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If you want to download the text of the speech -
Click here (pdf format -34 kb) or read below:
Address by Mr
David T Hopper - Full text
It is a great pleasure to again be at Stella Maris. I am honored
to be invited to address this seminar on fostering Corporate Social
Responsibility and Community Based Organization Partnerships, and in
doing so to help inaugurate the Department of Public Relations at
Stella Maris College.
I understand that the Department of Public Relations actually was
launched in August of this year and that the students have completed
their first semester, in which the focus of study was community
relations. The next specialization is the corporate sector and
customer relations, hence this seminar that combines the corporate
and the community. I further understand that students in the Public
Relations program work multi-sectorally in the corporate, service,
government and development sectors with the aim of being able to
function in allied communications and media related positions. I
congratulate the Department and the College on this innovative
approach, which I am sure will provide the students with excellent
preparation for a world where the abilities to understand a variety
of sectors and to communicate effectively are keys to success.
Please accept my best wishes for what I am sure will be both a
popular and successful program.
When I learned that I was invited to speak on Corporate Social
Responsibility from the U.S. Perspective I must admit that I
wondered if that meant corporate social responsibility was
considered well developed or under developed in the U.S. Whichever
might be the case, I hope the U.S. perspective is a useful one. Two
notes at the outset: America is a diverse country, just as India is,
so I consider this an American perspective rather than the
American perspective on this subject. Also, I should give credit
for much of the following to Dr. Angel Cabrera of the Thunderbird
School of Management in the U.S. state of Arizona.
Most admired companies in US
For some time Fortune magazine, a well known American
business publication, has issued a list of the most admired
companies in the U.S., a list that is widely read every year and
eagerly anticipated. In 2005, the top 10 most admired companies in
the U.S., included Dell, General Electric, Starbucks, Wal-Mart,
Southwest Airlines, FedEx, Berkshire Hathaway, Microsoft, Johnson
and Johnson, and Proctor and Gamble. I note that most of these
companies either have operations in India or, as we recently have
learned about Wal-Mart, plan to have operation here.
In addition to being the most admired, if you go to their
websites, you will see that these companies have something in common
that immediately jumps out. They all have a section, a very visible
section on their pages that covers social or environmental issues.
If you go, for example, to Starbucks, they still have a section
where they're trying to raise funds for relief efforts in southeast
Asia. If you go to Southwest Airlines' web page, you'll find
Operation Hope. If you go to Microsoft, you'll have information
about their engagement with educational institutions. And if you
look at Johnson and Johnson's page, you'll see a link to what they
call their "credo," with some of the actions they intend to take
based on those principles.
Why is this, one might ask? Why are some of the most admired
companies in the world and some of the biggest names in the business
taking into consideration and giving so much attention to social and
environmental issues?
How
economists felt during 70s?
If you go back to the '70s and '80s, some economists were saying
that it actually was a waste of time, a waste of money and waste of
resources, and in fact, it could be irresponsible to give such
attention. The argument was that businesses exist to deliver
products to clients and to make money for shareholders. And that if
a company utilizes its shareholder resources to do something else
other than its business, perhaps it’s not being a responsible
manager. That was the dominant view at that time.
Why has changed? Is it a fad that will go away, or is this
something more profound?
There are several things are happening. One is, virtually every
non-government organization in the world and every aid organization
in the world and every international institution has made it very
clear that some of the biggest problems, the biggest issues in the
world cannot be tackled without participation from the private
sector. Most of the solutions are in the hands of the private
sector. Now that doesn't explain that companies would actually take
the lead. Just because NGOs expect businesses to do something, that
doesn't meant that businesses are going to go ahead and do it.
The
present trend
So what else is happening? One thing is that is customers have
more power than ever before. The Internet has empowered customers
to self-organize, to find one another, to boycott products, to put
pressure on suppliers when they're not receiving the products they
want, or when the companies that they're buying from actually behave
in ways that they don't agree with.
Something else that has happened is that investors are
putting pressure, increasing pressure on companies. The whole
movement about socially responsible investment and shareholder
activism is not large. When one looks at the numbers, the
percentage of money that is invested through socially responsible
funds is still relatively small, but the rates of growth are huge.
All the big pension funds are now under big pressure from their
stakeholders to have strong principles of governance and the like.
So, that's also putting some pressure.
But all that is not enough. Although there are pressures that
may incline some companies to do be socially responsible, a major
force behind all this are the ideas of growing and developing global
brands and global reputation.
In the last few years, we've seen how some of the strongest
brands in the world like Arthur Andersen, the number one accounting
and tax firm in the world, virtually vanished within months because
of a mishap that happened in one of their practices with one client
in the United States. Building a global brand brings with it
vulnerabilities. If you have a global brand, something wrong that
happens in one part of the world can upset your operations all over
the world.
Global
brands have become sensitive to social role
The companies that are really battling in the global field, that
are building global brands, that are trying to take their products
to all over the world, have become extremely sensitive to their
social role. And now, even in management schools and research,
there is talk about social strategy. The leading companies not only
have a business strategy -- how they're going to position their
product, how they're going to sell it; they also have a social
strategy because brands are built not only around good quality of
the product; brands also are built around emotions, around values
that people ascribe to those products. When you see, for example,
Starbucks offering coffee from free trade suppliers or offering
coffee from sustainable development coffee fields, that is not just
a nice added thing to their operation, it's becoming a core part of
what they do.
I don’t wish to overstate the case. One of thing we can be sure
of is that companies are not charities. Companies do not exist to
take the shareholders' money and turn it over to charities and good
causes. Companies do things that are actually good business for
them.
CSR
should relate to core business
For companies to find good business in socially responsible
actions, several conditions need to be met. One of these conditions
is that whatever those companies do in the social realm should be
related to the core business. It's not just throwing money at good
causes. It's actually utilizing what the companies are good at.
It’s Microsoft providing free software to schools, or a food
company utilizing sustainable agricultural techniques, or is a
supply company or a transportation company applying their logistics
to take food to those who need it -- it's really something that
takes advantage of the core skills and competencies of the
companies.
The second condition for this type of social behavior to make
sense is that whatever the company does should help to create a more
competitive environment. In other words, it's an action that is
going to allow the company in the future to do better business. So
it makes sense that you use some resources from your shareholders to
do that because it's going to create a more competitive, a better
environment for you to do your business.
Here is an example: The next billion personal computers are not
going to be sold in the U.S. and Western Europe. The next billion
personal computers will be sold in the developing world. That's
where the growth is. That's where the volume is. And if companies
actually become active players in helping the development of those
communities, helping to create a big middle class, they're the first
ones who are going to profit from them.
The third condition that companies have to take into
consideration when they engage in the social realm is that it isn’t
purely a management directive; it isn’t only tip down. It's got to
be something that is central to the company, that engages the
organization, that permeates through the organization, and really
makes employees feel part of it. That's the only way in which
really makes the engagement a believable proposition for a company.
In summary: corporate social responsibility is not a fad. There
are structural reasons why corporate social responsibility is
happening and is happening so widely. I find it encouraging to
think that corporate social responsibility is sustainable because
not only is it good for the well-being of people and societies
around the world, but it also makes good business sense.
Role of Government
Finally, as I represent a government, a few
words about the role government can play. Government plays a huge
role by setting the rules, and by dictating what is acceptable and
not acceptable. Bribery is one example of something that is rampant
in some places and which has enormous negative consequences. I’m
pleased to say that the U.S. has an anti-corrupt practices law that
makes it illegal for American companies to engage in bribery. I
cannot guarantee you that every American company follows this law,
but the vast majority do, and the few that don’t risk punishment.
Tax policy also can create incentives for
corporate social responsibility.
Government also can encourage corporate social responsibility. My
Department – the American equivalent of your Ministry of External
Affairs, presents annual awards to American companies for
outstanding corporate social responsibility. I’m pleased to be able
to mention that last year, one of the finalists in the competition
was Ford Motors India, based here in Chennai, for its support for
tsunami relief and its engagement with community organizations.
In closing, I again extend my best wishes to
Stella Maris College on the establishment of a post-graduate
Department of Public Relations. I am sure it will be a great
success. And I congratulate all involved on organizing this
important seminar.
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