Values and Corporate Citizenship

Until the dot-com bubble burst and a slew of corporate scandals deflated shareholder value and the public’s trust, corporate citizenship reflected an ideal that business would aim to increase profits within a realm of rules and standards without deception or fraud.

So what does corporate citizenship mean today?

To help define corporate citizenship it’s best to look at the definitions of stakeholders versus shareholders. For much of the 90s, shareholder value — profits paid to holders of shares in the company — was the dominant driver of actions taken by business. This approach at times largely ignored the interests of stakeholders, who comprise the various non-shareholders, including employees, customers, suppliers, people who live in a company’s hometown and anyone affected by a company that created an environmental problem.

It is obvious now that how well a corporation treats all of its stakeholders is central to its reputation. It is also obvious that reputation drives the market value of the brand, an intangible asset that expresses the culture of the business and one that can be just as valuable — or in Enron’s case, perhaps even more valuable — than the actual products and services delivered.

Booz Allen Hamilton, the global strategy and technology consulting firm, and The Aspen Institute, a nonprofit and nonpartisan firm focused on values-based leadership and public policy, partnered in 2004 to do a worldwide study of corporate values, which surveyed 9,500 senior executives around the world.

Their study, “Deriving Value from Corporate Values,” defines values simply as a corporation’s institutional standards of behavior. They found that:

• 90 percent of companies now list ethical behavior as a value.
• 65 percent list social responsibility as a value.
• 85 percent said they rely on explicit CEO support to reinforce values.
• 77 percent said CEO support is the most effective reinforcer.
• Reputation, loyalty and recruitment are by far more driven by a company’s values.

The study found the benefits of corporate values go far beyond mere compliance with laws and regulations. Values are most critical in two strategic areas: reputation and relationships. This points to an opportunity for tomorrow’s MBA to go beyond the traditional skill of calculating return on investment and to begin to better comprehend the bottom-line return on values. It also suggests that reading up on a company’s corporate values is now part of any smart preparation for a job interview.

Applying Ethics

An MBA with a strong ethical sense will be able to identify and prevent decision-making that takes the business down a slippery slope of compromise that could lead to a slew of problems later. But because a business’s top priority is the greater good of the organization and its sustainability, leaders will be pressured to succeed at all costs. How can tomorrow’s executives keep their footing?

That question has spurred renewed efforts at teaching ethics throughout graduate schools of business, corporations and even in the U.S. military. Tomorrow’s MBAs must be prepared to face ethical dilemmas likely to confront them in the corporate world, where issues are often ambiguous, the pressure to act fast is often high, and lines of authority may not be clear cut, according to an article titled “Leadership Run Amok: The Destructive Potential of Overachievers” by Scott W. Spreir, Mary H. Fontaine and Ruth Malloy, in the June 2006 Harvard Business Review.

Through discussions of case histories, MBA students learn how to think through complex business problems and identify their ethical and legal responsibilities to the organization.

Ethics training won’t define wrong from right for any individual. But for tomorrow’s leader, it raises much-needed awareness, the first step in heading off serious difficulties. Also it provides valuable practice in how to responsibly handle a number of questionable corporate situations, and it will empower tomorrow’s MBA to stand up for what is right even in the face of what might appear to be a consensus otherwise.

For more information, visit DeVry Keller.