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May 7, 2007
Business reputation and the social contract
We know that business reputation is one of the most important, yet intangible of intangibles. Here is an insightful interview on the topic -- The McKinsey Quarterly: Exploring business's social contract: An interview with Daniel Yankelovich:
Intro:
As more and more executives come to recognize that a company’s reputation is an important strategic asset, many are understandably confused as they ponder the numerous social and political issues that now stand alongside simple profit as a measure of long-term corporate health. Avoiding scandals is a no-brainer. But how “green” should a company be in an increasingly environmentally conscious society? Where should a corporation draw the line between what is acceptable from a purely legal standpoint and what would be dictated by the ethics of different generations of consumers? Where are the tipping points between public tolerance of executive and corporate behavior and a public backlash or crude regulatory remedies?
As a founding father of public-opinion research and its preeminent practitioner, Daniel Yankelovich has been probing attitudes toward business and other issues for more than four decades. Yankelovich, 82, introduced the New York Times/Yankelovich poll in 1975, has written 11 books, and served as a consultant to business and political leaders. He has also established four companies, including his latest, Viewpoint Learning, which helps organizations to develop special-purpose dialogues to expand their options, anticipate obstacles, and broaden support for difficult decisions. Yankelovich is no stranger to the boardrooms of large enterprises, having served as a director of Arkla, CBS, Educational Testing Service, Meredith, U S West, and other companies, as well as foundations, universities, and nonprofits.
Throughout his career Yankelovich has unwaveringly stressed the need for organizations to embrace ethical integrity in their operations and their ties to the outside world. He recently sat down at his home in La Jolla, California, with Lenny Mendonca, a director in McKinsey’s San Francisco office, and Matt Miller, an adviser to McKinsey, to discuss the current and future contract between business and society.
There is one part of the interview I found especially interesting:
There’s nothing wrong with shareholder value if the shareholder is served through long-term profitability. I’m sure that what some companies will do is say, “Look, we got off on the wrong track—we let a bunch of 32-year-old fund managers on Wall Street pervert the true meaning of shareholder value.” It’s a variation on a theme we hear from Warren Buffett and others. Most companies will either try to go back to the original, long-term conception of shareholder value or just quietly let it recede into the background.
Amen to that. I realize the power of short-termism, especially in the financial market. But strengthen long-term thinking is of vital importance in coping with the rapidly changing I-Cubed Economy. It is too easy to get caught up in the minute-by-minute, second-by-second dynamic – at lose sight of the long-term goals. A constant reality check against long-term profitability is needed, even in the face of hyper-mobile financial markets. If that calls for a redefinition of “shareholder value” and a new business social contract, so be it.
Posted by Ken Jarboe at May 7, 2007 11:13 AM
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