Nowhere to Run: The Growing Spotlight on Corporate Ethics


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’s 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’s 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

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