Top 10 Corporate Responsibility Stories of 2010

Mermaids protesting the BP oil spill. Photo by Johnathaneric.

 It's been a big year for corporate responsiblity. A huge oil spill, continued ructions in the financial sector, landmark decisions in the courts, and a new dawn for online companies around human rights issues. It is never easy to pick the most important stories of the year. Some get huge coverage simply because they feature big brand companies. Some hardly even scratch the public consciousness despite having major implications. In other cases, it can be difficult to determine accurately what their long-run significance will be.

But here in the Crane and Matten control room, we've put our heads together to come up with what we regards as the top 10 corporate responsibility stories of the year. These are the events that we think will have the most lasting impact on the field. But it was a hard choice - narrowly missing the cut were the 10 year anniversary of the Global Compact, the FIFA World Cup corruption scandal, Unilever's "Sustainable Living" plan, Apple's labour violations, Wal-Mart's latest announcements on sustainable agriculture, Jerome Kerviel's massive fine, and American Apparel's rollercoaster ride through 2010, among others.

But, hey, not everyone can be a "winner". So if you think we're worng, or if we've missed off your biggest story of the year, do let us know. And while you're at it, take a moment to complete our poll on the right to help us find the top stories according to our readers.Here, though, is our top 10.

1. BP's oil spill in the Gulf of Mexico
Deepwater Horizon was one of the world's largest ever oil spills, and understandably this story absolutely dominated 2010. Not only did it put a final nail in the coffin for BP's once vaunted sustainability reputation, but it heralded a major rethink about the viability of deep sea drilling. BP didn't cover itself in glory by failing to come up with a realistic remedy until far too late - and ended up picking up most of the tab, thereby putting paid to the usual assumption that pollution is simply an 'externality' of business. Really, this was the mother of all corporate responsibility crises in 2010.  

2. Google's battle for free speech
Google's withdrawal from China at the beginning of the year was a landmark decision in the battle for free speech on the web. A real clash of titans, no other story this year illustrated better the clash between government and big business around human rights issues. But Google's subsequent legal problems in Italy, where senior executives were convicted of privacy violations, demonstrated just how complicated this battle is going to be. 

3. WikiLeaks publication of the embassy cables
Who knows where this one will end up, or just what its long term significance will be for corporate responsibility? But it's hard to deny its significance as a major turning point in the fight for greater government transparency, and the contested role of the media and NGOs in bringing confidential information into the public realm. Heralded by some as the first great cyber war, the WikiLeaks maelstrom inevitably catapaulted online companies into the fray with predictably unpredictable results.   

4. Citizens United decision
The only court case to make it into the Top 10,  but according to President Obama the 5-4 decision by the US Supreme Court in Citizen's United vs Federal Election Committee "reversed a century of law" and "opened the floodgates" for corporations to play an ever greater role in US politics. According to the ruling, companies and other special interests can now spend as much as they like on influencing the outcome of elections. And why? Because despite their vast resources, companies should have rights to free speech on political matters the same as any other citizen. An historic ruling.

5. Toyota’s product safety recall
This case grabbed a lot of headlines in 2010, mostly because of the very scale of the recall and Toyota's previously unblemished safety reputation. This was a huge embarrasment for the Japanese car maker and showed up serious problems in the firm's management culture.

6. Bank bonuses 
Bank bonuses stayed in the headlines during 2010. Despite continued economic problems, huge public bailouts in Greece and Ireland, persistent unemployment, and widespread austerity measures, some banks managed to award bigger bonuses in 2010 than ever before.  No surprise that the public stayed angry with a bonus culture apparently so far removed from their day-to-day problems. But European regulators finally seemed to get the message with new guidelines released at the end of the year that looked set to dramatically change the bonus landscape across the entire continent.

Butcher in Haiti with food vouchers used to stimulate trade. Photo by DFID

7. Corporate response to the Haiti earthquake 
Few stories better illustrated the precarious role of business in international development than the corporate response to the Haiti earthquake back in January. The arrival of cruise ships full of vacationers represented for many the unacceptable face of corporate insensitivity and amoral consumerism. Yet, few denied that business had to be an essential ingredient in getting the stricken country back on its feet again. 

8. Greenpeace campaign against Sinar Mas palm oil 
Greenpeace won Ethical Corporation's campaigner of the year in 2010 for its work in combating deforestation. This was exemplified in the NGO's campaign against Indonesian palm oil producer Sinar Mas which saw them force Unilever, Nestle and others to cease buying from the company during the year. Greenpeace's spoof ad on YouTube for the Nestle chocolate bar Kit Kat went viral demonstrating how campaigners were effectively harnessing social media for anti-corporate protest. 

9. HP's termination of CEO Mark Hurd
Hewlett Packard has had its ethical ups and downs over the years, but few expected the company to follow through quite so severely when CEO Mark Hurd was found to have made fraudulent expense claims to cover up a relationship with a female contractor. Rejecting Hurd's offer to pay back the $20,000 he'd received for the claims, the highly regarded leader was ousted by the board for failing to live up to the company's code of conduct. This was an impressive commitment to ethical rules by anyone's standards. However, it angered many who thought the company was shooting itself in the foot. A tumbling stock price and Hurd's instatement at competitior Oracle showed how much pain there could be in doing the right thing.

10. India's 2G licence scandal
OK, so actually this happened in 2008, but it was only in the closing months of 2010 that the full extent of the 2G telecom spectrum licences scandal began to be revealed. In what some have called India's biggest scandal since independence, Telecommunications Minister Andimuthu Raja was forced to resign over allegations that he lost the Indian Government some $38 billion in revenues using an opaque permit system that was riven with corruption. Leaked tapes of secret phone calls with corporate lobbyists have poured oil on the fire. This could yet become India's Enron moment.

So that's our Top 10 for 2010. Doesn't make for particularly edifying reading, but it hasn't been all bad. In amongst the scandals and corruption there have been some genuine cases of ethical leadership in 2010, where companies like Google and HP have had to make some hard ethical choices that have cost them dear. No ne said corporate responsibility was easy.

Toyota – or: Why acceleration is not always a good thing

Seeing executives of car companies testifying before congress is not too much of a novel picture. It has happened before. But the context of today’s and yesterday’s appearance of Toyota’s top brass in Washington provides a lot of food for thought.

We have followed the news for a while and it took things to unfold to convince us that this is actually a very interesting issue not just for business, but yes, for business ethics. It is indeed – and even more so, as one of the seminal cases for the business ethics literature has been a rather similar problem. Remember the Ford Pinto, in the 1970s, where Ford had installed a gas tank which exploded at the slightest collisions and allegedly killed more than 500 people? That case though was clear cut in some ways: Ford decided not to deal with this problem for six years because the cost difference between fixing the car versus compensating the victims amounted to $7.04 per car – too much to ask for a company whose only goal at the time was maximizing returns for shareholders.

Superficially, Toyota has ignored the problem with the gas pedals of their cars for a couple of years in the same way. But it is inspiring to ponder the reasons. We would suggest that putting the usual lens of Anglo-American capitalism on the issue is not very helpful. Though many do exactly this: The Economist, applying its mantra ‘Ketchup’ of neo-liberal economics on the issue – which btw. is complimentary with any news item they report on, - just see the scandal as a failure of Japanese corporate governance. As if the Anglo-American model of corporate governance has given us those much more efficient and healthy car companies, such as Chrysler, General Motors, Jaguar, Rover, and… - you get the picture.

We would argue that the Toyota case provides some more subtle and deeper lessons. First, there is the fact that all these deficient gas pedals were manufactured by suppliers Toyota worked with only recently. Following their ambitious goal of gaining 15% of global market share in the car market, the company had to engage with suppliers all over the world beyond their traditional network of ‘Keiretsu’ suppliers in Japan. This poses risks and needs more attention in order to integrate them into the high quality processes the company is known for. So, ethical issues are just a result of bad management. Not because evil people devise evil plots.

At this stage, though, you might ask questions regarding why Toyota did not deal with the problem earlier. Fair point. And again, its not that evil, profit crazed nerds in suits did not care about people dying. A first point one of the executives made in the Congress hearing was that while the problem was know, it was just not communicated between the different units of Toyota globally. While the problem was known in Europe in 2008, it was not ‘shared’ properly with the US unit. This points to the traditional organizational pattern of Japanese MNCs: to keep all core competencies at home and deal with the subsidiaries in the different countries just as delivery units of what was decided in the headquarters. Of course, this does not work for a global actor like Toyota, who needs to take into account that local differences and problems need to feed back into the global organization. So what results in a huge ethical issue is just the result of bad management: not adapting to the global growth of the organization.

Finally, there is another point worth considering. Brought up, we concede in all fairness, by The Economist. Japan is a rather hierarchical culture where criticism of superiors is not socially accepted. In such a culture, raising issues of insufficient vetting of suppliers, criticizing strategic decisions etc. is just not happening. No wonder then that an upfront confrontation of the issues took so much time within the Toyota organization. But again, this is more a cultural issue than a result of evil profit-maximizing apparatchiks.

What it boils down to, in our view, then is that issues of business ethics are not just an add-on, the icing on the cake – but they are rather deeply embedded in core business strategy and an integral part of good management. After all, think of the dosh Toyota has to put up for fixing this issue. Not to talk about the dent on the image of a company whose motto is ‘moving forward’.

Photo reproduced by the Creative Commons License.