“Nice Companies Finish First” was the title of a Strategy+Business article recently passed on to us by Center for Higher Ambition Leadership board member Doug Conant. Author Matt Palmquist asserted that companies that strive to be socially responsible are rewarded more than those that simply pursue economic gains. As this goes to the heart of the ongoing debate between stakeholder and shareholder views of capitalism, we were intrigued.
The article is based on a research paper in Knowledge and Process Management, “An Analysis of the Organizational Core Values of the World’s Most Admired Companies.” Palmquist summarizes the approach of authors Maria Assunta Barchiesi and Agostino La Bella:
The authors analyzed the core values espoused by the 34 firms that made Fortune’s list of the 50 most admired companies for each of the last five years (2009-2013). The list is based on an annual survey of more than 15,000 analysts, directors, and executives. Fortune ranks the world’s largest companies—those with annual revenues of US$10 billion or more—according to nine attributes that speak to reputation, including the level of innovation, personnel management, and the quality of products and services.
The companies included such familiar names as Southwest Airlines, Nike, Coca-Cola, Marriott International, and Procter & Gamble. Barchiesi and La Bella looked at each company’s core values and put them into one of five categories: Customer/User Orientation, Employee Orientation, Economic/Financial Growth Orientation, Excellence Orientation, and Social Responsibility Orientation. Companies typically had values that addressed more than one orientation so an additional level of analysis was undertaken to determine the predominant orientation.Palmquist cited Marriott as an example from the paper:
Marriott International emphasizes five pillars: one dedicated to customers (“embrace the change”), one to employees (“put people first”), one to the pursuit of excellence, two to CSR (“act with integrity” and “serve our world”), and none to financial growth.
This multifaceted orientation view of firm purpose aligns with our concept of Higher Ambition: to create positive social and financial value for all stakeholders. And, as Palmquist notes, these Most Admired companies delivered for shareholders even while putting social responsibility first:
Paradoxically, economic growth was the value least mentioned and emphasized. Companies certainly have to make money. But even though all of the world’s most admired companies turned a hefty profit, none placed this fairly narrow goal above the broader, deeper pledge to produce sustainable value for its community and stakeholders.
Barchiesi and La Bella note the “obvious fact that corporations exist to produce wealth” but that “top performances arise when this concern does not prevail over a deeper commitment to generate well-being for the community to which it belongs.” Their work is important for those who believe that social responsibility and profitability are not only mutually exclusive, but actually interdependent. In their words:
…(we) think that there is a positive correlation between a firm’s care for CSR (corporate social responsibility) and its corporate performance and that ethical behavior and a concern for people and for the environment help in achieving and maintaining a strong competitive position.
We could not agree more.