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Nowhere to Run: The Growing Spotlight on Corporate Ethics

April 12, 2012

There’s been a seismic shift in the scrutiny of organizational practices. One major reason –  social media.

Along with the meteoric rise in social media, there has been a steady decline in institutional trust, exacerbated by post recession ill will towards Wall Street and the potent messaging of the Occupy movement. Put it together and you have a combustible mix that will undoubtedly continue to foment reaction with no end in sight.

Has a lack of trust in organization integrity reached a crisis level? According to the 2012 Edelman Trust Barometer, CEO trust dropped from 50% to 38%.  Media scrutiny, always quick and often harsh, is now instantaneous. Within minutes of his abrupt resignation amidst a company probe into his “personal conduct,” Best Buy CEO, Brian Dunn’s story was plastered across social media communities. The stock market quickly reacted to what is perceived by some to be an already sinking corporate ship.

Analyzing the recent Rush Limbaugh brand controversy, Bloomberg writer, Edmund Lee  writes that within twenty-four hours a  major advertisers’ boycott was in place. Six companies, including Geico and Citrix Systems bailed out. Three days later, eighteen more companies including, Netflix, AOL and Sears Holdings, pulled their ad revenue from the show.

According to Angelo Carusone, campaign director for Media Matters for America, “The boycott wouldn’t have had the same effect without Twitter or Facebook.” Bloomberg writer Lee points out, “While threats of boycotts over content are as old as old media, online social outlets have matured – both in use and perception – to the point that major corporations now weigh these campaigns more seriously and with an urgency not seen before. The collective power of social media to specifically target a group of companies has never been more dramatically on display than in the Limbaugh incident.”

While it is evident that many corporations now take the power of social media “outing” very seriously, many companies still don’t get that a coat of public relations paint won’t do the job of building and restoring integrity in their brand. Many companies are jumping on the apps bandwagon (who would want a GE app anyway?) because they believe that’s the thing to do to reach tech savvy audiences.  And I’m wondering how many people are reversing their beliefs about Big Oil companies like BP because of the constant television commercials they see with happy customers communing with the natural environment?

Real time social media responses have a remarkable way of sniffing out the BS from PR engineered press conferences and managed political or corporate statements. Just grab the hash tag from the next odorous public event and you’ll see how limited public response management really is.

And while many issues have a short mainstream and social media shelf life, the memories linger on and most important, public trust, once eroded or destroyed is mighty hard to restore.

We all live in this village, but we have no elders

In the recent meeting of the Skoll World Forum on Social Entrepreneurship at Oxford University,  Ian Goldin, Professor of Globalization and Development told 800 distinguished delegates from the social, finance, private and public sectors, “Humanity is at a crossroads. Never before have we accumulated such wealth, never before have we been so connected and never before have we been faced with such imminent global threats. We need not look further than the recent financial crisis to see the effects of inappropriate incentive structures. The short-term thinking that has evolved from our governance systems, have created the fragile world that we live in.  We all live in this village but we have no elders.” 

In the past year, we’ve seen a remarkable string of big business related negative press with major social media response. While some of this pushback has been spontaneous, most has built in  social media communities over time.

One of the most significant online responses was to recent U.S. legislation proposed to limit internet freedom. SOPA (Stop Online Piracy Act) in the House of Representatives and PIPA (Protect IP Act) in the Senate were opposed within one week by over 4.5 million online petition signatures.  What makes this successful campaign so interesting is that it pitted corporations like Google, who supported the petition, against giants like The Motion Picture Association of America and the Recording Industry Association of America.

Other recent examples include:

  • The Pink Slime Scandal.  If you haven’t been following the pink slime headlines, it goes like this: Just 10 years ago the rejected fat, sinew, bloody effluvia and bits of meat cut from carcasses in slaughterhouses were sold primarily as pet food. Then companies like Beef Products, Inc. rebranded the stuff as “boneless lean beef” and started marketing and selling to wholesalers and supermarkets. One of their biggest clients, The U.S. Department of Agriculture started to use the “meat” for school lunch and low-income feeding programs. Last year UK superstar chef, Jamie Oliver made headlines with his demonstration (using discarded beef parts, ammonia and a washing machine) of how the pink stuff is made.  Recent reports of where the slime was being sold exploded on social media. The backlash was swift and within two weeks AFA Foods, one of the producers, went into bankruptcy.
  • The Long Arm of ALEC. The American Legislative Exchange Council (ALEC) has been around for 39 years but catapulted to the headlines in recent months because of its high-profile support of state legislation and its glossy board membership roster that includes bedrock American corporations like Exxon Mobil, AT&T, State Farm Insurance, Bayer, Koch Industries  and Johnson & Johnson and some major corporate newbies like Amazon. ALEC, a 501 (c) 3 tax exempt group that describes itself as “a nonpartisan membership association for conservative state lawmakers interested in limited government, free markets, federalism and individual liberty” found itself in the crossfire of the controversial Stand Your Ground laws that are at the center of the Trayvon Martin killing in Florida.   Creating boiler plate legislation for similar Stand Your Grounds laws in many states and more recently voter ID laws that voting rights advocates say could disenfranchise millions of legal voters, ALEC found itself rapidly losing support once the word hit social media outlets.  Fueled by a petition to boycott Coca Cola (started by the advocacy group, Color of Change) Coke withdrew its ALEC membership within hours.  Kraft, Intuit and Pepsi had bowed out of ALEC earlier this year. Within the past week, the Bill and Melinda Gates Foundation severed their ties with ALEC and McDonald’s quickly followed suit.
  • APPLEThe very high-profile inquiries into the safety and conditions of the Chinese manufacturer Foxconn, that manufactures all Apple and some Nintendo, Sony and HP products has received global attention. Foxconn, which employs 1.2 million workers, is China’s largest private employer and single exporter. Problems with excessive overtime, widespread safety and health issues have been well-known since 2006 which Apple promised to correct. Since that time accounts of worker abuses have mounted including documented cases of 19 suicides by employees.  Last month the Fair Labor Association released a report which promises that excessive overtime will be eliminated by July 2013. Critics, skeptical of the veracity of the report, which was commissioned by Apple, state that while the report did raise important issues such as excessive and unpaid overtime, health and safety concerns, it ignored others, such as Foxconn’s harsh management practices and public humiliation of employees (previously documented by organizations like Students and Scholars Against Corporate Misbehavior based in Hong Kong. Apple is a major contributor to the Fair Labor Association. Critics further add that Apple could end this “problem” in a matter of weeks or months by raising the prices it pays for Foxconn products and directing Foxconn to raise wages and hire more workers. It could also do something even more radical – lower it’s profit margins rather than passing along increased costs to Apple users.

In the intricate and massive global supply chain that has been created by multinational corporations, few organizations are “clean” from the taint of unfair, illegal activities and the worker abuses inherent in the current global workforce.  In their article, “While Apple is Criticized for Foxconn, Other Companies are Silent,” the New York Times points out that in recent weeks it has made inquires to Hewlett-Packard, Samsung , Microsoft and others about their reports on labor conditions. Most responded with boilerplate public relations messages. Some didn’t even respond! The answer, they got from Barnes & Noble, the maker of the Nook e-reader was typical. Mary Ellen Keating, a senior vide president said, “We don’t comment on our supply chain vendors.”

Sorry Mary Ellen, that response doesn’t cut it anymore for most customers.  It make me think twice about making new purchases on my Nook and raises real questions about any further upgrades to new Nook products.

Of course, ardent, devoted followers of Apple and other products may not change their purchasing habits based on reports of corporate practices, even malfeasance. Many of these products have great appeal and the argument stands that cheap non local labor makes products that enrich our lives more affordable.  Many people are even making the case that Foxconn workers are better off, despite the factory conditions, than if many had continued to toil in the rice paddies for a pittance.  Without question, living with global goods meaning dealing with the complexities of global realities, remote to many of the world’s wealthiest residents even a decade ago.

Whether it’s 22 year old Molly Katchpole’s one woman petition campaign  against Bank of America to drop customer charges or recent actions taken to shame GE to pay it’s fair share of taxes, or a mother’s determination to hold Enterprise Inc. responsible for renting a recalled car which killed her daughter, people are fighting for fairness, justice and equity more visibly than ever before.

However, the “ethics crisis” isn’t confined to corporate behaviors alone.  It is critically important to remember that ethical behavior begins with personal choice.  Living our ethics day-to-day often isn’t easy and sometimes comes at a real cost to our convenience and even our livelihood.

In his Harvard Business Review article, Profits, Ethics and Trust, author Vineet Nayar writes, “ Looking ahead, sustainable business can only be built on a culture of trusted partnerships with each and every stakeholder group – including employees, customers, shareholders, vendors, regulators. Trust through transparency will finally gain its due recognition as the only way forward.”

Let’s hope so.  The village depends on it.

As always, thanks for taking the time to read, comment, share, tweet and like these posts.

Louise Altman, Partner, Intentional Communication

4 Comments leave one →
  1. April 12, 2012 1:55 am

    Good article. It made me wonder whether the frontier of corporate ethics lies in empathy or lack of it – causing short term interests to dominate without thought of consequence. Without empathy, ethics could also just be another mission statement without anything fundamentally changing – an empathic culture could be the ‘Elders’ you mention.

    • April 12, 2012 9:27 am

      Hi Darran,

      Appreciate your comment. Interesting that you mention empathy because the Skoll World Forum meeting that I mentioned featured a panel on empathy. Surely experiencing and acting in the world with empathy as a primary underlying feeling would have a transforming effect in the world. By it’s nature empathy has both a short and long term impact. Unfortunately I think many corporate decisions are increasingly driven by short term self interest. I love the concept of the elders as empathy.

      Thanks for taking the time to share your thoughts,

  2. Paul Haffner permalink
    April 25, 2012 11:48 am

    great article and writing. I teach an ethics class and many of these issues have been discussed this year.

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