Stakeholder Trust: A Proposal for a Global Business Ethics Principle

01.08.2015

dowden-nicholsThis article originally appeared on the Russian International Affairs Council blog.

By Patricia E. Dowden and Philip M. Nichols

What standards should businesses observe in their own countries, or abroad? Businesses now have resources and influence that rival or surpass those of governments and certainly of ordinary people.[1] The choices businesses make can profoundly influence the lives of every person on the planet. Businesses, governments, and people now recognize that businesses must do much more than merely obey the law. Yet discerning and agreeing on globally appropriate rules for business behavior has been a formidable and contentious discussion among business leaders and academics.

While acknowledging all of the contentiousness, we now offer a modest proposal for a unifying global business ethics principle:

A basic duty of every organization is to earn stakeholder trust.

This principle is meant to replace a more familiar but flawed imperative: that the basic duty of each business leader is to “maximize shareholder value.” [2] Such a duty has never been explicitly written into corporate law, yet is often practiced by CEOs as a way of avoiding dissatisfied shareholders and being replaced by a similarly dissatisfied Board of Directors. But a single-minded focus on profitability – especially very short-term profitability – has serious limitations and risks to the ongoing enterprise; we will explain why earning and maintaining stakeholder trust – including shareholders — can not only serve businesses’ bottom line over time, but also make the market economies where they operate much more sustainable.

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