Goldman Sachs headquarters in Manhattan. (Photo: Bloomberg)
Two weeks ago Greg Smith’s public resignation from Goldman Sachs via an op-ed in the New York Times went viral, sparking controversy over how Goldman Sachs does business. In the op-ed, Smith named a toxic business environment as the primary reason for his departure. Whether deserved or not, Smith’s criticism of his former employer and the international reaction to Smith’s op-ed revealed two important truths for the international business community:
Good business practices are more than the pursuit of profit.
Corporate citizenship refers to a company’s responsibility to its surrounding community, including both society and the environment. Companies that incorporate environmental and social concerns into their business plans are better able to adapt to local contexts, promote their brand, and develop connections with their clientele.
One way for businesses to engage in corporate citizenship is through Corporate Social Responsibility (CSR) programs. Examples of CSR programs include providing daycare options for employees, raising awareness about informal employment in a business’ a supply chain, or training employees in environmental policies.
Corporate citizenship goes beyond CSR, however; it entails that businesses are responsible to their communities in all of their business practices. For example, Beraca Sabara Quimicos e Ingredientes Ltda., a family owned chemical business in Brazil, seeks to mitigate human rights and labor issues—which are common in many regions of Brazil—through educating local communities, building trusted relationships, and explaining why traditionally accepted unfair labor practices can be harmful. When a business invests in its community, a community is more likely to invest in the business.
Good corporate governance strengthens businesses internally, and translates into stronger market economies.
Good corporate governance ensures transparency, accountability, and responsibility in business, and is a major focus of CIPE’s work with business associations across the globe. Regardless of local context, a company that makes their operating procedures transparent and holds themselves accountable is better positioned to make informed decisions. The importance of good business practices applies to everyone, from big business to micro-enterprises, and across regions, from Latin America to Eurasia to the Middle East.
Transparency and access to information – the key principles of good corporate governance – not only allow businesses to operate more smoothly from the inside, but also promote the development of legal and institutional structures that support free and fair market-oriented societies.
Around the world millions of people are employed (or unemployed) in business environments ridden by corruption, nepotism, and discrimination. With all of the new corporate citizenship, CSR, and corporate governance strategies available to 21st century businesses, the environment in which we do business does not have to be a toxic one.