According to a 2021 survey by PwC, 91% of business leaders think their company has a responsibility to act on environmental, social, and governance issues. The vast majority of consumers acknowledge that companies have made progress in taking care of the environment. But 64% of leaders still express disappointment with progress on diversity, equity, and inclusion.1
It is up to you, as the CEO or CHRO, to decide where to draw the lines for your company in all these areas. You have to be very clear in your own mind about why your company should do any of these things or not. What framework will you use to guide your choices?
A DECISION-MAKING FRAMEWORK
Your organization’s raison d’être is to create value for your customers, investors, and society. All your decisions should, therefore, be justifiable from the perspective of company performance. This is the standard by which your work and your contributions as a leader will be measured.
At the same time, you cannot ignore the two non-negotiable requirements of your leadership role: you must always abide by the laws and regulations of the countries in which you operate, and you must display decency in all your actions.
These three elements—company performance, laws and regulations, decency—form a flexible framework for your DEI and ESG-related strategic choices. For instance, if you believe an important source of value creation sits in an area of diversity, don’t doubt the possibility. Deal with it as such. Conversely, if your customers hold you to account in an environmental area and/or you see significant value may be destroyed if you don’t address it, then take it on. In both cases, put a number to the value to be created or destroyed. Then rank it along with your other sources of value. Using this framework, you will have no reason to take on issues if they will neither create nor destroy value, if the impact on your customers and your business will be neutral, or if no regulations stipulate what actions you must take.
In the free world, we abide by rules and regulations for their own sake. Fortunately, liberal democracies also rely on—and serve as the best vehicle for—decency.
A FOUNDATION OF DECENCY
Decency as a non-negotiable in the C-suite means we must consciously set boundaries as far as business performance and results drive our priorities.
By decency, I mean more than just conforming to generally accepted standards of good manners in our interactions with people at work. Decency in the C-suite is about treating others with respect—and doing right by them.
As Bill Boulding, Dean of Duke University’s School of Business, put it, “Technology, innovation, and automation are changing the very nature of work. Instead of letting them fracture us, we can use decency to find ways to move forward without leaving anyone behind.” Decency follows from respecting human dignity. Many CEOs have already shown that this can be done. Brian Moynihan is one. When mobile technology dramatically changed how customers did their banking over a decade ago, he successfully reduced headcount at Bank of America by 100,000 through a combination of natural attrition and work redesign.2 Employees felt valued and respected and could maintain their dignity, whether they stayed with the company or left.
What should employees expect from their employer? What should companies expect from their employees?
People are entitled to decent treatment. That is indisputable. However, it does not imply employees can abdicate responsibility for their own lives. Yes, governments set minimum employment and safety standards through labor laws. Yes, CHROs maintain a laundry list of initiatives to fulfill their company’s obligation to treat employees ethically. But employment laws and HR initiatives are no replacement for individual agency.
In some places, companies are held solely responsible for guaranteeing the future employability of their employees. In many countries in Europe, it is made very difficult for companies to exit employees because of the idea they need to be protected. Often the assumption is that companies invest in the ongoing development of their people so that, when they depart the organization, their “economic value” in the talent marketplace will be higher than when they joined.
This “employability guarantee” serves the tenet of human decency and the advancement of society. But there is a downside. It seems to imply that individuals have little to no agency, that they cannot and do not need to take responsibility for their own development and growth, that they will not foster a sense of pride in accomplishments they achieve outside of the objectives the corporation sets for them. Yet agency, responsibility, and self-motivated achievements are key elements of human dignity.
Let’s turn to “equal opportunity”, which is often blissfully confused with filling diversity quotas. (Full disclosure: I really believe in the importance of the former, less so in the latter.) Diversity is a characteristic of groups, not individuals. We aim to fill diversity quotas by assembling a “reasonable” mix of people who think, decide, and act differently. Yet even companies that score high on minorities in management can struggle with groupthink and fail to retain basic human decency in their interactions.
Equal opportunity is about ensuring that every individual, regardless of their cultural and economic background, race, gender, or sexual preferences, has the same unbiased access to opportunity (that is, employment, pay, and promotions). It is up to each individual whether they will use those opportunities well or not. While this is of great value in eliminating discrimination and fostering decency, we won’t always know if improving access to opportunity for all will translate into improved performance for the organization.
Ultimately, it is up to you, as CEO or CHRO, to prioritize the needs of your company while also respecting the rights of all the individuals who work there. Trying to balance collective needs with individual rights can be like playing an unending game of tug-of-war. Remember, there are really only three fundamental reasons to do anything related to DEI or ESG: a positive or negative impact on company performance, compliance with laws and regulations, and basic human decency. If at all possible, none of these should be compromised.
NOTES
1 PwC poll of 5,005 consumers, 2,510 employees, and 1,257 business leaders in the US, Brazil, the UK, Germany, and India from March 29 to April 23, 2021. Summary of poll results accessed online April 20, 2022, at https://www.pwc.com/us/en/services/consulting/library/consumer-intelligence-series/consumer-and-employee-esg-expectations.html.
2 Bill Boulding, “For Leaders, Decency Is Just as Important as Intelligence”, Harvard Business Review, July 19, 2019. Accessed April 18, 2023 at https://hbr.org/2019/07/for-leaders-decency-is-just-as-important-as-intelligence
