GE, IBM and Ford still top performers in sustainability communications using social media

We're pleased to feature a guest blog today from Matthew Yeomans, a leading expert on social media in the area of sustainability and CSR. We asked him to tell us a little more about the Social Media Sustainability Index, an impressive report that he recently authored on the state of social media sustainability communication among major international companies. Read what he has to say, and then download the free report in full over at the SMI website. It's full of practical tips on how to communicate effectively about sustainability using social media - and of course there's a top 100 list to pore over at your leisure.

"One year ago, we published the inaugural Social Media Sustainability Index, a trawl through 287 major companies in North America and Europe to identify who was using social media tools and thinking to communicate sustainability. At the time we found just 60 companies that were devoting any real time or dedicated resources to that mission.

Fast-forward to the end of 2011 and a new landscape of social media sustainability has emerged. In researching our new report, The SMI-Wizness Social Media Sustainability Index, we identified at least 250 major corporates that are engaged in some form of social media sustainability comms and more than 100 have a blog, YouTube, Facebook or Twitter channel dedicated to talking about sustainability. Those dedicated 100 form the basis of our new Index.

Even as the volume of social media sustainability content has increased, the standout leaders of our Index – GE, IBM, Ford, PepsiCo, BBVA and Allianz – are the same as last year. This we believe is a testament to good social media practice in that none of these leaders consider social media sustainability through the prism of a campaign mentality. Indeed the top companies in our Index all have built upon the editorial platforms and community engagement they had established in 2010.

The social media sustainability leaders also demonstrate that companies who are committed to making their business more sustainable – be it through improved energy efficiency, lowering emissions, policing their supply chains, pioneering ethical sourcing and promoting equitable working environments – have a distinct advantage in social media communications. That’s because they have a good and believable story to tell, and good storytelling remains the most valuable currency in social media. Here are some of the ways the smartest companies are using social media, not just to communicate their sustainability stance, but also to involve the public in building a better world:

• Homage to compelling reportage: Hiring experienced filmmakers, writers and reporters to tell a complicated story well like IBM and Allianz
• Crowdsourcing: Tapping the public for big innovative ideas like General Electric
• Crowdfunding: Enabling collaborative fundraising and donations like BBVA and Bendigo and Adelaide Bank
• Bold alliances: Teaming with established NGOs, charities and conserva- tion watchdogs to support common goals and raise awareness like Levi’s
• Leveraging community: Tasking your massive online following to build a better future through campaigns, contests like PepsiCo
• Platforms not campaigns: Building an ongoing social media sustain- ability communications vehicle like Danone
• Making technology accessible and digestible: Creating content that shows how sustainability technology and initiatives matter to the general public like Philips and Sony
• The wisdom of your crowd: Collaborating with fans to break taboos and challenge the status quo like Kimberly-Clark

These stand out leaders in this year’s Social Media Sustainability Index all have a few things in common. They fully embrace their newfound power to publish and provide useful, regular, transparent and creative content for their social media communities.

It just so happens that we think those qualities are exactly what companies need if they are to succeed in social media communications. And so they form the bedrock of how we have ranked and rated the 100 companies that make the Index."

You can download the entire Index at: http://socialmediainfluence.com/SMI-report/

This post was first published on SMI. Graphic copyright SMI Wiziness

Down-under, are things upside down?

Last week we talked about executive pay and bonuses. If you read or watch the news today in Australia you will come across an entirely different story though. In a time when bankers have to be told off by governments to stuff their pockets, CEOs get stripped of royal titles for their reckless actions or presidential hopefuls turn out to be ruthless maximizers of personal wealth – this story sounds like a fairytale.

Ken Grenda, the owner of a bus operating and manufacturing company in Melbourne has given all his staff a AUD 15 million bonus (US$ 15.3m), averaging $8,500 per employee with some receiving as much as $30,000! The background of the payout is a sale of the family-owned company which netted Ken some $400m. His rationale:

"A business is only as good as its people, and our people are fantastic. This is to recognise that. We have had people here who are second generation, and one fellow in the same job for 52 years. We have grown from just four bus routes ... in 1945 to operating 1300 buses in Melbourne, Adelaide and Perth. You only get there if you have good people."

Now that’s exceptional. And good on Ken and his family – sure enough. The facebook page of the event is full of praise, amazement and disbelief. It is indeed a gesture which is rare, if not unprecedented in today’s economic climate.

It makes you think though. Ken’s rationale, above, is perfectly sound. Especially in a service company, the personnel at the customer interface, such as bus drivers, can make all the difference. In a time, when bonuses have become a common instrument for people at the top, there is no good reason to exclude workers from the same thinking.

Recently, The Guardian has published a piece on the intellectual heritage of the current situation of excessive bonuses. It is really hard to understand why Michael Jensen and his colleagues, when suggesting share-price related remunerations for top management, never thought to include the lower ranks.

The real question here though seems to be why those performance related elements have to be just this discretionary, pseudo-feudal benevolence of a rich guy. It’s a great gesture of philanthropy, as some bloggers say, but if employees are really so vital to a company’s performance why not make it a right of the employee? After all, $15m of $400m is not all that much. What would be a fair share? And who should decide about that?

As we have commented earlier in this blog, there is a funny bifurcation in the debate on CSR and industrial relations.  From a CSR perspective we should praise the Grenda family; but from an industrial relations perspective we might ask the question why – if what Ken Grenda says above is true – the employees should not have a right to their share in the growth of the company’s value to begin with?

It all points to the role of worker’s representation and collective bargaining. These used to be the classic tools to make sure that workers participate in a company’s overall prosperity. But Australia and New Zealand have seen the highest declines in trade union membership over the last two decades, between roughly 30 to 50%. In that sense then, Australian industrial relations are pretty similar to the rest of the world and Grenda's example more a one-off than something of a rule. Other solutions might be share ownership of employees, which apart from examples such as John Lewis (department stores, UK), Westjet (airline, Canada) or W.L. Gore (Gore-Tex, US) have remained exceptions.

In as much as gestures such as that of Ken Grenda deserve praise and respect as a single incident – they also raise these more general question of how sustainable this approach is. As critics in the Australian blogosphere point out, is this just the final golden handshake, before the new Brazilian owners of Grenda take over and expose workers to an entirely new game to make their new investment pay off?

Picture by Natinaal Archief, reproduced under the Creative Commons License.

Solving the executive pay problem

The idea that executive pay can be "too high" is a touchy issue. While many regular Joes are seeing their jobs disappear, or have been forced to endure cut backs to salary and benefits, CEO pay continues to escalate. Bonuses in the financial sector - never popular among the general public - are largely back to their stratospheric pre-crisis levels, much to the chagrin of the tax payers who funded the bailouts that kept them in business. And there is the growing chasm between those at the top and the bottom of the pay ladder that helped galvanize the Occupy movement. According to one recent study, the gap between CEO and average U.S. worker pay was 325-to-1 in 2010. In 1965, it was 24:1.

The business community, of course, continues to argue that it should have the right to determine its own remuneration levels. The global market for executives, they say, forces them to offer high salaries to attract the top talent. But stagnant performance is prompting many to question the logic of that argument. Why should companies be rewarding top executives for failure when everyone else is tightening belts?

Unsurprisingly, regulators have started talking tough. But progress has been limited. Three years ago President Obama announced that he would cap the salaries of executives of companies in receipt of TARP balilouts, yet by 2010 could do nothing to stop those companies awarding huge bonuses, judged to be "ill advised" by his newly appointed pay czar. A more systematic approach was promised with the Dodd Frank financial regulation, but efforts to rein in pay have had limited success. After much sword rattling from senior British politicians, the announcement by the UK government on January 23rd of a new approach to regulating executive pay claims to be the start of a more concerted response to the problem. The trouble is, it is not a very convincing solution. And perhaps even worse, it is not at all clear what the problem really is that they are trying to solve.

The "problem" with executive pay is that it is in fact a whole set of related problems. And each of these require different types of solutions. Income disparity between high and low earners is one thing, whereas CEOs being rewarded for poor performance is quite another. Setting the pay of bailed out businesses is yet another. And so on.

Regulators have to work out which of these problems they are trying to solve and what the best combination of regulation, encouragement, incentives, and sanctions should be to achieve desired results. Take the problem of pay disparity and those troubling pay ratios.  Blunt regulation probably isn't going to be very helpful here. For a start no one really knows what the "right" ratio should be. A maximum permitted ratio of say 100:1 may be feasible in some industries, less so in others. And as many have pointed out, the unintended effects might be that companies start outsourcing any of the low wage jobs they still have to generate a lower ratio.

Incentives, such as tax breaks for companies reaching certain thresholds, may offer more potential, although it would be technically complicated to administer effectively. A pay-ratio credits type market could also be devised whereby those companies failing to meet their targeted ratio could buy credits from those that over-achieve theirs. Much like in carbon markets, these types of systems help to even out differences across industries.

The "transparency" option trumpeted by the current UK government speaks to a more typical way of government providing the framework for corporate social responsibility initiatives. In creating a mechanism for pay ratios to be compared across companies (such as through mandatory reporting of pay, and support for some type of league tables comparing performance) governments can spur companies to improve their ranking. This avoids any necessity of setting limits or levels of acceptable performance and instead relies on competitive forces to drive improvements. As with all these incentives type approaches, it remains up to companies themselves to determine how to improve their performance, whether through increasing the remuneration of lower paid workers or decreasing that of higher paid executives. It stops regulators getting directly involved in setting pay limits and enables businesses the freedom to determine what works best for them from a competitive point of view.

Of course, there are also other less direct ways to encourage better pay equity. George Monbiot the UK journalist and environmental campaigner has recently put forward a spirited defense of a "maximum wage". Others argue for incentives or regulations to encourage increased employee share ownership among the lower paid. Such initiatives avoid the risk of companies simply "gaming" the pay ratio statistics, but also run into other problems, such as resistance from the business community and difficulties in implementation. Still, there is plenty of scope for interesting and imaginative ideas to help solve this and the other executive pay problems, and the UK in particular seems to be at a crucial tipping point in terms of public support for change.

Where the current UK government's proposals largely fall flat is in their over-emphasis on enhancing shareholder control of executive pay. For a start this does nothing directly about pay equity (which is what the public wants) but rather focuses more on the problem of whether senior executives are being rewarded for poor performance. Whilst giving shareholders more input into executive pay is not a bad thing, first you need to have shareholders that are active participants in the companies they invest in. In our dispersed ownership model of financial capitalism where shares are often held for matters of minutes, hours, and days rather than months and years, we often simply don't have sufficient shareholder engagement for such initiatives to make all that much difference. Similar rules imposed by the Dodd Frank Act in the US have done little to curb executive pay.

Clearly the time is right for action on the manifold problems of executive pay. But for those seeking to tackle them, whether in industry, government, academia, or civil society, it is imperative that there is clarity on which problems are going to be addressed. And dealing with such complex issues is going to require more creativity in terms of solutions, and more joined-up-thinking in terms of the causes of those problems, than we've generally seen so far.

Photo by GDS Infographics. Reproduced under Creative Commons Licence

Business Ethics enters Politics

Finally. The American establishment is talking about the issues the Occupy Wall Street movement attempted to raise since October last year: the ethics of Wall Street investors, private equity firms, the inequality of income distribution, the unfair taxation system. All these issues are now at the core of the Republican primary. Four of the five remaining contestant use those things in an attempt to stop current front runner Mitt Romney. And apparently he looks guilty on all accounts.

Mind you – let’s not get into the ethics of why these issues are brought up. The Republican base, many of them evangelical Christians, just hates Mormons such as Romney. So any argument will do to stop an heretic on his way to the White House. And while Newt Gingrich, Rick Perry and Rick Santorum are pretty much guilty of most of the things they accuse their opponent of - Mitt Romney as the Ex-CEO of Bain Capital, a private equity firm and the richest of the contestants, is just such a clear cut, stereotypical representative of the ‘One Percent’.

There are a number of reasons why this is worth pondering. The first and obvious one is that none of the Republican candidates was a strong supporter of these classic ‘Occupy’ issues. They all more or less dismissed the movement. In the primary election, in which the Republican base selects the next presidential candidate though it appears that obviously the issues have traction even with conservative voters. Whether this is an indirect result of the ‘Occupy’ movement is hard to tell. But it certainly shows that the role of Wall Street, income inequality and a tax code that favors wealthy people resonates with a far wider constituency of Americans. These issues currently, in the Republican primary, appear to be somewhat engineered and disingenuous; but they will become a core issue of the election later this year, when Romney as the most likely winner of the Republican ticket will run against Obama in the fall.

This turn in the debate is also remarkable as for the first time in a presidential race, a serious candidate with a background in business is assessed on his credentials in business ethics. Not that he is the first business person to do so: Romney stands in a long line of the likes of Mike Bloomberg in New York, Silvio Berlusconi in Italy or Sebastián Piñera in Chile - all examples of this kind of career. But it is interesting, that for the first time the ethics of a businessman-turned-politician's wealth creation is the subject of a debate on whether s/he is fit for public office. Obviously, ethical issues in business resonate with the general public more than ever before. This includes the level at which they have paid taxes, which in Romney's case with just 15% over the last years will make it very hard for him to endear him to the '99 per cent'...

This said then, the crucial ‘ethical’ issue seems to be the question whether Romney’s activities at a private equity firm resulted in job losses for the average American. This is however just a small fraction of what really is the ethical issue with private equity firms. In some ways, the rise of the private equity industry in the US (and beyond) was a result of the Sarbanes-Oxley Act, which attempted at addressing limited transparency and accountability which led to the Enron- and other scandals 11 years ago. With Romney in the race, for the first time there seems to be a real public awareness and scrutiny of what has happened in corporate America in the last decade.

While this makes one feel somewhat hopeful with regard to the potential of politics and the public sphere to not just accept the current state of ‘financial crisis’ and all that has gone along with it, it is also important to not forget about the context in which this happens. In some ways, if we judge Romney by his track record as Governor of Massachusetts – from the perspective of a liberal democracy he looks actually not too bad: as much as he denies it now, he pioneered what Obama now wants to implement as a general approach to health care in the United States. At the same time, characters like Rick Santorum are nothing short of suggesting some sort of ‘Judeo-Christian Sharia’ law, dismissing the rights of gays or women’s rights of abortion, just to name a few. The first country in the world that constitutionally separated state and religion now decides on candidates according to their faith. But that’s a whole new topic.

Picture by LWVC, reproduced under the Creative Commons License

Top 10 Corporate Responsibility Stories of 2011

It's that time of year again when we consider the big news events around corporate responsibility during the past twelve months. It has undoubtedly been a significant year, with some stories potentially having a huge impact on future corporate responsibility practice or government policy. Nuclear accidents, protests galore, high level corruption - there's been a lot of ugliness again this year. But sometimes you've got to go down before you can go up. Let's hope 2011 will be looked back on as the year that business finally woke up to the new realities of corporate responsibility.

1. Fukushima nuclear disaster
As with the BP oil leak in 2010, no corporate responsibility story dominated the media in the same way that Fukushima did. And for good reason. The world's second worst nuclear disaster (after Chernobyl) slammed home just how risky the nuclear industry could be. Tokyo Electric Power (TEPCO), the company operating the plant, has had to shoulder a lot of the blame for its shoddy risk management, poor planning and siting, falsified safety records, governance procedures, and lots more besides. Its now mired in debt, awaiting either nationalization or a government bail-out. Japanese regulators meanwhile failed in providing adequate oversight, in large part due to overly cosy relations with the energy industry. Not surprising then that Fukushima also had huge impacts more broadly, most notably in a massive swing away from nuclear in the clean energy debate. Germany for one has made a 180 degree switch away from nuclear. Really this was the mother of all corporate responsibility disasters in 2011.

2. The 'Occupy' movement
Starting with Los Indignados in Spain, gradually hitting the headlines with Occupy Wall Street, and then turning into a global phenomenon, the Occupy Movement thrust social equity and democracy into the corporate responsibility debate like never before. We've had anti-capitalism protests before, but the Occupy Movement took a much more focused aim at the titans of the financial sector, and kept an unlikely conversation going for months. The challenges the unruly movement posed for business may not always have been crystal clear, but they've struck such a chord with the general public, and even among senior business leaders, that they can't just be ignored. Demands for tax justice, banking regulation, and more controls on corporate political influence have all received a fillip by the movement. Who know's? Maybe in time, the legacy of Occupy for corporate responsibilty may even surpass that of Fukushima.

3. News International phone hacking scandal
Few corporate responsibility stories can claim the scalp of an entire business, but the closing of the UK newspaper the News of the World, and the arrest of its editor, Rebekah Brooks, in July of 2011 showed just how significant the phone hacking story surrounding News International had become. When the story also took the scalp of the UK's most senior police officer, and landed veteran media mogul Rupert Murdoch in a Parliamentary inquiry, the reverberations were felt near and far. We like our journalists to pursue truth. But when they cross the line and illegally tap the private phones of bereaved families, it's clearly time for a clean up in the media. On the bright side, the story was broken, and vigorously investigated over several years, by the Guardian newspaper. So while we may not trust journalists all that much any more (if we ever did), the story also demonstrated the importance of a strong and independent media as a corporate responsibility watchdog.

4. FIFA's corruption own-goal
2011 was a bad year for integrity in sport. The Pakistani cricket betting scandal, the Sumo wrestling bout-fixing revelations, the Penn State University football coaching sex abuse case, the continued flow of scandals convulsing the Chinese Football Association and the Turkish Football Federation - few sports or countries have managed to come out looking clean. But rising above them all has been the FIFA corruption story, which more than any other sporting corruption story of 2011, demonstrated not just how deeply ingrained corruption is in sport but even how much it is embedded in sporting management and administration. The scandal has been rumbling on at least since 2010 when allegations about bought votes in the 2018 and 2022 World Cup hosting competition started pouring in. After bribery allegations, resignations, and an unopposed re-election of beleaguered FIFA chair Sepp Blatter, the organization finally looked to be getting itself back on track with an internal inquiry and a life-ban for the President of the Asian Football Confederation. But FIFA's proposed roadmap for tackling its integrity problems fell far short of the root and branch surgery that was necessary, and the recent withdrawal of Transparency International from the reform process demonstrates that the FIFA leadership still don't understand the basic principles of ethics management. Students of corporate responsibility need no better case study of how to get it all so wrong.

5. Raj Rajaratnam's insider trading trial
No list of corporate responsibility stories is complete without a big fish being caught. In 2010 we saw the sacking of HP CEO Mark Hurd for expense claims fraud. This year, we had a two-for-price-of-one bonanza with the trial of former hedge fund boss Raj Rajaratnam giving us a guilty verdict, 11 years in jail and a $10m fine for insider trading .... plus the charging of his friend and former McKinsey head Rajat Gupta with securities fraud for passing on insider information to Rajaratnam. As the New York Times said: "it was the longest-ever prison sentence for insider trading, [and] a watershed moment in the government’s aggressive two-year campaign to root out the illegal exchange of confidential information on Wall Street."

6. UBS and the not so 'rogue' trader
Another big story of personal ethical failure was the revelation back in September that UBS trader Kweku Adoboli had managed to lose the company a staggering $2.3bn in authorized trading. With a loss that big, this one makes the list on scale alone. But the real story here was not so much the ethical failings of Adoboli himself (though that clearly was one of the issues at play here), but the failure of UBS to manage the problem before it got out of hand, and the inherent risk-taking at the heart of the financial services industry. In desperate need to repair its flagging reputation, UBS subsequently accepted the resignation of its CEO and installed a new leader with a mandate to move into less risky and less complex investment banking.

7. Twitter revolutions and Blackberry riots
You know when your reputation is in good shape when you get associated with progressive political revolutions like the Arab Spring. After a government telecom crackdown in Egypt, companies like Twitter and Google found themselves center stage in the flourishing revolution. Switch to the ever declining fortunes of Canadian tech pioneers RIM and their Blackberry device, and all you get is an association with mindless looting in London. But whichever way you cut it, 2011 will indelibly be marked as the year that tech companies realized that for better or worse, social protest - and government response to protest - was an inevitable part of their business. Message to CR department: write a policy.

8. Michael Porter's popularization of 'Creating Shared Value'
It was certainly not the most popular article among CSR commentators, but Porter and Kramer's piece in the January issue of the Harvard Business Review on 'Creating Shared Value' has probably done more to get corporate responsibility issues into the boardroom than anything else written this year. Sure, it's simplistic, derivative, and takes cheap shots at a version of CSR that most us don't even recognize. But it's also compelling, endearingly positive, and says a lot of things that most of us have been trying to say for years without anyone taking much notice. Plus it couldn't be more prescient with its "capitalism is under siege" motif. Oh, and Michael Porter said it. So it must be true. Take it from us, CSV is here to stay.

9. Facebook's privacy adventures
There was little doubt back in January that Facebook would probably be hitting a whole bunch of corporate responsibility snags during the year. Once you get so big and popular, it is inevitable that the critics will start sharpening their knives. Greenpeace pushed hard on the coal powered energy issue and eventually scored a well-earned success. But the big issue dogging Facebook in 2011 was privacy. The tech giant wasn't alone since privacy and security continued to afflict a number of companies especially with the shift to cloud computing. But Facebook's privacy battles stand out simply because they affect so many of us and therefore mark the front line of the personal privacy battles with tech companies and regulators. Remarkably, despite a surge of criticism the company initially managed to stave off too big a hit on its business during the year. But last month's settlement with US regulators saw Facebook accused of "unfair and deceptive practices" and resulted in the company facing an extraordinary obligation to submit to independent privacy audits for the next 20 years. And late in December the Irish data protection commissioner gave Facebook 6 months to comply with a raft of new privacy measures for all of its non US and Canadian users. As a result the company has started adopting a far more conciliatory tone with its critics but the road ahead will be marked by yet more battles as we gradually move to some kind of a post-privacy future.

10. The tar sands failed ethical makeover
The year started with the Canadian Environment Minister seeking to make the seemingly indefensible case that the tar sands were an ethical source of oil because they came from a democratic country that respected human rights. The argument was designed to influence US and European policy makers in the run up to critical energy decisions during 2011 such as the controversial Keystone XL Pipeline plan which was designed to bring oil sands crude directly into the US, and the European Commission's deliberations over whether to label tar sands oil as a "dirty fuel" due to its higher carbon intensity. So far the Canadian government and the oil sands producers have failed to win the argument with the Keystone decision being postponed by President Obama and the EC approving the dirty fuel label, which also then attracted further backing from a similar initiative in the State of California. Recently the story has spiraled into the more absurd territory of a banana boycott. The announcement by fruit company Chiquita to reduce their use of tar sands oil in its fleet sparked a concerted campaign by Ethicaloil.org to boycott Chiquita for discriminating against Canada's "ethical oil". You couldn't make this stuff up.

Looking at the two stories book-ending our top ten - the seriousness of a world of nuclear disaster and increasingly dirty sources of conventional energy (such as the tar sands and gas fracking) - not to mention the erosion of privacy, a crisis in capitalism and the never ending scourge of corruption that populate the middle order, it is clear that the corporate responsibility stakes have never been higher. Next year promises to be more of the same.

Photo by IAEA Imagebank. Reproduced under Creative Commons Licence