Humanizing Corporate Governance

Lawmakers in a trio of Southern states - Georgia, Mississippi and North Carolina - recently passed so-called religious freedom bills that, essentially, let individuals and businesses deny services or jobs based on sexual orientation or gender identity. Mississippi Gov. Phil Bryant signed the bill and North Carolina's governor has indicated he will, too. But Georgia Gov. Nathan Deal vetoed the legislation.

What's most noteworthy is that some major corporations with operations in those states have lobbied actively and taken action to get them to reconsider and rescind the laws. In North Carolina, PayPal canceled plans to establish an operations center in Charlotte that would have created more than 400 jobs. Other big businesses - American Airlines, Bank of America, Dow Chemical, Wells Fargo and major sports leagues - are threatening repercussions as well. Georgia's governor used his veto power after Disney and the NFL lobbied heavily against the legislation.

Such activism by corporations and many CEOs on thorny public policy issues isn't new, of course. They have taken public stands on several societal issues well outside their core operations. These include apartheid and other matters of race relations as well as gender equality and same-sex marriage.

Increasingly, Boards Can't Stay Neutral

Still, this pivot by boards of directors away from command-and-control postures to embrace modern operating realities and social change is fostering behavior constructs which value connectivity and engagement with their employees, their customers and the communities in which they work and live.

It's especially true with major brands with large employee and/or customer bases. Management may be prodding boards to accept such actions, but it's the directors themselves who are grasping why it's essential in today's global world. They recognize that to survive competitively, their companies must be learning and improving constantly.

So directors in growing numbers have joined the 'listening loop' to better understand why it pays dividends to take a stance on often-controversial societal issues. Out-of-touch boards are bridging the gap with their CEOs and senior management because they comprehend that their silence isn't sustainable any longer and can destroy growth and shareholder value.

The 2016 Edelman Trust Barometer captures this shift. The respected annual global survey shows that the general public's trust in business rose to a post-recession high this year, to 53 percent from 47 percent in 2012. In the U.S., the trust level remained at 51 percent for the second year in the row.

Another finding is even more illustrative. Of the four institutions tracked by the survey, which also includes government, media and NGOs, the public trusts business the most to keep pace with changing times. Sixty-one percent of global respondents trust business in this regard vs. just 41 percent for government, the lowest-ranking institution.

Consumers Want Business to Lead on Social Issues

But, perhaps this is the most revealing takeaway that supports why boards of directors are weighing in on such issues as gender equality. Eighty percent of the 33,000-plus global respondents, up from 74 percent the year before, agree that business must lead to improve economic and social conditions in the community in which they operate.

Other trust data underscores why the vast majority of the public feel this way. Asked to judge the reasons why trust in business has improved, 45 percent said it has increased because business "contributes to the greater good." And for those who said faith in business has declined, half agreed it's because business "fails to contribute to the greater good."

What are we to conclude? It seems clear. Companies - the largest ones in particular that strive to personalize their bond with consumers - and their boards of directors don't gain anymore by staying neutral on sensitive societal issues, even if they offend some customers. Look for more of them, in increasing numbers, to take what some will consider controversial stances; and in the process.

And then look for the ripple effect, as smaller companies and then small businesses copy the Goliaths and add their voice to the mix. As for where to look, watch what happens in North Carolina and Mississippi.

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