A Challenge for Leaders:
Rebuilding Trust through Corporate Responsibility
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Barbara Stymiest
Chief Operating Officer
RBC Financial Group
Women's Executive Network
Toronto, Ontario
November 24, 2005
Thank you for your kind words. It is an honour to be here
and to speak to such an illustrious group of award winners
and leaders.
Pam, you deserve our gratitude and appreciation. This event
is only in its third year, but it has already grown in scale
and scope, and has probably exceeded many people's expectations.
You have truly transformed these awards, because they don't
just celebrate women who are leaders: they celebrate leaders
who are women. I'm being deliberate in my choice of words,
because the distinction does matter.
Personally, I am very proud to be associated with all of
the award winners, and especially to those who also happen
to be my colleagues at RBC Financial Group. These women, along
with everyone else being honoured today, are professionals
who are among the best in their field. Congratulations, all.
This morning, we have gathered some of the greatest minds
and talent in the private and public sector. You are truly
Canada's leaders, so I would be remiss if I did not use this
time to address one of the most important challenges facing
business leaders today.
It has to do with trust.
It's hard to think of a time in the past 25 years when consumers
and the public have had less trust in traditional institutions
such as business and government.
You can point the finger of blame at any number of things— Enron,
accounting scandals, lawsuits, the dot-com bust, sponsorship
scandals and the like.
But the net result is that the public — including our customers,
employees and investors — has rarely been more cynical about
our motives. It's not uncommon for them to question the truthfulness
and integrity of our organizations, and as a result, they
are demanding more and more transparency and accountability.
More than ever, consumers and investors are ready to put
their money where their values are— to punish us when we behave
badly, and reward us when we behave well.
Accelerating this trend are increasingly powerful and influential
special interest groups. Five years ago, we might have tried
to brush off activists as mere irritants, but we can no longer
afford to do so. You simply cannot ignore the fact that activists
can successfully influence corporate behaviour by mobilizing
forces all around the world with sophisticated PR campaigns,
boycotts, and protests.
I believe we are standing at a unique point in history. This
is a critical moment for businesses to step up to the plate,
to articulate our corporate and social aspirations, and to
be transparent about our performance in areas that go beyond
our financials.
This is an area that's called "corporate responsibility".
And this morning, I'd like to talk about why corporate responsibility
matters.
There's an old Jack Benny routine where the comedian is confronted
by a mugger.
"Your money or your life," the mugger demands.
Benny, who was notoriously stingy, says nothing. Seconds go
by. The mugger says, "Well?" And Benny finally replies,
"Don't rush me, I'm thinking, I'm thinking."
That gag is recalled in a book called "In Pursuit of
Principle and Profit," that points out that we often
accuse business leaders of misplacing their priorities
just like Jack Benny did. In business, isn't money and profit
everything?
This is certainly the point of view The Economist
took last year. The magazine published a scathing indictment
of the 'corporate responsibility' movement, arguing that it
squanders shareholders' money on projects that do more harm
than good to society.
This is very much along the lines of Milton Friedman's famous
dictum that "the business of business is business."
While The Economist article provoked a lively debate, I believe
its argument did not accurately reflect the web of complexity
that defines doing business in today's global, post-Enron
economy.
It's true. The basic responsibility of a company is not about
solving the problems of the world. Our job is to conduct business
profitably. But we must do so in a way that aligns with societal
values, because there can be no question: business is no longer
just about satisfying our shareholders: we now have to satisfy
a broader group of our stakeholders.
Sir Geoffrey Chandler, who is a former director of Shell
International, and who also happens to be the founder of Amnesty
International, puts it this way:
".. a company whose practices are based on 'ordinary
decency' will thrive, but this …naïve concept
is unlikely to be of practical help to those who actually
manage in the many countries which… suffer from…,
corruption, discrimination, violence and human rights violations.
Companies are learning the hard way that their hugely increased
scope and influence in the post-Cold War world…require
a recognition that without forethought and principles they
can and do exacerbate problems and damage their own reputation.
"
It's been said that you only know what your reputation is
worth when it's in tatters. I'm not sure if you can put a
dollar figure on the cost of a lost reputation, or even a
damaged one, but I would just ask you to consider three examples:
Shell… or Nike… and WalMart.
All three of these companies have had highly visible crises
and PR challenges over the years.
Take Shell, my first example. If all you knew about the company
was taken from their financial statements, you wouldn't have
had a clue that they planned to dispose of the Brent Spar
oil platform by sinking it into the North Sea. And if you
were an investor, it would have been a nasty surprise when
Greenpeace staged a hugely successful protest to the Brent
Spar plan, resulting in worldwide consumer boycotts, and a
battering for Shell's share price.
Same thing with Nike in the '90s.
This was a great global brand with quality products, and
you'd probably have felt comfortable buying both Nike shoes
and Nike shares. But you might not have felt as comfortable
about your investment or your purchase if you'd have known
that they were about to face a serious, long-lasting backlash
from activists and consumers around the world for using child
labour in developing nations. Nike is still paying the reputational
price for this business decision, even though they are now
a model of responsible, transparent corporate behaviour.
And in the last few months, we've all seen the challenges
WalMart has been facing in terms of pressure from human rights
and environmental groups about their business practices and
performance. Just one month ago, Lee Scott, the CEO of WalMart,
took many people by surprise when he embraced sustainability
in a landmark speech, announcing ambitious initiatives on
issues such as greenhouse gas emissions, waste reduction,
product sourcing, healthcare, wages, and diversity.
Shell, Nike, and WalMart are only three examples that prove
companies have "hidden" assets and liabilities that
don't appear on the traditional balance sheet. But, arguably,
all of our companies have them. This is nothing new.
What is new is that today's shareholders and stakeholders
feel entitled to as much information as possible to support
their investment and purchasing decisions. And they don't
just have the means to uncover this information. They are
also willing to fill in the gaps themselves when they feel
a company is not being transparent enough in its disclosure.
So, for example, environmental groups want to know how a
company manages its greenhouse gas emissions. Human rights
groups want to know what a company's policy is on child labour.
Consumer advocates want to know how a company protects their
privacy.
These stakeholders aren't just operating out on the fringes
of the markets. Just over a month ago, one of Canada's largest
pension investors, the CPP Investment Board, announced a new
Policy on Responsible Investing, that will integrate social,
environmental and governance issues into investment analysis
and management. They fully intend to take an active role in
persuading companies to be open about environmental and social
risks.
This is the space we now call corporate responsibility,
a term that is much maligned and debated.
You might hear it referred to as corporate social responsibility,
accountability, sustainability, the triple
bottom line or corporate citizenship. There's not
a lot of agreement on the semantics, so sometimes, it's easier
to describe what corporate responsibility is not.
For me, corporate responsibility is not a program. It is
not managed by a single department. It is not about a single
policy. It's not about how much you give to charity.
Rather, it is about behaving with integrity, sustaining your
company's long-term viability,being transparent and accountable,
and contributing to the future well-being of all your stakeholders.
For RBC, we say that it is about behaving with integrity,
every day, in every transaction, in every part of our business.
And we believe corporate responsibility matters.
- It matters to a growing number of investors and analysts.
- It matters to clients and consumers.
- It matters to current and prospective employees.
- It matters to our partners in the voluntary sector, including
NGOs and activists.
- It matters to government and regulators.
- And it might even matter to your suppliers and prospective
suppliers, if you're one of the many companies that are
starting to extend your codes of conduct down through your
supply chain.
And so corporate responsibility should matter to you.
If you asked me to describe a company that exemplifies corporate
responsibility, I'd point to one that is well-managed and
operates with integrity. If I wanted to brag, I'd point to
RBC.
When corporations operate with integrity, they demonstrate
sound corporate governance principles in every part of the
corporation. They provide full and plain disclosure of financial
results, giving investors a balanced discussion of material
events and their outlook on business trends and their potential
impact. They disclose reliable performance data on key non-financial
items that may represent risks or opportunities.
Responsible corporations make a positive economic impact.
They do this by creating employment and a well-trained workforce,
paying their fair share of taxes, and purchasing goods and
services responsibly. Financial service companies like RBC
also demonstrate responsibility by contributing to economic
prosperity. So for example, we provide access to credit for
small business, fund community economic development initiatives,
and support innovation and entrepreneurship.
Responsible corporations have fair and progressive people
management practices, respect human rights, and understand
the business value of diversity in their workforce. They create
productive workplaces by building an environment of inclusion.
They work hard to attract, retain and engage talented women
and men to gain a competitive advantage and provide superior
service to clients.
Responsible corporations work towards environmental sustainability,
reducing the environmental footprint of their operations,
while having a positive impact through their products and
services as well.
For example, for years, RBC has made a concerted effort to
manage risks in our lending portfolio related to environmental
issues. But we also see potential business opportunities in
this area. We have a growing alternative energy portfolio,
we have financed over 20 wind farms since 2002, and we created
a $50 million alternative energy technology venture fund through
RBC Technology Ventures.
We don't call this corporate responsibility, although it
is: we call it good business.
Transparency and accountability are also hallmarks of corporate
responsibility.
Don Tapscott describes this phenomenon in his book "The
Naked Corporation." He says that if your company is developing
products, delivering services or operating in a way where
there is potential for negative social and environmental impact-then
you should take the bull by the horns and report those as
risks and outline how you plan to manage them. He calls this
"opening your kimono," and his point is that bad
news travels, and your hidden liabilities will only stay hidden
for so long.
At RBC, we are attempting to be more transparent in our disclosure
through the publication of an annual Corporate Responsibility
Report. Many of your companies may produce such a document
as well, or you may be considering starting one soon. I believe
these reports are well on their way to becoming an integral
component of a company's full disclosure package.
If you do produce such a report, you are probably wrestling
with a whole set of interesting questions. Which topics are
material to our stakeholders? And who are our stakeholders?
How do we actually calculate the environmental and social
impact of our operations? Where can we be transparent in our
disclosure without divulging client information or harming
our competitive position? How wide should we open our kimonos?
Don Tapscott always gets a good laugh when he says that if
corporations are going to be naked and transparent, they'd
better be buff as well.
He's right. This discussion about transparency and disclosure
will cause some interesting discussions in your company. You
might start to ask what new programs, policies, products and
services you should consider developing to satisfy your stakeholders.
And you may start to see business opportunities inherent in
the new sustainability or responsibility marketplace for which
you can develop new products and services.
I'll be the first to say this isn't an easy process. It might
provoke some difficult and challenging conversations within
your company. But the journey must start somewhere because
clearly, corporate responsibility is catching. Some commentators,
like the writers at The Economist might say it's catching
like a virus. But make no mistake: corporate responsibility,
transparency and accountability are not fads and they are
not going to go away.
Should your company get on the corporate responsibility bandwagon?
You should well ask if your company should adopt good business
practices. It's the same thing.
In late October, at a conference hosted by Canadian Business
for Social Responsibility, former Prime Minister Joe Clark
called for corporate Canada to work towards establishing corporate
responsibility as an international Canadian brand.
Today, I am adding my voice to his.
Canadian business has a real opportunity to regain trust
and to earn back our licence to lead. By doing so, we will
not only contribute to our company's bottom lines, but to
their long-term sustainability and reputations as well. And
more importantly, we will make an enormous difference to the
lives our companies touch and the future we can help create.
Thank you.
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