Dialogue: In business, money isn't everything

By RICHARD RANDERSON*

The Auckland Chamber of Commerce's Michael Barnett raises important questions on the ethics of doing business.

I want to develop some of the questions he raises, and do so from my own experience of the corporate sector through seven years as an industrial chaplain in Auckland, post-graduate study in ethics and economics, and running seminars on corporate values for New Zealand companies.

Mr Barnett quotes Sir Norman Barry as saying that businesses should act positively for the public good, even if it should be very costly for them to do so. The key questions here are what it means to contribute to the public good, and whether it is costly to act positively for such good.

Both inside and outside the corporate world, the view of many is that contributing to the public good is primarily to do with distributing a portion of corporate profits to the community. Community groups see profitable businesses as a source of funding, and benefit from corporate grants.

Such financial grants are indeed a good thing, but my own view is that they are peripheral to the main contribution businesses can make to the public good, and that is by the way they run their own organisations.

To conduct a business on ethical lines is much more important than to divvy up some of the surplus that might have come from acting unethically.

Attending to the needs of stakeholders is an excellent way to contribute to the public good. A company's stakeholders include staff, customers, suppliers, the community, the environment, the shareholders - all of whom have a stake in how the company operates.

In recent years I have run workshops for major NZ corporations on stakeholder objectives. In the course of a day goals are worked out to achieve desirable outcomes for each of the stakeholder groups. Measurable targets are linked to each goal, and a strategy for achieving such targets established.

Such an approach links well with the current concept of a Triple Bottom Line for corporate annual reporting : financial, social and environmental achievements are all measured and documented.

At a seminar for a large public hospital, an interesting conflict emerged between two goals. One was financial - to achieve a balanced budget with restricted funding. The other was a community goal - to meet the health needs of the people of that region.

Both goals are important, but in discussion the board and senior management group came to see the latter was of greater significance insofar as it was to do with their ultimate purpose. If that purpose was likely to be thwarted by shortage of funds, their strategy had to be to seek more funds rather than reduce services.

Another area for improved stakeholder relationships may be seen in the current debate between Carter Holt Harvey and the Waterfront Workers Union at Nelson. In all the media coverage I have read there has been no discussion of what constitutes a fair wage for waterfront workers.



As an industrial chaplain in Britain some time ago I became familiar with a process to determine a fair wage. It was based on a joint employer/union process that assessed a job in terms of such factors as required skills, experience, stress or hardship, and responsibility.

A fair wage was determined by mutual agreement. It was not always easy but the concepts of mutuality and fairness helped.

In the absence of such a process the outcome is industrial strife, where whoever has the strongest muscle wins.



New Zealand has made progress in recent years in achieving greater mutuality, but the Nelson waterfront scene reminds us there is some distance still to travel.

The Tylenol scare in the United States a few years ago provides an excellent example of good stakeholder relationships with customers. When Tylenol products were found spiked with a toxin, the company responded by withdrawing its stock from outlets all over America.

At one level the cost was enormous, but at another the company's prompt action to ensure the well-being of its consumers was rewarded with enhanced customer support.

Companies that attend to the needs of stakeholders in these and other ways contribute far more to the public good than can be achieved by merely distributing a share of company profits.

Such an approach raises questions about Sir Norman's second proposition: that it may be very costly for them to do so. But is it?

If a company treats its staff and its customers fairly, will that send it down the road to financial disaster? Or will it be repaid by greater staff loyalty and customer support?

If a company takes steps to reduce smoke emissions and to prevent toxic discharges into rivers, it may cost something in the short term - but long term its reputation in the community will rise.

If one company feels it will be competitively disadvantaged by taking a unilateral step to protect the environment, an industry-wide agreement will enable a collective step to be taken.

Far from it being costly, therefore, to serve the public good, such positive strategies towards stakeholders not only achieve desirable social and environmental outcomes but may enhance the financial bottom line.

The oft-quoted dictums "good ethics is good business" and "doing well by doing good" may be cliches, but there is truth in them.

The cynical may regard such an approach as a new way to enhance profits. I see it as a partnership with mutual benefits.

I conclude by returning to the question of the distribution of company profits for community purposes.

A new angle on this was proposed by a leading insurance executive in Sydney addressing a conference of social service agencies. His advice was: Don't just ask us for money; put up a proposal for a programme that benefits us both.

As an example, he quoted a request from youth workers in one of Sydney's poorer suburbs for money to run a youth programme. The company allocated finance and two of its younger managers to work with the youth agency to establish an effective programme.

The agency got the money and additional leadership it needed. The youth and families of the neighbourhood (the prime stakeholder group), gained major social and educational benefits. And the insurance company benefited from seeing a decline in claims for damage from crime and vandalism in the area.



Mr Barnett rightly says that people today see themselves increasingly as part of a seamless society. There is evidence of productive partnerships between business and other sectors of the community, even if the concept is not yet widespread. Corporate and community leaders can work together to translate concept into reality.

* Richard Randerson is a former Auckland industrial chaplain, and currently Dean of Holy Trinity Cathedral in Parnell.

* randers@ihug.co.nz