Published in CommPRO.biz 2013.09.17

Good News “IS” News, Occasionally

We find ourselves largely focused on a minority. The majority, most of us, are trying to do the right thing everyday. By nature we are an honest hard-working people. And most businesses understand that an ethical model is a roadmap to long-term strong profitability. Take care of your customers, employees, vendors, community, and the environment; and the bottom line takes care of itself.

In our weekly pursuit of ethical issues, we find ourselves largely commenting on players who choose to ignore the ethical model. Those not interested in long-term growth. Then there are those who operate in a non-competitive market. A market that is structurally immune to competition such as healthcare. When was the last time someone struck a deal with a surgeon whilst headed for the operating room?

More disturbing are those made immune to failure through their lobbying efforts. Take the monster banks. They have created a world where they are not only too-big-to-fail; they are permitted to take part in unimaginably outrageous practices. They make huge bets –outright gambling– on anything they can label “investing;” even with depositors’ funds insured by the United States taxpayers. Worse, our Department of Justice is afraid to go after these scumbags; a monumental failure.

So between big pharma, predatory healthcare entities, and smarmy bankers, we have lots of unethical issues. We aren’t forgetting that the scumbags make up a tiny minority. Most folks in healthcare are there for the right reasons, executing herculean efforts everyday. Most bankers focus on depositors and businesses in their community. They guard depositors’ savings; make loans to keep businesses growing, homes building, and dreams evolving.

However, good news rarely makes “The” news. That’s what we like when we find a major story about a newsworthy ethical happening. IBM, a pioneer in personal computers, sold that business in 2005 to Lenovo, a Chinese company most of us never heard of. Since then Lenovo has grown their share of the home computer market, recently surpassing Hewlett-Packard. Ninety days ago Lenovo opened an assembly plant in North Carolina. 

All of that is nice, but the icing on the cake came earlier this month (2013.09.02) when Lenovo CEO, Yang Yuanqing, announced that he was splitting $3.25 million –most of his annual bonus– with his workers. For the workers in North Carolina the $300 bucks they received was a nice surprise. For the vast majority in China the $300 is roughly a month’s pay.

Hats off to Yang. He gave away $3 million of his bonus last year. It wasn’t news here until Lenovo built their plant and Yang announced that he would split his time between two headquarters in Beijing and Morrisville, NC. Those who see this as a marketing ploy may have a point, but the impact on Lenovo workers in twenty countries is still there. Unlike other big players, Lenovo produces their computers, phones, laptops and tablets in their own factories. And we’ll bet they don’t have nets stretched around them to prevent the workers from jumping to their death.

Reputation Counts

Corporate Responsibility Magazine released its first corporate reputation study in advance of its annual Commit!Forum (2012.10.02>03) held at the opulent Wall Street venue, Cipriani. The CARAVAN® telephone survey of 1,032 adults in early September came up with some startling results; especially startling in view of the existing job market.

They found that among the unemployed in the study, 75% said they would rather keep looking than take a job with an organization with a bad reputation. Among those currently working, 58% would move to one of the bad guys for more money. How much more? On average they would hold their nose and change jobs if their pay were doubled. On the flip side, among the currently employed, 87% would take an offer from a company with an excellent reputation. More money? Yes, but not all that much, between 1% and 10% added to their paycheck.

“The results of the new survey underscore Americans’ desire to align themselves with organizations that do more for society than increase their bottom-line. Even during a time when Americans face many fiscal challenges, most people would rather continue their search for employment than work for a company that has questionable business practices or ethics,” Elliot Clark, the CEO of Corporate Responsibility Magazine, is quoted in a press release. “The survey demonstrates that there is a cost of bad business behavior, which significantly affects the ability to attract and retain people.”

Great people who stay with an organization are one of the markers not only of a nice place to work; they are makers of a profitable business. Businesses that care for their employees, their customers, their vendors, their community, and the environment get a much better shot at profitability than outfits that focus on the bottom line. The authors of Firms of Endearment found that companies that followed these markers racked up eight times the profits of the S&P 500 average over a ten-year period.

So those who would rather keep looking are wise. Better to keep looking until you find a decent organization to work for than go to work for a bottom-line focused scumbag outfit that’s likely to fail or kick you to the gutter at the first sign that their bottom line is shrinking. That leaves you with another empty spot on your resume to explain when you are back out on the street. Who needs that?

A good place to work attracts good people who stay long-term, who work really hard, who take care of your customers and your suppliers. Employees who are active in your community and alert you to its needs; employees who are alert to environmental issues and keep you caring about those issues. Employees who keep your lenders and your stockholders happy because those employees keep the bucks coming in and the profits piling up. That’s what an ethical business model looks like, what makes it a fun place to work, a great place to work, and a secure place to work.

The Bottom Line

Dog Eat Dog, nothing but the bottom line matters. Surprisingly there are those in business who still buy into this myth. Understand, it works. Goldman Sachs and many of the other Wall Street types come quickly to mind. It is always those who get away with playing dirty and breaking the rules who make the headlines. As the saying goes, “Good News is not News.”

Truth is, from the days of the industrial revolution businesses that treated their stakeholders well– their employees, their customers, their community, their suppliers, and the environment– found that the bottom line took care of itself.   Does that mean the good guys always win? Of course not. It does mean they have a better chance of winning.  And when they do, they win bigger than those who choose the alternative path.

The problem is documenting this truism. A few years ago a writer and couple of  college professors set out to do just that. Their book, Firms of Endearment, showed that those who took care of all their stakeholders returned eight times as much as the Standard and Poors average over the ten years prior to their study. That’s not eight times the worst, that’s eight times the AVERAGE return; that’s the kind of bottom line every company dreams of.

A massive research effort, 10,000 consumers in ten countries, The Cone/Echo 2011 Global Corporate Responsibility Study, shows that consumers not only support those who follow this business model, they will punish businesses that focus solely on the bottom line. The margins surprised the researchers as they did us. Over nine out of ten respondents said that to win their business companies must go beyond the legal requirements and that they need to look at their practices and make sure their overall impact on society as a whole is as positive as possible.

Their number one concern is a company’s efforts to support and expand the economy. Nearly all the respondents (96%) placed economic development at the top of the list they expect companies to strive for. The environment comes in at the same level (96%), followed by human rights, education, health, and poverty, all above -or just below- the ninety percentile mark. That’s pretty dramatic.

And it’s widespread; the study covered a lot of geography: Canada, China, Brazil, France, Germany, India, Japan, Russia, The United Kingdom and The United States. Nations that house almost half the people on the planet and by far the majority of enlightened consumers. Consumers who told the researchers that they would switch brands to be assured of their makers’ devotion to high ethical standards.

Pack that all together and it makes for an overwhelming argument for the ethical business model. It makes sense; who would want to do business with someone or a company that is trying to rip you off? Who wants a company that does not care about you, your community, the air you breathe, the water you drink? Who needs those kind of people? You can no more run a company by focusing on the bottom line, than you can win a ball game by focusing on the scoreboard. 

© 2011 GLG