Chief Operating Officer
RBC Financial Group
Women's Executive Network
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.
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.