Communities thrive when corporations thriveFebruary 2017
Interview with Henry Stoever, CMO, NACD by Tom Idle
According to the National Association of Corporate Directors – whose 17,000 members represent around 98% of the Fortune 1000 – social responsibility has become “the new corporate imperative” with more companies “moving from rhetoric to action”.
There are numerous reasons for this marked shift, says NACD chief marketing officer, Henry Stoever – none of which is likely to be affected by a change in political leadership in the US—Tom Idle.
TI: Given the uncertain political and economic times that we live, can businesses really afford to be engaging in corporate social responsibility right now?
HS: Absolutely. Yes. We all work in this thing called the economy, which has a social contract that companies serve to. We all want to make sure companies are around for long, long time.
The primary role of company boards is to help ensure the long-term economic sustainability of an enterprise. They do that by recruiting right and helping to set the right economic strategy, and then tracking performance against that strategy. Of course, the specific economic sustainability for each company is different and the types of stakeholders each company has will vary too.
So, yes, companies can and should be thinking of sustainability in their own terms. That might differ from company to company – and that’s okay. Company goals are all about creating long-term value for the enterprise and that means thinking about employees and the communities in which they serve.
TI: It seems that many companies are keen to reflect on what has happened in the past and get their house in order once and for all. Why has that happened recently?
HS: For public companies, a key trigger has been much more proactive engagement between themselves and their shareholders. If you take the top ten owners of a company, from a stock perspective, they will no doubt have different views on what is important to them. Companies don’t need to 100% agree with their investors, but shareholder communication is vitally important.
There has also been a shift in how shareholders look at performance. Generally, when company performance is strong, shareholders are happy. But increasingly, they have different expectations – and, again, that’s why strong engagement is important.
TI: What impact will Donald Trump’s US election victory have on business attitudes and investments in CSR and tackling issues such as climate change? After all, he is a man that disputes the idea that global warming is a man-made phenomenon.
HS: Companies will continue to focus on performance regardless of who is running the country. There will be a bigger focus on the use of non-financial metrics to track performance in different ways though.
Plus, there is a big debate raging right now about long-term value versus short-term value, and companies will no doubt continue to discuss both. You cannot avoid the short to go long.
TI: Famously, Unilever did away with quarterly reporting in favour of looking more long term. Must companies focus on both short- and long-term value creation at the same time?
HS: Yes, and they can do both. It all comes down to how you communicate your strategy to shareholders because people want to understand where you’re going. Do you need to increase your capital expenditure to invest in new plant technology that will benefit the to company in the long term, for example.
You need to discuss the long-term in the context of the short-term, and vice versa.
TI: Trump’s election victory was seen by many as a backlash against globalisation and the fact that corporates have long ignored local communities in their pursuit of growth. Is that how you see it?
HS: Companies have always been focused on benefiting the community. They just haven’t said that – and writers and journalists have not articulated that either.
Companies can’t create value without people. Employees are a company’s greatest asset. And those employees have families and kids that go to the local school, and they all spend money in the local community.
When companies do well, people benefit. Without thriving companies – whether that’s in corporate America, in corporate UK, or wherever – then local communities thrive.
TI: So, what can the NACD – and bodies like it – do to help companies realise the benefits of taking CSR seriously?
HS: We focus on helping boards get the right information so they can help their companies create long-term value; that’s what we do. First, we talk about these things. Not that talk is a solution in itself, but it’s an important first step.
Company directors are the guardians of capitalism, overseeing the impacts of a company. The board oversees how the CEO and management team runs that business on day-to-day basis.
And it is up to the board to define the company’s culture. If done well, a culture can permeate all aspects of a company – from the employees to the suppliers. If you have the right culture, as defined and desired by company’s leadership, you have an opportunity to be successful for the long term.
TI: Really, a company is a group of people making decisions. How do you create a culture that really resonates?
HS: Culture comes from having a clear definition, and literally writing that down to communicate what you believe it should be.
Then, if I was a CEO, I might have six tenets of what my culture for success looks like, and I would pressure test that with my employees, to see what they think. You can then evaluate it and evolve it over time.
TI: More surveys point to the fact that the new generation – Millennials and Gen X-ers – want to work for companies that are improving their sustainability leadership. Are you seeing something similar within the companies you represent?
HS: Yes. We see that different segments of the employee population have different desires. But there is a consistent commonality across the demographics: to do well.
Professionally, we all want to do a good job. But how we do well is defined differently across the segments.
Companies need to be aware of the perspectives, desires and needs of Millennials and Gen X-ers, and to share feedback in the context of those desires.