Dear colleagues
A Happy and Healthy New Year to all! As 2018 begins, Janice Dean Consulting Ltd formally starts life and we reflect on doing business in an ever-changing world, I thought I’d aim to answer straight away two questions the site might raise.
One is on the presentation: ‘Why a Pyramid logo?’; one on the content: ‘Why services in Company Law, Corporate Governance and CSR?’
The answers are related. They also reflect my own journey from ‘black letter’ law to building sustainable business.
The pyramid reflects Archie B Carroll’s well-known pyramid of business responsibilities. At the base is ‘Economic Responsibility’ (‘Be profitable’). The next level of Carroll’s pyramid is ‘Legal Responsibility’ (‘Obey the Law’). On top of that is ‘Ethical Responsibility’ (‘Be Ethical’) and at the top ‘Philanthropic Responsibility’ (‘Be a Good Corporate Citizen’). How are they related?
A company that does not ultimately generate a profit from its goods and services cannot last: profit is a reflection (albeit crude and variable) of the value added, at least measured by willingness of customers to pay more than costs: this is the base. At the top of the pyramid, corporate charitable donations and philanthropic activity are not ‘requirements’, though desired of successful business organisations and indirectly, perhaps, a contribution to a healthy business environment. It is in the middle of the pyramid, the legal and ethical and the overlaps and movements between the two, that most of my attention has focused.
There is a zone that caught my interest between the ‘letter of the law’ (which of course varies in different jurisdictions and is not always certain) and that which is an ‘add-on’ but becomes ‘expected’ conduct for a ‘reputable’ business. This consists principally in what is expected by consumers, suppliers, employees, communities and their representatives even when not (or not yet, or not in one nation) prescribed by law. There are a number of reasons why expectations may not be reflected in law: the law may not yet have caught up with expectations (payment of proportionate and ‘fair’ taxes by companies in the jurisdictions where services are used and profit is generated, and exploitative treatment of younger employees by more senior staff with power over their careers may be topical examples?) or may be difficult to prescribe in a single fixed legal standard when industries vary and technologies change quickly (environmental impact being such an area). There are also reasons why expectations of society and stakeholders are important to business even if not in an applicable national law: NGOs may expect business to adhere to widely agreed international standards, for example, on tackling climate change or child labour and businesses need clear standards, even if those international agreements are not directly applicable to business organisations and may spotlight ‘failures’ with negative business impacts, while strong customer and worker relationships going beyond ‘bare minimum’ legal compliance reduce costs of turnover (seeking out new staff and buyers). Clear policies and processes and a company culture of dealing fairly with, and avoiding harm to, all of those groups and the society and environment in which the business is based protect reputation (relating back to the imperative ‘be profitable’ where ‘brand premium’ can be generated) and keep the business ahead of regulatory change.
Understanding legal duties and going beyond (current national) laws to help shape the business environment and address stakeholder and social expectations is the way to ensure true ‘sustainability’ of ‘responsible’ business. That’s why my advice spans company law matters but goes on to address corporate governance requirements – the right people and processes to drive strong performance – and embraces CSR that protects corporate reputation and strengthens key relationships. All levels of the pyramid have to be managed together for the whole structure to be kept strong.
It’s noteworthy that The Economist magazine in a recent leader (of November 30th 2017) acknowledged that effective CEOs had to respond to and anticipate social and political trends and the demands of varied stakeholders to ensure long-term profitability. Their organisations had to be consistent in their core values and aware of the concerns of key groups (beyond day-to-day operations and compliance with current law), if only because: “Consumers can now express their opinions dramatically online”, “Employees… increasingly demand that their firms take positions [on key social and environmental issues]” and “shareholders are judging firms on broader criteria than financial ones [increasingly considering environmental, social and governance factors also]”. Sound legal awareness and ethical judgment will be needed to succeed in challenging and ever-changing political and economic environments.
Please get in touch if you have queries or need any assistance with any level of your own corporate pyramid!
best wishes, Janice Dean
