Who Drives the Corporate Conscience?

By Sheehan, Cathy | New Zealand Management, May 2007 | Go to article overview

Who Drives the Corporate Conscience?


Sheehan, Cathy, New Zealand Management


RUNNING a company has always been a balancing act. Board and management juggle the sometimes conflicting demands of shareholders, customers, employees, suppliers and communities. Now it's even more tricky. Companies are under increasing scrutiny, not only for their financial performance but also for the way they conduct themselves.

They are expected to be 'good corporate citizens', 'a fun place to work' and concerned with not just keeping shareholders happy but being also socially and environmentally responsible--while complying with the laws, rules and regulations that govern the company's business.

Scandalous high-profile cases in the United States and closer to home have exposed company boards to increased public attention and criticism, followed by tighter standards for regulatory compliance.

But some companies are voluntarily putting money and time into meaningful and successful partnerships with charities, environmental groups and NGOs, even when it's not core business or required by the government.

They are also taking action on reducing greenhouse gas emissions ahead of government incentives to do so, and taking part in initiatives such as Target Zero for waste and EECA's Emprove programme for energy efficiency.

Why do they do it? What's in it for them, and where does the impetus come from?

We enter the boardroom to look at the role of directors.

Newly appointed New Zealand Institute of Directors vice-president Kerry McDonald believes the drive comes from two forces: the interests and personalities of the individuals on the board and the need of the business for acceptance by the community.

Besides his role at the Institute of Directors, McDonald is also chairman of the Bank of New Zealand and Oceana Gold New Zealand, and vice-chairman of Oceana Gold. He is a director of National Australia Bank, Ports of Auckland and Gough Gough and Hamer, and has just been appointed as director of Opus International Consultants, following a more than 20-year career with Comalco in Australia, New Zealand and elsewhere.

Says McDonald: "The nature of the individuals on the board and their own values--that is a powerful driver. The individual sees it as appropriate--if not necessary--that the company has not only a high standard of economic performance and compliance, but also, within its capabilities, social responsibility and environmental performance.

"The companies can range from large to small. The personal values of the people and the capacity of the company will vary.

"The second leg is--in many companies these days it's almost the 'licence to operate' catchphrase--if we're to operate in this community, we must have the confidence of the community so they accept us as good operators and are happy to have us as part of the community."

McDonald refers to the mining companies he's been involved with, including Comalco and Rio Tinto in Australia and New Zealand, and Oceana Gold: "Comalco and Rio Tinto were thinking along these lines 20 years ago. Not with the public engagement you have now, but the corporate ethos was you either did it to a high standard or the business would be at risk--otherwise, if you were going to be a mining company you wouldn't be allowed to operate."

Auckland University of Technology professor of management Kate Kearins agrees. Kearins, who has a special interest in sustainability, says: "There are several motivating factors for companies who want to do good things and be seen and report on them. But one of the main underlying ones would be corporate 'legitimation'."

She says that although the link between doing good and financial performance is not securely established, "There will always be a place for people who want to invest money in good rather than bad.

"For people to do business with you, you need to be legitimate social members of the community."

She sees the need for legitimation as one of the forces behind such partnerships as SkyCity's support for Kidz First, the Starlight Symphony, the Special Olympics NZ and the Breast Cancer Foundation.

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