Among its many missteps in the Gulf, BP has now hired public relations executives to pose as journalists along the beaches besmirched by its oil spill. With so much incompetence and deception on display, it is hard to believe that only recently BP earned recognition from corporate social responsibility innovators as the most accountable large corporation in the world. BP won the Account Ability Rating™ award outright in 2004 and 2005, and came in second in 2006. With such credentials we need to ask some tough questions. Is it that the corporate culture that earned kudos somehow turned 180˚ in a few short years? Or is the premise and criteria for such awards faulty and now suspect? Oil industry experts are acknowledging that the scale of the spill in the Gulf will have a structural impact on industry assumptions and procedures. Are the corporate social responsibility experts who created the matrices for accountability – and who anointed BP as a paragon – also willing to reconsider their stance and methods for evaluation?
These are important questions for several reasons. First, the real lesson of recent corporate ethical impropriety is not that executives will overreach their legal mandate, or that companies will lose sight of their ethical responsibilities to the community, but that the sentinels intended to protect the public interest have been too easily co-opted into supporting the abuses they were intended to guard against. This is what happened when Arthur Andersen gave its auditing imprimatur to Enron’s off-balance sheet deceptions, and what occurred again when Moody’s and Standard & Poor’s worked with Wall Street banks to give mortgage derivatives credit ratings that the securities did not deserve. In both instances the sentinels meant to audit and scrutinize companies became the enablers for abusing the checks and balances of the system. Have the social responsibility sentinals now slipped on the same banana peel?
Second, in the absence of effective global governance, corporate social responsibility activists across the spectrum of disciplines have set themselves up to be the ethical sentinels. Inspired by the provocative report “Tomorrow’s Company” published in the mid-1990s, UK consultancies have taken a global lead in articulating terms and metrics for corporate responsibility. Perhaps the most prestigious of these firms is Account Ability, whose publications and research papers have informed much of the productive debate around corporate social responsibility. Based on measures of “strategic intent,” “governance and management,” “engagement,” and “operational performance,” Account Ability publishes annual ratings of corporate performance in Fortune Magazine. It is not incidental therefore that BP won Account Ability’s top ratings two a successive years, and came in second the third. Have we business ethicists, and responsibility advocates, been celebrating the right companies? And, more importantly, have we been celebrating the right thing?
Third, there is mounting evidence that the social responsibility initiatives of the largest global corporations are not living up to the expectations of advocates, or to the hard commitments proffered by companies. The authors of 2010 report by the United Nation’s Research Institute for Social Development (UNRISD) conclude that the majority of companies have derived a much greater benefit to their bottom line from corporate social responsibility programs than have the programs to which they had dedicated their attention and resources. In absolute dollars, the strategic investments in corporate social responsibility are less than what used to be given out as corporate philanthropy. Is CSR a placebo, or an ineffective prescription for moral management?
At a time when so much is at stake for managerial integrity, and when the principles and practices for social responsibility are under challenge, the role of the sentinel, and the moral authority for that supervision, become hugely important. Critical study of past failures showed that the reasonable judgment of the sentinels became distorted, and even corrupted, when new commercial relationships assumed greater priority than for protecting the public trust. Arthur Andersen had a profitable consulting relationship with Enron, which – with hindsight – made it impossible to objectively audit its client’s financial performance. It turns out that corporate social responsibility firms been walking a similar knife edge: on the one hand prodding companies to become or systematic in their responsibility; while on the other selling services to help them achieve better social outcomes and credibility. As explained on their own website, the Account Ability Rating is the result of the founding partnership between a “non-profit network,” and a consultancy called csrnetwork. And among its clients, csrnetwork lists BP.
We can assume that some walls are in place to safeguard the ratings activities from the commercial ones, but, as we must recognize from history, this association between auditor and consultant is a serious red flag for the responsibility industry. Just as BP deserves critical scrutiny for its management, safety and environmental controls, so too those that bestowed legitimacy on its accountability culture, or consulted on it, must be called to account. For those of us in the responsibility business, we need to ask about the credibility of such ratings? Are we building real metric with consequence for balanced business operations? Or have we become producers of PR wallpaper? Have our social responsibility sentinels misjudged, or has their (and therefore our) moral authority been compromised?
http://www.csrnetwork.com/clients.asp
http://www.accountabilityrating.com/rating_partners.asp
Tags: accountability, CSR, questions for ethicists, responsibility industry, responsibility ratings
This entry was posted on Friday, June 25th, 2010 at 3:15 pm and is filed under Ethics in Practice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
