Responsible Management and CEOs

As of 13 August 2020, COVID-19 has affected more than million people globally, including 744,385 deaths, reported to WHO. The virus has also had severe economic implications, leaving organizations facing a unique set of new challenges that can only be summed up in one word: uncertainty. And the only way to navigate these uncertain times is through leadership. This is critical right now, as COVID-19 has magnified societal vulnerabilities. Good leaders can and should lead society into a new “normal”. However when Harvard economist Greg Mankiw argued in a New York Times opinion piece that CEOs are qualified to make profits, not lead society this is somewhat inadequate to the times we live in now. Furthermore, Doug Sundheim, contributor at Forbes, has argued in his article “CEOs Have A Responsibility To Help Lead Society” that Greg’sc arguments just simply do not fit today’s business models. This “shareholder-first business model” originated from 1970, however 50 years on a lot has changed and at a time when over 70% of the largest entities on earth are corporations, not nations, Mankiw’s view is troubling. 

The sheer number of corporations around the world should make us understand that business impacts societies on a global scale; therefore, business leaders have the responsibility to at least consider those societies and how they impact them. The singular management goal of CEOs is no longer about maximizing returns to shareholders, but to support society as business has grown more interconnected and complex. Today, business and society are weaved together in an intricate way, both depending on the other for stability and success. 

The COVID-19 pandemic has also changed businesses and created a surge in the number of positive collaborations between companies, institutions and governments. Our article “COVID-19 prompted innovative leadership” reflects how Mankiw fails to grasp the world in which CEOs are now in fact leading communities and helping societies.

Mankiw asks the reader to imagine having to make an executive decision and how effective and simplier it is when your only priority is profits, and not the wider set of stakeholders – i.e., employees, suppliers, communities, and shareholders. Mankiw defends the idea that corporate management’s mandate should be the narrow self-interest of achieving greater profits for shareholders, not broad social welfare. He goes on to list several additional hypothetical questions. A social-driven leader would have to consider:

• How do you weigh those losses against the gains to the would-be workers at the new plant?
• How much will the closure of the old plant hurt its workers and their community?
• Does it matter whether the new plant is in South Carolina, providing jobs for American workers, or in Mexico, providing jobs for Mexican workers?
• How should you weigh the benefit of electric cars in mitigating climate change? 
• How should you balance these concerns against the interests of shareholders, who entrusted you to invest their savings?

However, the above questions are now part of the many new demands from consumers, talent and governments. 

Consumers have changed; they are no longer only interested in the end product. Consumers are demanding more from companies for their buy-in. And every corporate leader has to include some version of the above questions in their considerations if they want to succeed. Top CEOs say social responsibility should be prioritised over profits proving that social responsibility planning; it’s officially basic business planning. Last year the bosses of 181 Leading US’s biggest companies dropped the shareholder-first principle – they changed the official definition of “the purpose of a corporation” (from making the most money possible for shareholders) to “improving our society.”

Most successful CEOs and corporate leaders have profit in mind, and they always will; but they are also considering the needs of a variety of stakeholders, including the communities they impact. In this day and age, CEOs and corporate leaders are rising up to social expectations and are balancing the demands of multiple stakeholders.

Mankiw questioned CEOs’ and corporate leaders’ ability to be broadly competent social planners.  Paul Polman (former Unilever CEO) talks about creating collective courage. He rightly argues that it’s difficult for one industry player to impact an issue like reducing greenhouse gases because of the loss of competitiveness. However, if 20% of industry players come together, they can begin tipping the scales.  It’s starting to happen. In this way, by unifying their efforts, corporations, governmental agencies, and NGOs can partner to lead society.

CEOs and other leaders now find themselves in a changed world … they can and should play a variety of leadership roles that move beyond narrow profit maximization. This is a social responsibility, not broad social planning. Short-term earnings no longer feature in the top of the mission statement for most successful companies. We’re starting to find our way back to a more balanced view, and we need CEOs’ leadership in the process.

Mankiw admits that the world needs people to look out for the broad well-being of society – elected leaders who are competent and trustworthy – but those people are not CEOs. However, Mankiw fails to acknowledge just how much influence CEOs and corporate leaders have over our elected officials and the legislative process. Today, large corporations and their associations outspend labour and public interest groups 34 to 1 on lobbying efforts in the US.

In today’s high-risk environment, businesses have to pay attention to their social and environmental roles not only due to demand, but out of responsibility for the damage they (can) cause. For example, companies that contribute to, but then deny, climate change – the attorneys general of several American states launched investigations into ExxonMobil and whether they had committed fraud by sowing doubts about climate change – even as its own scientists knew it was taking place to firms involved in botched Grenfell Tower revamp refusing to accept responsibility for tragedy. Then there is Chamath Palihapitiya, former Facebook executive, who expressed regret for his part in building tools that destroy ‘the social fabric of how society works’. Companies are responsible for causing great damage on a human scale. We have to hold companies, CEOs and brands accountable for their destructive impact in today’s society; while they have a responsibility to support and help lead society.

CEOs and corporate leaders are exerting immense influence behind the scenes; therefore, qualified CEOs and corporate leaders should step up and help lead on the thorny economic issues of the day. However, with great power comes great social responsibility. Not all of the corporate leaders are equipped to lead societies; therefore, they should take a significant weight off the scale. Contrary to what Mankiw and others of his mindset might think, we must continue to demand more from our corporations, their boards, and their CEOs and leaders. Corporate leaders can make a unique and lasting positive impact, too.

About us…

Based in London, CRI® Group works with companies across the Americas, Europe, Africa, Middle East and Asia-Pacific as a one-stop international Risk Management, Employee Background Screening, Business Intelligence, Due Diligence, Compliance Solutions and other professional Investigative Research solutions provider. We have the largest proprietary network of background screening analysts and investigators across the Middle East and Asia. Our global presence ensures that no matter how international your operations are, we have the network needed to provide you with all you need, wherever you happen to be. CRI® Group also holds BS102000:2013 and BS7858:2019 Certifications is an HRO certified provider and partner with Oracle.

In 2016, CRI® Group launched the Anti-Bribery Anti-Corruption (ABAC®) Center of Excellence – an independent certification body established for ISO 37001:2016 Anti-Bribery Management Systems, ISO 37301 Compliance Management Systems and ISO 31000:2018 Risk Management, providing training and certification. ABAC® operates through its global network of certified ethics and compliance professionals, qualified auditors and other certified professionals. As a result, CRI® Group’s global team of certified fraud examiners work as a discreet white-labelled supplier to some of the world’s largest organizations. Contact ABAC® for more on ISO Certification and training.

MEET THE CEO

Zafar I. Anjum is Group Chief Executive Officer of CRI® Group (www.crigroup.com), a global supplier of investigative, forensic accounting, business due to diligence and employee background screening services for some of the world’s leading business organizations. Headquartered in London (with a significant presence throughout the region) and licensed by the Dubai International Financial Centre-DIFC, the Qatar Financial Center – QFC, and the Abu Dhabi Global Market-ADGM, CRI® Group safeguard businesses by establishing the legal compliance, financial viability, and integrity levels of outside partners, suppliers and customers seeking to affiliate with your business. CRI® Group maintains offices in UAE, Pakistan, Qatar, Singapore, Malaysia, Brazil, China, the USA, and the United Kingdom.

Contact CRI® Group to learn more about its 3PRM-Certified™ third-party risk management strategy program and discover an effective and proactive approach to mitigating the risks associated with corruption, bribery, financial crimes and other dangerous risks posed by third-party partnerships.

CONTACT INFORMATION

Zafar Anjum, MSc, MS, CFE, CII, MICA, Int. Dip. (Fin. Crime) | CRI® Group Chief Executive Officer

37th Floor, 1 Canada Square, Canary Wharf, London, E14 5AA United Kingdom

t: +44 207 8681415 | m: +44 7588 454959 | e: zanjum@crigroup.com