to stay in business, a company needs to maintain its ‘social license to operate.’ But more specifically it needs to retain the goodwill of key stakeholders, and investors are very high on that list.
But of course, investors can turn on a company for all kinds of reasons; the perception that the company isn’t doing well socially or environmentally (or more generally, ethically) is just one. Companies can take a hit to their shares for any number of reasons. Even if we limit ourselves to broadly “social” reasons, there are good and bad reasons, reasons about which there is broad social consensus (e.g., child labour) and ones that are socially divisive (e.g., contributions to pro-choice or anti-abortion groups). And so on.
This points to an interesting question about the obligation that managers and boards have to manage risk. It is increasingly clear that the obligation to manage risk includes not just financial risk, but just about any risk to which the company might be subject. That includes environmental risks and reputational risks. Understandably, the two are intertwined. According to the story cited above, one “ethical investment” company (Northwest & Ethical Investments LP) has expressed concern about Enbridge not (just?) because of the risks its pipeline poses, but because of the risk posed by opposition.
Should Enbridge (and its shareholders) be concerned about the Vancity divestment? That’s unclear. The divestment itself doesn’t sound catastrophic, but things could change if other investors follow suit. How likely that might be is also unclear. The interesting question is which kind of worry is more likely contagious: worries over environmental risks (and financial risks that go with those) or worries over risks of opposition.
In the end, it may not matter much. As I’ve argued before, oil companies need to do a better job of managing environmental risks. If they can succeed at that, they may well see the risks of social opposition melt away at the same time.
I live on the edge of Toronto’s Little Portugal. There are two corner stores in my neighbourhood. One is a 7-Eleven. The other is a small, family-owned convenience store. I shop at both stores from time to time — to pick up eggs, bread, whatever.
Is there any ethical difference between shopping at 7-Eleven, on one hand, and shopping at the little Portuguese place, on the other?
At least some advocates of the “buy local” movement would say I absolutely ought to shop at the locally-owned Portuguese place. After all, it’s a part of my community, whereas 7-Eleven is a multinational corporate entity. But wait…7-Eleven is a franchise. So even though the parent company isn’t local, the owners of the franchise very likely are. The owners of that franchise are just as much part of my community as the owners of the Portuguese place are…minus the franchise fee they pay to Seven-Eleven Japan Co. Ltd. (Does that count?)
But still, the 7-Eleven, even if locally-owned, is still part of the 7-Eleven empire. When I shop at my 7-Eleven, I’m patronizing that empire. I am, to some extent, entering into a relationship with the parent company. So this question occurs to me: is Seven-Eleven Japan Co. Ltd. in any sense my “neighbour”, one to which (or to whom!) I owe the neighbourly obligation of shopping at their franchise?
Major corporations are increasingly expected to think of themselves as good neighbours, and as having obligations to local communities. But the “neighbour” relation is generally thought of as being reciprocal, as are the duties it implies. If you are my neighbour, then I am your neighbour, and vice versa. So if 7-Eleven, and other major corporations, are expected to act as good a neighbour, should we all reciprocate, and act as good neighbours to them in turn?
I don’t have an answer to offer to this question. But I think the reciprocity that is normally a feature of the concept “neighbour” ought to be part of the larger conversation about how we think of the role of business corporations not just in our economy, but in our communities.
A recent story quotes Fred Green, the CEO of the Canadian Pacific Railway, as saying that he won’t sacrifice safety in pursuit of profits. In his words, he won’t violate the terms of his company’s unwritten ‘social licence’ to operate.
The notion of a ‘social licence to operate’ reflects the notion that in order for a business to be successful, in the long run, the support and goodwill of society is essential. This includes everything from the willingness of a local community to walk into your store to buy things, to the willingness of neighbours to put up with the noise of your trucks driving past, to the willingness of duly elected representatives of the people to pass the kinds of legislation that makes modern commerce possible.
This raises the question: just how does a company earn, and maintain, its social licence to operate? How, in other words, can — or should — a business show its gratitude, or pay its debt to society?
There are a number of ways, and they are not mutually exclusive.
One option is through charitable donations. Corporate philanthropy is as old as the hills, but is generally pooh-poohed by proponents of modern CSR, who favour instead things like collaborative efforts to build local skills and capacity.
Another way is by paying special attention to social impacts, beyond what is required by law. For example: selling junk food is perfectly legal, and arguably fully ethical, at least on a case-by-case basis. But a food seller that looks to the aggregate social consequences of its junk-food sales, and tries to mitigate negative impacts, might be said to be doing so as part of its social licence to operate.
Another way is by paying its taxes. That might seem trivial, a mere matter of following the law. But given the complexity of the tax code, the number of loopholes, and the size of some companies’ accounting departments, a commitment to paying your fair share is probably non-trivial.
Another way a company can earn and keep its social license to operate is by a commitment to looking for ‘win-wins.’ In this category, we could place various efforts at seeking energy efficiency and waste reduction. Of the many ways a company can look to save money, some are socially valuable, and opting to pursue those over others might be seen as supportive of a company’s social licence.
And finally, there’s the old (and true) point made by Milton Friedman years ago, which is that companies contribute socially by making goods and services that people want. What does Merck ‘give back?’ It gives us pharmaceuticals that relieve pain and suffering. What does BP contribute? It finds and refines the oil without which our economy would literally grind to a halt. What does my local coffee shop do for the community? It provides a place to get in out of the rain, have a cup of coffee, and chat with a friend.
Now it’s quite likely that no one of these is sufficient. Each of them is a plus, and counts towards a company’s social licence, but likely some combination is necessary. From this range of options, each company chooses how it thinks it can best earn and keep its social licence to operate. Different mixes will make sense for different companies in different industries. There’s no one right combination that will let a company merit its social licence. Innovation and variety are a good thing, here. Let a hundred flowers blossom!
In the wake of the Sandusky sex-abuse scandal the question has arisen whether Penn State University’s Board of Trustees should tender its collective resignation. And now, following the death of Coach Joe Paterno on Sunday, the question has taken on additional emotional resonance. The university’s Faculty Senate is scheduled to discuss a motion to strike an independent committee to investigate the Board’s role in the whole affair, and indeed has seen at least one motion calling for the entire Board’s resignation.
So, should the members of the Board be asked to resign? And if not, should they do so of their own volition?
To answer these questions, here are some questions that need to be considered:
Fist, did indeed the Board fail in its fiduciary (‘trust-based’) duties? It’s worth noting that the Board has been under fire from two different directions, here. Some think the Board failed in not staying sufficiently ‘on top of’ the Sandusky situation, and in resting satisfied with whatever dribbles of information the university administration saw fit to feed them. (The only detailed account I’ve read so far paints the Board in a rather sympathetic light, in this regard.)
Others think the Board failed in firing — in their eyes, scapegoating — the beloved Paterno. Both sides think the Board screwed up, but for very different reasons. Of course, both can be right at the same time. Perhaps the Board has just generally done a bad job, first by letting the situation get out of hand and then second by botching the task of responding to it. Rather than cancelling each other out, maybe these two sets of complaints just compound each other.
Next, we need to ask, if the Board failed, was it a failure of people or a failure of structure? A board, after all, is both an institutional structure and a set of people occupying that structure.
If it was a failure of structure (and, as governance expert Richard Leblanc wrote back in November, there are serious problems with how Penn State’s board is configured) then there’s little reason to think that a change of personnel on the Board is either necessary or sufficient to fix the problem. And if instead it was a failure of people, then getting rid of them all is a blunt, but perhaps effective, way to solve the problem — providing, of course, that the new people brought in to replace them are better.
Of course, the problem is that it’s difficult to distinguish between a failure of people and a failure of structure, in a case like this. Perhaps people better-suited to the job would have risen above the confines of a poorly-structured board, or lobbied to have its structure revised. Human behaviour and institutional structure shape each other.
And finally, regardless of the above questions about the sources of failure, it might be the case that the removal or resignation of the Board is necessary in order to restore public confidence. That is, even if the individuals currently on the Board are not in any way to blame, the fact that key stakeholders have lost faith in the Board might be sufficient grounds for calling for the entire Board to go. Without the confidence of key stakeholders, any Board is going to find it hard to do its job.
But then, while the current Board certainly faces challenges, so would an entirely new Board. The loss of continuity that would result from a 100% change in membership could seriously impair the Board’s functioning, and make it even more reliant on — and susceptible to control by — university administrators. There’s a good reason why well-governed boards have careful plans in place to make sure that new blood is brought in regularly, rather than en masse. In the end, it seems to me that the best prescription is this. The Board of Trustess at Penn State needs to see substantial structural change. It also needs enough new blood to restore confidence, while retaining enough of the old guard to ensure continuity. Beyond that, the Board is just going to have to do its best to muddle through whatever challenges lie ahead, with whatever strengths and limits it possesses, just like any other board.