SIX

Stories about Responsibility

I stood up to be counted and they told me to take a number.

—Anonymous

A CEO’s Letter to the Board—long overdue

Dear Directors

I am writing to you with a proposal that may seem radical but is in fact conservative. That is because my primary responsibility as chief executive officer of this company is to conserve it as a healthy enterprise. You are now paying me so much that I can no longer manage this company as I should. I hereby request that you cut my salary substantially and eliminate all of my bonuses.

We have talked a great deal about teamwork in this company—that our people are all in it together. So why I am singled out by virtue of my compensation? Bonuses are the worst part of it. Like everyone else in this company, I am being paid to do my job properly. Why should I be paid extra to do a good job? If I believe in this company, I’ll buy the stock. If I don’t, I need to quit. The misguided assumption behind these bonuses is that I, as CEO, do it all.

Now I am getting hate mail from employees about my pay. This is certainly disconcerting, but more troublesome is that I have no reasonable reply to them, other than to claim that I must be several hundred times more important than they are. This is not leadership. It is no way to run a company.

We have had a good deal of discussion at our board meetings about the long-term future of this company. Why, then, am I being rewarded for short-term gains in its stock price? You all know perfectly well that I can use all kinds of gimmicks to drive up that price, for the sake of my bonuses, while undermining a sustainable future.

Ever since we started this Shareholder Value nonsense, our culture has gone to hell. The frontline employees tell me that it gets in the way of serving our customers: they are forced to see dollar signs out there, not people. Consequently, many of them don’t give a damn anymore. As one employee put it to me recently: “With all this counting, we don’t count anymore. So why should we care?”

I have always prided myself on being a risk-taker; that is one reason why you put me in this job. So how come I cash in big when the stock price goes up but pay nothing back when it goes down? Some risk-taker! You know what? I am tired of being a hypocrite.

I know the excuse we have been using all along: that I am being compensated to keep up with the CEOs of other companies. This makes me a follower, not a leader. Enough of this complicity in behavior that we all know to be outrageous. My salary should not be some kind of external trophy but an internal signal about the culture we are trying to build.

So, please, help me concentrate on managing this company as it should be managed.

Sincerely

Your CEO

“Downsizing” as Twenty-First-Century Bloodletting

Get out of my way!

Until two centuries ago, bloodletting was a common treatment for all sorts of illnesses. Physicians who didn’t know what else to do drew blood, sometimes killing their patients. We know better now, at least in medicine.

But not in management. Bloodletting is here with a vengeance. Corporate executives who don’t know what else to do fire great numbers of workers, thereby killing cultures in their organizations and societies. This goes by the polite name of downsizing, despite the havoc it inflicts on people’s lives. Does the fact that everybody is doing it make it okay? Is that leadership?

Downsizing is popular because it’s easy. Just sit atop a hierarchy and deem some number that ends in three zeros—say, 5,000. Leave the messy part, and the guilt, to the middle and bottom managers who have to convert these zeros into damaged lives. Jack and Jill did nothing wrong, other than to work for the wrong company. But out the door they have to go, carrying the angst for themselves and their families while the company carries not so merrily along.

As for those Human Resources left behind, they have to work that much harder to make up for their departed colleagues, probably with lower wages at that. At least until they burn out. Guess what happens to pride in their work, commitment to the company, and respect for its customers. But who are they to complain? They should be thankful to have a job in such an economy, even if it is being brought to its knees by these very practices. So they lie low—after all, they could be next. Can you think of a better way to kill an enterprising economy?

Sure firms that are in deep trouble have to save themselves, even if that means eliminating some jobs to preserve others. But most downsizing is not about that at all. It’s about saving the bonuses of affluent executives. The scent of a company missing its numbers brings out the wolves of Wall Street, baying at the door for the bones of workers. Throwing them some brings down costs so that profits go back up—at least long enough for those in the know to cash in their stock and run.

How can thousands of workers suddenly become redundant? Was no one aware of all that slack just a few weeks earlier? Who was managing the place, anyway? Probably the same people who are now deeming the downsizing. This alone is testimonial to their incompetence: they are masking the problem they created or ignored—but not solving it. Thus it’s the downsizers who should be downsized, the executioners who should be executed.

A Little Story within This Story

Some years ago the editor of a division of a large publishing conglomerate was told that he, like his colleagues in the other divisions, had to cut 10 percent of his staff. He protested, pointing out that his division was doing well, had no redundancies, and indeed had been promised more staff. There was no slack here; he would have to cut bone.

So he was taken before the boss of all bosses (a famous publisher, who later went more literally overboard). This great man told him personally that if he didn’t fire that 10 percent, he would be fired himself. He refused and was fired—punished for managing a tight ship, so to speak.

That editor went on to create a new company, to be run as he thought a publishing house should be run. It has become a bit of a legend in this business: its people believe in books beyond sales, causes beyond Shareholder Value, authors’ ideas beyond their reputations. The place is run as a community of engaged human beings, so people stay and are enthusiastic. When the company decided to raise some money, it issued what could be called an IAO—an initial author offering (for other stakeholders as well). All the authors were given the chance to buy shares—and 60 of us did! No wolves of Wall Street bay at this door. In the very difficult field of publishing, Berrett-Koehler continues to do well indeed. It is the publisher of this book—and of my past five books, as well.

Productive and Destructive Productivity

I am a Canadian who, years ago, got tired of listening to economists tell us how unproductive our economy was. We had to listen to this while our economy was doing exceptionally well, thank you, far better than the exceptionally productive American economy to the south. Can there be something unproductive about productivity?

Yes, there can. There are two kinds of productivity: one productive, the other destructive. The problem is that economists can’t tell the difference.

Economists measure the ratio of production outputs to labor inputs, and when that goes up they declare an increase in productivity. The assumption is that workers have been better trained, or superior machinery has been purchased, or improved practices have been introduced. This may be the case for a certain amount of productivity but not all, not by a long shot. The unproductive side of productivity has been on the rise.

While economists study statistics in the air, companies engage in practices on the ground. Statistics can be dangerous when their users don’t understand where they came from. Consider this not-quite-hypothetical example.

You are the CEO of a manufacturing company, determined to make it the most productive one around. Here’s what to do: fire everybody in the factory and ship customer orders from stock. Sales will continue while labor costs drop. Ask any economist: that’s productive! It’s great for the company too, until, of course, it runs out of stock.

There are less blatant ways to realize this kind of productivity. Cut research. Reduce maintenance. Diminish quality. All save money immediately, even if they trash the company eventually. Best of all, these fixes are quick and easy, not like training workers, improving processes, and developing products.

Add up all these schemes by so many companies and you have an economy that is running out of stock—and a society that is running out of time.

The Scandal That Is a Syndrome

“What was Volkswagen thinking?” The question came from an editor of a Canadian newspaper who asked me to write a commentary on the Volkswagen scandal, about the emission overrides for its diesel engines to circumvent government regulations. The question made a big assumption: that the Volkswagen people were thinking—about anything beyond their own greed. About the future of Volkswagen. About decency. About the planet.

Okay, so when you heard this you vowed never to buy another Volkswagen. A Chevrolet perhaps? You had to watch out for the keys in the ignition: they killed some people. Or how about a Toyota? Were you prepared to duck as a defective airbag came your way?

In Europe, the United States, and most everywhere else, something has been going on: a level of corruption that transcends the automobile industry. How about the banking scandals in the United States and the European Union—for example, a Goldman Sachs that allegedly manipulated the market for recycled aluminum to siphon off $5 billion by moving ingot uselessly from one warehouse to another. The company claimed to have broken no law. That is precisely the problem.⁶¹

An airline dragged a passenger off a plane because he refused to give up his reserved seat. Another canceled several flights with the claim that the runways couldn’t receive their planes, only to admit later that they cancelled the flights “for business reasons.” Is this what “business” is about?

Do you see a pattern?

It’s not just the criminality of some corporations and judicial systems more inclined to incarcerate criminals who wear blue collars rather than white; it’s about the legal corruption of so much corporate activity these days. And not only corporations. There are university professors in cahoots with pharmaceutical companies that charge obscene prices for life-and-death products. And economists who refuse to see past the markets that support this scandal. Some markets! The pharmaceutical companies are exploiting monopoly positions, called patents, that are granted by governments that fail to regulate prices responsibly.

Why don’t they? In the United States, the Supreme Court has legalized bribery. Companies can now donate to election campaigns to their hearts’ content, in return for favors worth billions. Hence people die for want of medicines that could be affordable as well as adequately profitable while the investors walk off with massive profits. What kind of a society tolerates this? The one you probably live in.

Do you see the pattern now? It’s not a scandal; it’s a syndrome. Expect it to get worse until we do something about it.⁶²

Please Welcome CSR 2.0

Giving CSR a little push.

Why do we focus on the conditions of our problems instead of addressing their root causes? Medicine, for example, gives far greater attention to treating diseases than to preventing them in the first place. Jonas Salk provided a telling exception: instead of treating polio, he created a vaccine to eradicate it.

0.0, 1.0, 2.0

Much the same can be said about corporate social responsibility, or CSR. A corporation is considered responsible when it attends to the conditions of a social or environmental problem. But imagine how much more responsible it would be to address the cause of that problem? Finding a better way to recycle waste is good; reducing the generation of that waste is better. Not good, however, is greenwashing: pretending to be environmentally friendly. It takes us toward CSI, namely corporate social irresponsibility.

We are inundated with CSI these days: for example, banks that register customers for accounts they never requested, alongside bribery in the form of massive private funding of public election campaigns.

Let’s label (a) the irresponsible activities as CSI 0.0, (b) the responsible attention to the conditions of a problem as CSR 1.0, and (c) the substantial addressing of the cause of such problems as CSR 2.0. We should appreciate CSR 1.0 for its damage control but welcome CSR 2.0 for helping reverse the damage. We need as much serious corporate social responsibility as we can get.

Imbalance as the Root Cause

I see imbalance in society as the root cause of many of our major problems, including global warming and income disparities. In my book Rebalancing Society, I trace the tipping point to 1989, when the Berlin Wall fell.⁶³

Western pundits at the time declared that capitalism had triumphed, over communism. They were mistaken. Balance had triumphed, over imbalance. A healthy society balances the collective power of governments in the public sector with the commercial interests of businesses in the private sector and the communal concerns of citizens in the plural sector (civil society). The communist regimes of Eastern Europe were severely out of balance on the side of their public sectors, whereas the democratic countries of the West were then better balanced across the three sectors.

But the mistaken belief that capitalism triumphed in 1989 has been tilting many democratic countries out of balance ever since, in favor of their private sectors.

The corporate world has hardly been an innocent bystander in this. Beyond that lobbying in the United States and CSI, the promotion of fossil fuels has helped intensify global warming, and the stock markets’ relentless demand for ever MORE has exacerbated excessive consumption—all while the incomes of many workers have been eroded alongside their protections. Too often Shareholder Value has become the only value.

The Business Fix?

A solution popular among businesspeople is to fix capitalism. Hence we see all kinds of proposals for what can be called “adjectival capitalism”: for example, Sustainable Capitalism, Conscious Capitalism, Inclusive Capitalism, and Democratic Capitalism (capitalism is the noun, not democracy!). No doubt “doing well by doing good” can be beneficial, for example by building better windmills. The trouble is that too many companies are now doing well by doing bad or doing nothing. There is no win-win wonderland out there.

Capitalism certainly needs some fixing, but it is society that needs fixing: to restore balance by returning capitalism to its rightful place, namely the marketplace, and out of the public space.

Responsible Responses

What, then, can responsible businesses do? Beside CSR 2.0, they can challenge the indecencies of some other businesses, not least by supporting legislation to correct their indecencies. And the private sector needs to collaborate further with the other sectors of society, as equal partners.

So, please, enough of business as usual, especially in the form of CSI 0.0. Beyond CSR 1.0, it is time for CSR 2.0—time for all we citizens and neighbors, in business and out, to become more actively responsible.