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Corporate Social Responsibility (CSR) and Sustainability

Are Fortune’s Most Admired Companies Really Admired?

Fortune magazine just announced its annual list of most admired companies. Apple was number one. No surprise there. But what is absolutely amazing is that Goldman Sachs was number 8. Huh. In the very same issue of Fortune (March 22, 2010, page 70) Allan Sloan tells us how Goldman Sachs helped engineer the Greek debt crisis. It used to be that investment banks made money by helping worthy companies raise capital. Today they make their biggest money by deception and then betting on both sides of the deceit. If their timing is right, overnight fortunes are made. Sloan reports that Goldman created “Trojan Horse” securities for the Greek government to sell that looked far less risky than they proved to be because they cleverly figured out how to hide Greece’s actual financial fragility. When the country’s mountain of debt and weak economy came to light it put the entire European Union at risk. Then Goldman created credit default swaps that made them more money even as Greece’s financial stability imploded. It’s a lot like having a CPA fake your financial statement so you can get a loan and then make a bet that you won’t pay your loan off because they know the real story. Ouch.

So how can Goldman Sachs be admired in an age when corporate reputations should count for something? Well maybe it’s because the people Fortune surveys are the CEO’s directors and Wall Street analysts of the companies on their master list of contenders. It’s a questionable, some might say stupid, self-serving survey. Many people wonder if it’s a lot like asking criminals what criminals they most admire. Few could agree that Google, Berkshire Hathaway and Johnson & Johnson shouldn’t be on a great company list. But the fundamental problem is that in nearly all global surveys over 80% of consumers distrust corporate leaders to behave ethically. In the past two decades business leaders have gone from some of the most admired to the least admired in our society. CEOs can easily suffer from myopia if they only have horizontal conversations. Input from peers, directors and analysts give them a false view of reality. They need to get in touch with vertical reality. What do consumers, employees, regulators, suppliers think of their reputation? Those opinions have to be factored in to have a sense of one’s “real” corporate reputation.

Today business leaders’ credibility is street-gutter low. For leaders to delude themselves with cigar-chomping back-slapping in an age of transparency is simply foolish. Perhaps it’s time for Fortune to change its methodology or suffer the greatest failure of journalism, irrelevance.

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Comment by Pauline Giroux on April 8, 2010 at 8:03am
Great article, thanks for sharing your point of view!
Most companies are using unethical ways to make more and more money, and we - as consumers, employees, investors etc. - only get to know a very partial picture of these companies. Even though scandals do pop up from time to time, most unethical behaviours stay hidden from the public eyes. Despite this, I think the public is becoming more and more aware of it and I would argue that most people do not trust companies at all.
If companies are to become more trustworthy, they not only need to behave ethically but they have to prove that they do through transparent and comprehensive reporting of their actions. However, I am convinced that most companies will always find a way to hide some inconvenient truths, because in the end what matters for them is to make money. Maybe we need to focus on changing our current economic system that is causing all these issues: unethical behaviours, high pressure on employees etc.
Comment by Penny Lane on April 13, 2010 at 6:01pm
Perhaps one way of examining in greater depth an organization's integrity would be to examine their approach to stakeholder engagement. It is comfortable to talk with groups that reaffirm the prevalent and pervasive worldview and value system of a company - however it is more stretching and perhaps healthy to engage stakeholders who bring a different perspective and paradigm. An organization speaks volumes about what is valued if it engages with stakeholders who hold a dissenting or different worldview. I feel more confident in a rating of a company that can demonstrate an engagement process that is interactive, diverse, and that demonstrates how they have been influenced by the view of true stakeholders - especially to the point of engaging the stakeholders in their decision making.

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