The CEO’s Challenge: Balancing Expectations of Consumers and Investors
By Margaret Coady
Should large companies help address societal issues? It's an age-old question that even today continues to be a subject of lively debate for the private sector. A company’s investors might advocate that the company leave progress on societal issues to government and nonprofits, opting for a bare-minimum scenario in which businesses do little more than pay taxes, obey the law, and pass all profits to shareholders.
But study after study – whether it’s the annual Cone survey or the Edelman Trust Barometer – shows that consumers are asking companies to do significantly more than the bare minimum. After all, a healthy company depends on a healthy society, so shouldn’t business step forward and get involved in a meaningful way?
Given the tension between consumer expectations and investor pressure, whose voice should corporate CEOs listen to?
CECP's Annual Board of Boards CEO Conference
This was the central theme of the Committee Encouraging Corporate Philanthropy’s (CECP) annual Board of Boards CEO conference.
Convened on the occasion of International Corporate Philanthropy Day, CECP brought together more than 50 leading global CEOs—including executive delegations from India and Brazil—to discuss the opposite tensions that a company’s consumers and investors exert on its commitment to community engagement. In this closed-door session, attendees focused on analyzing how CEOs can guide consumers and investors along the path of long-term societal wellbeing.
The CEO Perspective on Social Responsibility
The results of our live polling made it clear that we had hit upon an acute area of tension for CEOs:
- 59% of CEOs reported that consumers are demanding greater levels of transparency regarding a company’s community engagement initiatives as compared to five years ago.
- 69% of CEOs felt their companies’ community engagement efforts are rewarded by consumers, yet most of those CEOs cannot concretely measure those rewards.
- 52% of CEOs indicated that shareholder demand for transparency regarding a company’s commitment to community engagement is unchanged from five years ago.
Through panels and peer-to-peer discussions, the CEOs in attendance advocated for engaging more deeply in societal issues relevant to the future of the business.
Rather than fund causes reactively and sporadically, they said, companies can begin to satisfy consumer and investor pressures if they choose societal issues that are meaningful to those two groups simultaneously—issues that affect the company directly and for which the company has an opportunity to make a unique contribution. While many companies shared this ambition, the obvious hurdle: expert coordination between picking the issues and communicating activities to different audiences in a coherent, clear way.
A resounding suggestion from the attendees: Using social media as a channel for greater transparency about their commitment to community engagement.
Metrics: Connecting Social Progress with Shareholder Value
In the second half of the conference, the CEOs examined an underlying measurement challenge. Despite their firsthand experience of the business benefits of taking an active role in helping address societal issues, companies are often unable to quantify those benefits. President and CEO of Bloomberg L.P. Dan Doctoroff said: “We know that good companies tend to perform better, but until there's proof of that I don't think you're going to see a whole lot of interest from investors.”
As the conversation progressed, however, there was consensus that while the financial benefits of a company’s community efforts often escapes accurate measurement, that shouldn’t be an excuse for companies to pull back or disengage.
Leadership in Context: Who's Responsible?
In response to “In the marketplace, who will lead progress toward long-term societal well-being?” attending CEOs believed that the business community will be the agent for leading progress (45%) opposed to a collective call from consumers (32%), a regulatory intervention by government (18%), or investors recognizing and rewarding socially sustainable business practices (0%).
They saw a role for themselves to bring consumers and investors along on their companies' sustainability journey. They emphasized the need to be more accountable for taking action.
The Western Union Company CEO Hikmet Ersek summed it up: “My hope is that every CEO steps up. I think we as CEOs must take greater responsibility. Leadership is the real issue and it starts at the top.”
For additional polling results and a discussion summary of the CEO roundtable, see CECP’s Executive Summary report. Comments or ideas? Contact CECP: info@corporatephilanthropy.org.
*This post originally appeared on CSRwire
