Almost a year ago, James Cohen and I wrote about six megatrends that we believed would fundamentally transform how companies regard ethics, integrity, and the role of compliance. It seems clear that several of these trends are already making their way into the corporate status quo, admittedly faster than we expected.
This is primarily due to one driver: the growth of corporate or CEO activism, especially in the United States. The term “corporate activism” encompasses a range of developments, all reflecting corporate responses — amid a polarized political environment — to demands that companies demonstrate where they stand on social issues.
Here are just a few prominent examples.
Starbucks closed 8,000 stores to conduct diversity training following a high-profile incident at one of its outlets. Female employees at Nike have conducted a successful internal campaign against harassment and gender discrimination, prompting the departures of a number of senior employees. McDonalds, Levi Strauss, and dozens of companies have committed to ambitious targets to reduce their contributions to climate change.
Microsoft, Google, and several U.S. airlines have revisited government contracts, following employee pressure over immigration and the child separation policy. Pressed by socially responsible investors over financing of the Dakota Access Pipeline, banks have revised their human rights commitments. And a number of retailers changed their rules on gun sales after the Parkland shooting and the viral Twitter campaign it triggered.
Each of these corporate responses has been led from the very top of the organization. All are clear attempts to satisfy demands — from investors, employees or customers — to show that company values are meaningful, even if it means walking away from business. And all show the need to consider reputational risk and stakeholder opinion, not just legal or regulatory issues, when designing a company’s approach to corporate integrity.
Where does the compliance officer fit here?
In my work with companies at BSR, I have found that the most common approach is to set up a CEO-led task force, including representatives from legal, compliance, communications, government affairs, risk and strategy, and even human resources. The questions being raised stand at the intersection of reputation, risk, and responsibility, and no single department can resolve them.
We have seen many companies send out surveys asking consumers and other stakeholders for their views as to how they should engage on social and political issues. Indeed, a Weber Shandwick survey last week showed that the public supports corporate engagement on issues such as sexual harassment and equal pay — but not on gun control or abortion.
While it is essential that enterprise leaders understand the relationship between stated values and reputation, compliance teams can help remind them that the challenge is not primarily about branding. It concerns building a more robust ethical culture, which, in turn, means ensuring that values statements are supported by concrete changes in governance, strategy, and management decisions.
As compliance officers become increasingly involved in broader integrity questions, they are hardly equipped to singlehandedly resolve all the questions raised by the new dynamics of reputational risk. An uncertain regulatory and policy landscape, together with growing responsibilities, has put the compliance function under considerable stress. That makes this a particularly good moment to remind ourselves that cultures of compliance depend on cooperation, collaboration, and communication across the organization — and then to celebrate that companies are paying more attention to values and ethics than they have in many years.
Alison Taylor, pictured above, is managing director of advisory services at BSR, a non-profit consultancy and company network focused on sustainability and CSR and a professor at Fordham Law School and the Gabelli Business School. She’s the author of the working paper, The Five Levels of an Ethical Culture. In addition to the FCPA Blog, she writes for the Harvard Business Review and for Quartz, among others. Her article, “5 Signs Your Organization Might Be Headed for an Ethics Scandal,” appeared in the December 18, 2017 of the Harvard Business Review. She can be contacted here.