Leadership and corporate social responsibility (CSR) are two separate issues that are increasingly talked about, though rarely in the same sentence. But you can't have one without the other. And both are regrettably in short supply.
Leadership, especially the CEO kind, is about five things:
• Setting and communicating a vision that takes into account and balances the short-term, the bigger picture, and the long view
• Making tough decisions in the short-term to protect and nourish the long-term
• Motivating and inspiring the troops to do the above
• Treating all stakeholders well (including employees)
• Creating an ethical culture to do the right thing
Each item on the list also applies to CSR, which is focused on making the world -- and your company -- better. And all help drive shareholder value.
Balancing Short- and Long-term. Perhaps one of the most important traits of a leader is the inclination to make short-term sacrifices for the long-term. CSR is largely about sustainability on many fronts and it is inherently about the long view. In the private sector, there has been a growing emphasis on the short-term over the long-term. Look no further than national research and development (R&D) spending which was approximately 3 percent of GDP in the sixties and is now trending to 2.8 percent. In essence, corporate chiefs can boost their short-term results (and their own paychecks) by reducing R&D spending. Exhibit one is Mark Hurd who recently left Hewlett Packard. Hurd gutted R&D on the road to beating his targets. But the piper always gets paid and the product pipeline is now in wretched shape because the long-term was sacrificed for the short-term. Moreover, Hurd personally made boatloads of money as he hit his targets, so the board's compensation committee is also complicit.
Nourishing the Long-term. Conversely, Whole Foods announced that they will no longer buy fish, such as cod, in the northeast that are from depleting stocks. The northeast fishing community is up in arms but Whole Foods is essentially saying that they care about the long-term as much as the short-term. If they no longer stock cod then the probability of that species being around in 10 years (so they can return to selling it) goes up. The short-term was traded off for the long-term. But this type of good corporate citizenship is an exception to the rule.
Treating All Stakeholders Well. Employees create shareholder value, yet skyrocketing wages for the folks at the very top have created an increasing disconnect with the overall team. For example, the Boston Globe has discovered that the CEO of Liberty Mutual has been paid $50 million a year for the last several years while the regular employees are lucky if they can scratch out a cost of living increase. One executive told me that the biggest hit beyond PR is that employees now feel that management is just out for themselves. This is why movements like Occupy Wall Street get traction in such a short period of time.
Creating an Ethical Culture. The United States is in the midst of a giant crisis of leadership, and it is everywhere. The long-term is losing to the short-term over and over. It is in both the corporate boardroom and in the public square. CSR is the way business practices are eventually going to evolve or there isn't going to be much of an economy at all. CSR must be infused into everything and no longer be its own standalone discipline.
We desperately need corporate leaders to show the kind of leadership that CSR embodies. Not only because it confers all sorts of practical benefits, but because it's the right thing to do.