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Ron is a non-executive director (NED) of a medium sized listed company. He believes it is in the long term best interests of the company (and hence its shareholders) to form strong relationships with the community and for staff to develop their leadership skills through involvement in projects that bring them into contact with people from different backgrounds and in different circumstances.
He has talked to a few senior executives and they are very keen to get the company involved in some ‘meaningful’ charity work (his CEO is delighted when the board and senior executives have informal interactions between board meetings). They believe the CEO would support such an initiative. The Chairman, however, is known to be very much a proponent of the view that ‘the business of business is business’.
What should Ron do?
Ron's chairman is quite correct and any business that ignores that maxim does so at its peril, especially in these upcoming difficult economic times.
That is not to say that social responsibility and sustainability are not important. Shaun Mays explained it best in his report "Corporate Sustainability - an Investor Perspective":
"Sustainability, in a broad sense, deals with risk in the form of externalities and with opportunities in the form of efficiencies. Investment risks may arise where corporate activities adversely impact society or the physical environment. As stakeholders and communities recognise these potential (externality) impacts and advocate for their reallocation back to source; community, regulatory and litigation risks can arise. Opportunities for efficiency gains can be achieved via reduced resource consumption and/or a variety of productivity innovations."
The role of the non-executive director is to ensure that an organisation's sustainability initiatives are relevant and beneficial to the organisation and not just a feel good exercise. If Ron seriously believes these activities are in the best interest of the company, he should be able to develop a business case to support his proposal.
See how other practitioners addressed the problem... |
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