Corporate boards are crucial to shaping and leading the issues of corporate governance, accountability, and strategic direction. Increasingly these boards are recognizing that certain corporate citizenship issues represent 'hidden liabilities' on the balance sheet and/or untapped business and market opportunities.

A 2005 conference session addressing this topic featured Jill Ker Conway, visiting professor in the program of science, technology, and society at MIT and former president of Smith College, and Jane Nelson, director of the CSR Initiative at Harvard and director of business strategy, International Business Leaders Forum.

Conway, who has served for many years on the boards of several major corporations, including Nike, Colgate-Palmolive, and Merrill Lynch, noted that corporate citizenship issues have always been a major concern of management and the boards she’s been on, and these issues are becoming ever more important. It’s an ongoing process, she observed, and it’s important to figure out how an organization in a global market can achieve CSR. For any global entity, she said, CSR will always be redefined and changing. But boards need to convince institutional investors that it’s part of their fiduciary responsibility to support boards that want to make sure companies are socially responsible.

Nike's Corporate Responsibility Committee

Conway used Nike as an example. Conway sits on the company's corporate responsibility committee, one of six committees that comprise the complete board. Nike's board of directors is "responsible for corporate governance in compliance with the U.S. Sarbanes-Oxley Act and other laws, and the interests of its shareholders," according to the company's FY04 Corporate Responsibility Report. The corporate responsibility committee was established in 2001 to review significant policies and activities and make recommendations to the board of directors regarding labor and environmental practices, community affairs, charitable and foundation activities, diversity and equal opportunity, and environmental and sustainability initiatives. Nike’s executive team attends the committee meetings.

Conway talked about her efforts on the Nike board to make changes in the supply chain. “Until recently,” she said, “we hadn’t had a chance to assess the emotional and psychological state of the factories and employees.” Concerned board members wanted to structure the workers’ experience so it “wasn’t entirely negative.” Many of the employees in Nike’s Asian factories are 18- to 22-year-old young women, often living away from home in factory dormitories and eating in their cafeterias. The question was how to obtain an appropriate audit of workers’ issues. “We realized we couldn’t approach the far-away, long supply chain from a Western point of view,” Conway said. In 1997 Nike partnered with the International Youth Foundation and other organizations to form the Global Alliance for Workers and Communities. The Global Alliance interviewed thousands of workers, using social scientists from the countries involved, including Indonesia, Thailand, and Vietnam, to carry out its audit.

Through the process, the group realized that managers needed to be trained on interacting with the workforce, to make sure they thought about the employees as people. Nike developed a code of conduct for factory managers. The workers themselves wanted to learn how to be healthy, to be good mothers, to understand the cash economy. “We had to change Nike’s business model and move CSR from the margins of the enterprise,” Conway said, “or we wouldn’t have been able to make a major change in the supply-chain process.” Through their efforts, Nike has made changes, bringing CSR into the training of factory management and bringing the factories up to standard.

Leadership Characteristics that Facilitate CSR

Building on Conway's experience at Nike, Jane Nelson went on to speak about board leadership characteristics that will help facilitate CSR within a company.

Nelson, who is directing a new initiative on corporate responsibility at Harvard University's Kennedy School, is also director of Business Leadership and Strategy at the Prince of Wales International Business Leaders Forum (IBLF). Her ten leadership characteristics to help facilitate a company's corporate social responsibility efforts are:

1. Create a code of conduct or board policies for CSR.
2. Set up a CSR committee on the board.
3. Appoint a director with leadership responsibility for CSR who will champion the cause.
4. Ensure diversity in the board composition, including international members.
5. Ensure communication between the board and employees; for example, site visits by board members to factories around the world.
6. Set up executive committees to provide CSR briefings regularly to the whole board.
7. Set up an external advisory group with credibility to interact with the board.
8. Develop stakeholder engagement strategies.
9. Make sure the board approves the sustainability report.
10. Engage investors in dialogue. Often investors don’t ask or appear concerned. Bring up the company’s CSR efforts and make presentations; put CSR on the agenda and consistently communicate back to the investors.