Goaded by a rash of bad press, a very public lashing at the Congressional whipping post, and a 38% drop in the company's stock this year, Citigroup announced last week a major change in the way the banking giant does business. CEO Sandy Weill characterized the move as part of Citigroup's campaign "to be a leader in defining and adopting higher standards".
Notice he didn't say "high," but, rather, "higher." Relative to what the standards have been, yeah, I guess "higher" shouldn't be too much of a problem. And what exactly were these higher standards, deemed worthy of such public self-congratulation? The headline-grabber was that Citigroup will no longer provide financing to companies that conceal debt from shareholders. In other words: it's no longer going to aid and abet the fraudulent acts of corporate crooks. How noble. What's next, a splashy press release touting the fact that Citigroup will be raising Osama bin Laden's ATM fee?
Meanwhile, the company continues to defend its role in helping Enron hide billions in debt by claiming that it never knew that Enron was using such shady transactions to defraud shareholders. It's a bit like the driver of the getaway car proclaiming his innocence because the guys running out of the bank with masks and bags of money never told him they were robbers. Maybe they were just really shy and didn't like carrying wallets.
Saint Weill also vowed that Citigroup will start expensing stock options in 2003, and gave himself another proud pat on the back for complying with the SEC's demand to certify the accuracy of his company's financial reports. It's an indication of how low corporate America has sunk that Weill's pale concessions earned major coverage around the country. I guess we're living at a time when "Big Corporation Announces It Will Do The Right Thing" really is news.
But while the media are focusing on these belated corporate mea culpas, there's a truly important movement among American companies that is hardly getting any attention.
More than a hundred companies in America are seeking to redefine the bottom line -- moving away from conventional corporate accounting, where the only consideration is profit, to one that also includes the social and environmental impact the company is having. It's called the Triple Bottom Line.
Yes, stock price is important, say Triple Bottom Liners, but so is how you treat your workers, the effect you're having on the environment, and whether the McNuggets you sell are made from chickens raised in deplorable conditions.
The key idea is that corporations need to pay attention to both their stockholders and their stakeholders -- those who may not have invested money in the company but clearly have a de facto investment in the air they breath, the food they eat, and the communities they live in.
Among the leading crusaders for this shift in corporate priorities is Ray Anderson, the founder and chairman of the board of Interface, Inc., the world's largest commercial carpet company, and the co-chair of the President's Council on Sustainable Development during the Clinton administration. A corporate polluter and single bottom liner for two decades, Anderson became a devoted convert to the Triple Bottom Line after reading "The Ecology of Commerce," Paul Hawken's visionary book about socially responsible businesses.
Deciding that he wanted to "pioneer the company of the next industrial revolution", Anderson set out to remake Interface into what Fast Company magazine hailed as "the most highly evolved big company in the country" -- a $1.2 billion model for "social responsibility and economic growth".
He now travels the country giving speeches about this new kind of corporate responsibility. "There is a real hunger," he told me, "for companies that stand for something other than the conventional bottom line. Beyond profits, there must be purpose. Beyond success, there must be significance. And by doing good, you'll end up boosting your bottom line, as well." Anderson estimates that his company has saved $185 million on waste reduction efforts alone.
But Ray Anderson remains the exception -- not just among CEOs but even among triple bottom line CEOs. Most of them have made the shift not because of a personal conversion but because of public pressure and protest.
Nike, for instance, has moved to the cutting edge of environmentally conscious production techniques -- phasing out the use of the controversial carcinogenic chemical PVC in its products -- but only after facing boycotts and reams of bad PR over its unfair treatment of overseas workers. And Starbucks began aggressively marketing Fair-Trade Certified coffee -- a line that pays its coffee farmers far more than the going rate -- after it became the target of human rights activists.
However these yuppie stalwarts came to change their ways, they are now at the forefront of a growing movement. And with corporate America under siege, there has never been a more opportune moment to adopt better business practices. But for this change to occur, pressure will have to come from three sources: the government, the media, and, above all, the public.
The government needs to reward socially conscious companies with tax credits, incentives, and subsidies while levying higher taxes on polluting and wasteful companies. The business press needs to stop running adulatory cover stories on America's most cutthroat CEOs, and replace them with glowing profiles of the most forward-thinking ones (good-bye Dennis Kozlowski; hello Ray Anderson).
And, most importantly, the public has to keep the heat on. We can't settle for companies like Citigroup promising to no longer help corporate crooks intent on fleecing us.
Demanding that companies stop being bad is not enough. We have to demand that they start being good. That has to be our bottom line on corporate reform.
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