Shape Up or Ship Out
By Niall McKay in Silicon Valley, Wed Jun 04 12:27:58 GMT 2003
Wireless companies have a better reason than just avoiding legal trouble to be good corporate citizens - it can help the bottom line, too.
Last year, WorldCom was up its neck in financial and legal troubles. It entered the biggest bankruptcy in US history; some of its top managers were hauled off in handcuffs, and, despite its re-branding as MCI, it will go down in the history books with Enron as an egregious example of corporate deceit and mismanagement. Small wonder that investors, customers, and even government are asking corporations to become socially as well as fiscally responsible. The financial scandals of WorldCom, Global Crossing and Enron led the US Congress to pass legislation called the Sarbanes-Oxley Act, which aims to make companies' accounting and governance practices more transparent to investors and regulators. It mandates that CEOs and CFOs must personally sign off on Securities and Exchange Commission filings to assure auditors and investors that the information they provide is accurate. This year, the act will go a step further and asks corporations to clarify the internal process and controls including their accounting and information technology practices.
Indeed, there is little doubt that wireless corporations need to learn to become better corporate citizens if their executives are to avoid punitive measures. They need to speak up. They need to make their shareholders aware of their actions. They need to report the real financial health of the company. In short, they need to act ethically as well as legally, and become a little less profit-oriented and a little more socially aware.
Why? So that executives can sleep peacefully at night? Or improve their corporate karma? Actually, so that they can continue to sell their products and attract new investors.
Cashing In on CSR
Last year, the Lifestyles of Health and Sustainability Journal, issued a report that found that almost 30 percent of Americans decide what to buy based on the ethics of the company that produces those products. Annually, it's a $226.8 billion market in the US and a $540 billion market worldwide. In fact, corporate social responsibility is a new business trend. It is the "business process re-engineer" of the new millennium, though hopefully it will be more meaningful than a catchphrase.
So what about the investor? Investors too are looking to put their money where their conscience is, according to a report by the Social Investment Forum. In 2001, socially screened investment portfolios grew by 35 percent to $1.49 trillion. Not so much compared to the total investment cake, which topped $19.9 trillion, but still a significant amount of money.
"Corporate Social Responsibility is now on the radar of most major telecommunications and technology corporations," says Gary Tomchuk Director, of CSRwire, an organization dedicated to promoting good corporate citizenship. "Either they have a CSR department, or they have a CSR policy in place or they have discussed it the board level."
For example, Sprint, has had the Sprint Foundation, an organization which engages in philanthropy and its wireless division Sprint PCS organizes charity events at a local level. The company now has a program where it raises $600,000 a year from recycled phones for charities such as Easter Seals and the National Organization on Disability.
"We also have a phone-loan program," says Stephanie Kelly, communications manager for Sprint PCS. "We have 400 phones with the American Red Cross that they give out in emergency situations and we have thousands of phones out with local police, schools, and community workers in cities such as New York, LA, and San Francisco."
High time too, as the high-tech industry's philanthropy has been well outpaced by other, older industries. There are a few exceptions, says CSRwire's Tomchuck, noting Hewlett Packard, Cisco, and Nokia, but while vast fortunes have been made in the wireless, telecom, and high-tech industries, there are few Carnegies or Rockefellers emerging., although the Bill and Melinda Gates Foundation is beginning to step up to the plate and provide substantial medical funding.
"I think the wireless and tech industry have not been such early adopters of social responsibility partly because their products have been relatively less damaging to the community," says Tomchuck. "Furthermore, until recently, their shares have been in such high demand that they provided a high return on investments. So nobody bothered to look at the social record."
Sprint is not alone, many wireless companies have CSR departments. Vodafone, for example, introduced a set of business principles to in 2002 implement CSR, that are not only about philanthropy and community service, but also things like ensuring that the company's radio towers do not cause harm to the general public. It is also working to provide full disclosure to shareholders. Qualcomm, Cingular, and Verizon also have programs in operation.
A Growing Market
Certainly, the ethical business market is growing at a rapid pace. There are a whole host of new magazines dedicated to corporate social responsibility such as SRIworld, Ethical Corporation, and SocialFunds.com. The Stanford Business School recently launched a magazine called the Stanford Social Innovation Review, which is geared at providing research, practices and ideas for the socially conscious and there are a growing number of conferences addressing the issue each year. And schools are getting in on the act, like the The Presidio World College in San Francisco, which is offering a new MBA program designed to prepare professionals to position their organizations as leaders in the practices of sustainable management.
The incentive for companies to engage in ethical business practices and have active CSR policies and programs has never been higher. Governments, special interest groups, and even private citizens are watching closer than ever, ready to craft a law - or lawsuit - at a moment's notice. But the reasons for companies to avoid these groups' scorn needn't necessarily be altruistic or even just to follow a law, there are financial incentives as well.
It's Corporate Social Responsibility (CSR) Week on TheFeature! Check back daily for reports, analysis and in-depth articles on the future of mobility.
Niall McKay is a freelance write based in Silicon Valley California. He can be reached at www.niall.org.