Embedding Corporate Responsibility, Accountability and Profitability

While there are still companies out there who believe in the great trade-off myth, the reality is that ethical companies outperform others over the long term.  In it’s “WME Index,” Ethisphere showed how the publicly traded companies on their 2011 World’s Most Ethical Company list outperformed the S&P 500 between 2007 – 2011 – even in the midst of a global recession. 

 

In her article “The Fight Against Corruption Goes Global,” Andrea Bonime-Blanc, SVP of Global Corporate Responsibility and Risk Management for Verint Systems*, reports that today 38 countries have enacted legislation against corruption similar to that of the U.S. Foreign Corrupt Practices Act (FCPA), initially established in 1977.  Ethical practices go beyond corruption to include confidentiality, trade secrets, accepting gifts, fair labor practices, and compliance with a multitude of regulations, contract requirements and industry standards.

 

Building responsible organizations requires a system-wide approach and starts with ethical leadership.  When Siemens found itself in the midst of one of the worst bribery scandals since World War II, it was not only assessed $2.5 billion in fines and fees, but risked toppling its business by being barred from government contracts in countries around the world. Hired as the first external leader to join Siemens in its 162 year history, CEO Peter Löscher came aboard in 2007 and set forth to zealously clean up the company by instituting global compliance standards, firing more than half of the company’s top 100 executives and middle managers and rebuilding pride and honor into the company’s culture and reputation. The company also bet big on green technologies with about 25% of its 400,000 employees working in “green jobs.” Today Siemens performance is at an all time high, with its stock gaining 48% last year. 

 

Even with the right leaders in place, companies must build ethical practices through every part of their business model.  Management practices such as compensation, recognition, rewards, training, hiring and promotion must align to reward ethical behaviors along with business results.  Organization design, governance, policies, systems and processes must also align inside the company and extend outside to suppliers, customers and the communities in which the business operates.  All of these elements come together to form cultures that embrace responsibility and accountability along with profitability. 

 

The rules have changed and companies must align themselves to new corporate facts of life. 

*Disclosure:  Verint is a client of Strategic Imperatives.

Sources:

“The Fight Against Corruption Goes Global”  Foreign Affairs  http://www.foreignaffairs.com/articles/137219/andrea-bonime-blanc/the-fight-against-corruption-goes-global?page=show#

 

“2011 World’s Most Ethical Companies”  Ethisphere http://ethisphere.com/past-wme-honorees/wme2011/

 

“At Siemens, Bribery Was Just a Line Item” The New York Times Global Edition, By SIRI SCHUBERT and T. CHRISTIAN MILLER, December 20, 2008 http://www.nytimes.com/2008/12/21/business/worldbusiness/21siemens.html?pagewanted=all

 

How Siemens got its MOJO Back Business Week By Richard Weiss and Benedikt Kammel

http://www.businessweek.com/magazine/content/11_06/b4214018593359.htm

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While there are still companies out there who believe in the great trade-off myth, the reality is that ethical companies outperform others over the long term. In it’s “WME Index,” Ethisphere showed how the publicly traded companies on their 2011 World’s Most Ethical Company list outperformed the S&P 500 between 2007 – 2011 – even in the midst of a global recession. In her article “The Fight Against Corruption Goes Global,” Andrea Bonime-Blanc, SVP of Global Corporate Responsibility and Risk Management for Verint Systems.....

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