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Academic Stephanie Bertels outline four ways for organizations to address structural and cultural inequalities in latest installment on Salzburg Questions for Corporate Governance
This article is part of the series, the Salzburg Questions for Corporate Governance by the Salzburg Global Corporate Governance Forum
If nothing else, our collective experience over the past several months has shown us that society, and therefore our economies and our businesses, cannot be resilient if we do not meet the needs of the most vulnerable. The inadequacies and inequities of our current economic system have been laid bare for all.
A crisis creates an opportunity to let go of habits that no longer serve us. Already, this crisis has demonstrated that businesses have more capacity for adaptation than we thought. But the success of companies re-tooling their manufacturing to provide personal protection equipment should not give us the false sense of confidence that businesses need only to "rally" to address complex issues.
This pandemic has revealed the need to fundamentally question the role of business in society and its impacts on the larger socio-economic system. It has become abundantly clear that the path forward cannot be a return to the past. We must address the structural and cultural inequalities that underpin our current economy. Nothing short of a reimagining will do. Corporate directors are vital to this shift.
Start by looking inward to examine your privilege and confront the failure of the systems you once accepted as fair and just. Seek out the information and resources to help you surface and understand your own unconscious bias and take the time to listen and appreciate the perspectives of others. This process may feel uncomfortable. It should.
My research exploring what influences CEO decision-making points to the crucial influence that one director can have in shifting the entire conversation in a board room just by asking one hard question.
Time is tight; directors are conditioned to "stay in their lane." But a well-framed question makes a difference, especially when it is coupled with the courage not to accept a simple explanation, but instead, to demand a well-informed answer. Here are a few to consider:
Going forward, it is likely to be difficult to justify paying dividends to shareholders if the net-profit calculation does not include providing a fair wage to employees. Here are some additional questions to consider.
Finally, given that the issues of inequality and racial injustice are deeply intertwined with climate justice, here is one final crucial question to ask.
As we restart the global economy, companies are under pressure to demonstrate their strategy aligns with meeting the needs of society and the planet. Many companies are reflecting on how they can improve their resilience and contribute to the resilience of the communities where they operate. Our Embedded Strategies Guide helps companies set priorities and goals that are aligned with system resilience and delivering systems value.
Of late, an increasing number of companies have been lending their voices to calls for a more inclusive, sustainable, and resilient economy. A dividing line is emerging between those executives and directors that have accepted the role they must play in shifting our societies, and those still focused on delivering earnings and that continue to try to maintain a neutral stance on societal issues. As Desmond Tutu once reminded us, "if you are neutral in situations of injustice, you have chosen the side of the oppressor."
Directors need to get comfortable taking a position on societal issues. Ideally, boards and executive teams will be proactive in developing public position statements, ensuring they back up their position with concrete actions. Recently, we have seen major brands weighing in on systemic racism on their social media channels and in emails sent to employees and customers, many of them employing vague phrasing and awkward execution. Many of these have fallen flat.
In contrast, the unusually direct public statement from Ben & Jerry's addressing the historical roots of discrimination in the United States stands out for its candor and the courage to advocate for specific policies to prevent and redress racial inequality.
Based on extensive research, we have developed guidance on how to articulate a credible public position on key environmental, social, and governance issues. In addition, our position statement database identifies strong, clear, public positions articulated by global companies in a range of industries. For investors interested in re-examining their proxy voting policies, SHARE publishes a robust set of proxy voting guidelines annually.
Crafting a thoughtful position takes time. I urge you to begin the process now.
We encourage readers to share your comments by joining in the discussion on LinkedIn
Stephanie Bertels is the Director of the Centre for Corporate Governance and Sustainability at Simon Fraser University's Beedie School of Business where she conducts leading research at the intersection of corporate governance and sustainability. She also founded and leads the Embedding Project (www.embeddingproject.org), a research collaborative that partners with global companies to develop practical tools that help companies embed social and environmental factors across their operations and decision-making. Stephanie is a Fellow of Salzburg Global Seminar.
The Salzburg Questions for Corporate Governance is an online discussion series introduced and led by Fellows of the Salzburg Global Corporate Governance Forum. The articles and comments represent opinions of the authors and commenters, and do not necessarily represent the views of their corporations or institutions, nor of Salzburg Global Seminar. Readers are welcome to address any questions about this series to Forum Director, Charles E. Ehrlich: cehrlich@salzburgglobal.org To receive a notification of when the next article is published, follow Salzburg Global Seminar on LinkedIn or sign up for email notifications here: www.salzburgglobal.org/go/corpgov/newsletter