Corporate Accountability: How a Company Proves Its Character

In the News

CEOs taking high-profile stands on a variety of social issues have commanded headlines, from taking positions on sexual harassment, race relations and gender identity to the important role immigrants and refugees play in the workforce. But the rising tide of newsworthy business activism on social concerns is not confined to CEOs:

• Facebook employees, not CEO Mark Zuckerberg, drove changes to the company’s policies on fake news after Zuckerberg had dismissed as a “pretty crazy idea” that fake news on Facebook influenced the 2016 U.S. presidential election.
• In less than two months, a web-empowered public protesting Mylan’s 500 percent price increase for EpiPens, its branded lifesaving injection device, created a new market for generic alternatives that eroded Mylan’s market share by 24 percent.
• Social protest, not a corporate campaign, spurred ridesharing customers to download the Lyft app — surpassing Uber downloads for the first time — when Uber’s pricing seemed to syphon rides from New York City taxi drivers, following an impromptu strike protesting the immigration travel ban.

Something’s happening here.

The New Social Landscape

A new social landscape has reset the relationship between business and society. As we present in our forthcoming book, Reset: Business and Society in the New Social Landscape, converging trends in pop culture, workforce demographics, media, business reporting and large-scale social issues have dramatically transformed the landscape in which business governance, strategies and communications now operate.

In addition to the decades-old erosion of trust in big business, we document a new global trend: the public’s growing expectations for business to address pressing social needs, made more urgent when governments and political leaders have become unwilling or less able to serve the public good. Empowered by today’s transformative level of instantaneous communications, unbounded by time or geography, people are acting on their expectations, driving unprecedented visibility to the fact that they hold corporations accountable for unacceptable corporate behavior. A corporation’s stakeholders — including its employees — are its actively engaged 24/7 auditors.

Business Implications

The business implications of this reset are profound. Today’s social media ecosystem and the next generation of employees are transforming the concept of a successful corporation; the spotlight is shifting to the company behind its products or services, and the corporate control narrative is shifting to external voices. With an estimated 10,000 baby boomers retiring daily, corporations are fiercely competing to attract and retain their next generation workforce, people who vest their loyalty more with core values than with a company. They will walk if their expectations are not met.

In this reset relationship, a corporation cannot showcase its positive initiatives and expect to escape today’s always-on scrutiny of all aspects of its business. Corporate social responsibility programs, shared value initiatives or discreet CEO activism cannot inoculate a company from workforce turnover or business disruption if negative stakeholder impacts are inherent in other elements of its business strategies, policies or operations.

In this new landscape, C-suite management cannot communicate around business strategies unaligned with today’s public expectations for business. Today, a company must prove its character through its actions at all levels of its stakeholder engagements. What a corporation does is the authentic content for what it says.

How Does a Corporation Proceed?

Corporate management can address the public’s mandate for business in this new landscape. At a time when unexpected transparency can arrive at the corporate doorstep in a viral video, C-suites and boards of directors must proactively anticipate inherent negatives in their business models and find profitable growth opportunities that demonstrate the enlightened self-interests of both their business and society. Corporate cultural blind spots, however, inevitably make this difficult to see. Anticipating inherent negatives requires a new category of risk management: Social Risk Assessment.

Succeeding in this reset relationship means advancing strategies that create a three-way sweet spot in which the needs of business, customers and society intersect. The breadth of that intersection will vary. But in all cases, business must have a clear stake in the societal needs it addresses.

What has not changed in this reset relationship is the need to be profitable. What has changed is the web-enabled public vigilance for how that profit is made.

James Rubin and Barie Carmichael are authors of the forthcoming book Reset: Business and Society in the New Social Landscape (Columbia Business School Publishing), which provides a strategic framework for businesses to navigate this new era, with historic and social context for today’s headline business news.

The late James R. Rubin (1951–2016) was a Darden faculty member for more than two decades and served as area coordinator of its Management Communication area until his untimely death in 2016.

Barie Carmichael is a senior counselor at APCO Worldwide and a fellow at Darden’s Batten Institute for Entrepreneurship and Innovation.