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January 2007
 How CEOs are managing short-term business demands while balancing the challenges of societal issues requiring long-term solutions is the focus of a new report, Step Up: A Call for Business Leadership in Society, from the Boston College Center for Corporate Citizenship.
The report provides the perspectives of 48 CEOs and senior executives representing 27 major multinational companies from a cross-section of industries. These executives participated in lengthy interviews with Boston College researchers, and provided candid assessments about how expectations of their role are changing and the dilemmas that this presents.
Three strong messages emerged from the research:
- Public perception of the role of business has changed significantly since the 1970s.
- New responsibilities are being thrust on companies.
- The current business model is on a collision course unless companies recognize that society's issues are impacting — positively and negatively — their long-term business success.
"Our research offers the most candid and on-the-record perspectives of CEOs looking at the challenges of the 21st century," said Bradley K. Googins, Ph.D., executive director of the Boston College Center for Corporate Citizenship and associate professor at the Carroll School of Management.
Fewer than 10 percent of executives interviewed believe the business maxim that their greatest duty is solely to create wealth for investors. Today's CEOs offer a more sophisticated approach to blending non-financial activities with the bottom line. When asked to choose the definition they said best describes how business relates to society, a majority of the executives favored expansive definitions that recognize today's businesses must be concerned about issues such as protecting the environment and supporting the needs of employees and that a company can "do well" by choosing to "do good." A break down of the definitions chosen:
| The private search for profit advances the public good. An executive's duty is to create wealth for investors. Society is best served when a company does well. |
6%
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Private enterprise best serves the public good when it is subject to public intervention (e.g. taxation, public spending, regulation). It is government's role to correct market failures. Business should not decide matters of public policy.
|
4% |
| In pursuing private profit, companies should take care to protect the environment, uphold the rights of workers, and be a good neighbor to communities. |
27%
|
| A company should lead with its heart and nurture its soul as it makes money. It should inspire other companies to aim high. It should do more than simply avoid doing harm; it should consciously seek to do good. |
25%
|
Unprincipled capitalism ultimately inflicts damage on all its stakeholders. The good company leads by demonstrating the moral principles of capitalism, and by showing the connection between those principles and financial success.
|
15% |
| Other |
23% |
CEOs from companies as diverse as GE, IBM, Raytheon, Ernst & Young, Néstle, Apache Oil and Timberland discussed how they manage their companies and respond to the growing number of societal issues and vocal stakeholders.
The perspectives vary greatly.
GE Chairman and CEO said, "Profits are created by businesses that are doing things that ultimately have real societal benefits. And businesses have not done a good a job of describing that."
Néstle Chairman and CEO Peter Brabeck-Letmathe warned companies to "be careful what language you're using. Because when you say you should give something back, you are intrinsically saying that you have been exploiting society. I have nothing to give back to society; I have given to society before."
The in-depth interviews provide another dimension to the emerging body of research on how corporate leaders perceive the role of the corporation in the 21st century. This qualitative analysis provides texture to surveys conducted by the World Economic Forum and McKinsey & Company. The McKinsey survey revealed that 84 percent of executives surveyed thought their companies should make contributions to the good of society that went beyond pursuing shareholder value.
In the Boston College survey, Chuck Prince, CEO and Chairman of Citigroup said, "One of the main things I think is different today and will be different tomorrow…is to make [corporate responsibility] far more integral to what you're doing."
Challenging other top executives, KPMG Chairman Mike Rake said, "We need chairmen and chief executives to be courageous and determined to take a longer term view on their business. They need to be leaders of the business in a sense that really engages their people, their stakeholders, their shareholders, their communities, in believing that what they're doing is good for their business, good for their communities, and that these are inextricably intertwined."
During the in-person interviews most executives conceded they do not spend enough time explicitly examining the role their company plays in society. While they said forums for such debate are limited and the vulnerability of being outspoken can be great, a majority agreed to speak on-the-record for this project.
These comments are certainly instructive for other business leaders and will provide a glimpse of what goes into managing in today's turbulent environment and the impact of more businesses stepping up to the challenges of the 21st century.
» View Step Up: A Call for Business Leadership in Society (free registration and login required)
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