The concept that companies have an obligation to help improve society is not new, but there is a growing expectation among employees that corporate America should have an active role in driving positive social change. In this episode of All Things Work, host Tony Lee is joined by Elizabeth Doty from the Erb Institute for Sustainability in Business at the University of Michigan to discuss companies’ increasing role in addressing social and political issues.
The concept that companies have an obligation to help improve society is not new, but there is a growing expectation among employees that corporate America should have an active role in driving positive social change. In this episode of All Things Work, host Tony Lee is joined by Elizabeth Doty from the Erb Institute for Sustainability in Business at the University of Michigan to discuss companies’ increasing role in addressing social and political issues.
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This episode of All Things Work is sponsored by UKG.
Speaker 1:
This episode of All Things Work is sponsored by UKG. UKG offers HR and workforce management solutions that support your employees and transform your workplace into a work of art.
Tony Lee:
Welcome to All Things Work a podcast from the Society For Human Resource Management. I'm your host, Tony Lee, head of content here at SHRM. Thank you for joining us. All Things Work as an audio adventure, where we talk with thought leaders and taste makers to bring you an insider's perspective on All Things Work.
In today's episode, we discuss the role companies play in addressing social and political issues. The idea that employers have a social obligation to take action that improves society for the better has been around for many years, but it's been rare for groups of companies to collectively take a stand on important social issues, as many did in the wake of the George Floyd murdered last year, and did again earlier this year after Georgia state lawmakers sought to, in their words, make elections more secure. Research shows that a majority of employees support and expect their companies to be drivers of positive social change and say that they trust business more than they trust either government or the media.
As a result, more companies are feeling pushed to engage. Joining me to talk about business's increasing role in addressing society's issues is Elizabeth Doty. Elizabeth is director of the recently formed Corporate Political Responsibility Task Force at the Erb Institute for Sustainability in Business at the University of Michigan, which works to help companies better align their interactions with government and civil society with their purposes and values. Elizabeth also is the founder of Leadership Momentum, a consulting firm that helps companies clarify and deliver on their most important commitments to customers, employees, shareholders in the world. Elizabeth, welcome to All Things Work.
Elizabeth Doty:
Great to be here, Tony. Thank you for having me.
Tony Lee:
Well, it's our pleasure. Thank you. Why don't we just start with, kind of from a high level, what's the role of companies these days in addressing social issues from your perspective?
Elizabeth Doty:
Well, I think that is the million dollar question, right? There's some debate. There are many who would like to see companies step forward, but there are some that are hesitant and wonder, on what basis are we engaging here? We're not elected, so it's an area where one might say we're working out a new social contract, and on what basis do companies engage. We think at the Corporate Political Responsibility Task Force that companies need principles and guidelines. They need to think about this in advance, proactively, to be ready when issues come up.
And we see three basis for companies to step forward and to be more proactive. The first is companies have a role to be a transparent and accountable participant in society. Right now, only about two thirds of public companies, the S&P 500, disclose their political activities. So it's difficult to be a responsible actor if you're not transparent and accountable. And companies often have the left hand and the right hand don't know what they're doing, so government affairs may be involved in something in a way that employees or customers or investors might not appreciate. And we saw a lot of that after the January 6th insurrection.
Secondly, we think companies need to be responsible for the systems on which our markets, society, and life depend, to kind of be that third side in a conflict or take the long view investing in civic institutions and voting and representative government in a way that people feel they can trust. And I think that's one reason companies are stepping forward now as kind of a meta responsibility, not to the outcomes of society's processes, but for the institutions to work so people trust it. And that's very delicate, right? You want to make sure you're really standing for the third side, not picking a side.
And then finally companies are such big players in our civic and political debates, in our elections, in the influence in Washington and the state capitals, that they need to think about the long view on outcomes for things like jobs and social mobility and discriminatory practices and climate and technology and privacy. There's so many issues where companies have responsibility to think about how the systems are working.
Tony Lee:
Very thoughtful approach and three important steps. I guess the key question now is, so is your sense that companies are following these steps, are thinking through these steps, or are we still in pretty early days?
Elizabeth Doty:
I think that there's a thought process in motion. Right now, I think the key is for companies to have forums where they can talk about how to engage in civic and political arenas without being political as they're talking about it, right? They need a place to stand that's more foundational than that. And I say, we are in early days, but we're also seeing the systems breakdowns that mean it's not going to get better until we really look at what's going to help this all work and what's going to address the foundational distrust. So we're seeing some companies are starting to develop more proactive, principled approaches, but we're hoping to engage. And that's kind of our mission as a task force to engage companies in thinking it through.
Tony Lee:
Yeah. All right. So let's talk about it from the employee perspective, because it seems that's where a lot of the pressure is coming. Companies seem to be more responsive to their employees that are asking them to get involved. Is there a mind shift going on or are companies simply thinking about this is good for us as well?
Elizabeth Doty:
Well, it is interesting. The employees, they have the most visibility. I've done a lot of work on how companies keep their promises or not, whether they're consistent in what they say and do. And employees are uniquely positioned to both challenge companies and see where there are gaps, right? So some companies I understand are doing it in a shorthand, expedient way, but there's actually an opportunity to listen more deeply and to really learn.
I know many leaders we've talked to are surprised to hear their employees concerns, say in the wake of the George Floyd murder, other executives surprised to hear what their colleagues have gone through and the history, say, around voting rights questions. So it's a real opportunity to actually learn and to do what we don't do in the political sphere so much right now is to actually deliberate and weigh different considerations. And I think some of that is really important and good to see.
Tony Lee:
Yeah. It's such a fascinating time in our history, but also from a company standpoint in terms of the economy. I mean, we're seeing research every day that there's this great migration going on, employees coming out of the pandemic are saying, "I realize this isn't really the company I want to work for," or "This isn't really even what I want to do anymore," or "I like working from home and I don't want to go back." So for whatever motivation employees are making changes, but it feels like that there is a social component to it like never before. That if they saw evidence over the last year, year and a half, that their company wasn't of the same mindset that they were, that's just another reason to find a company that is. Are you seeing that as well?
Elizabeth Doty:
Yes, I think so. I guess what I'm encouraging companies to do is look at... I mean, look, Tony, we are in a situation where many, many foundational systems have not been working, right? We've had productivity growth over the past 40 years, but it's not been shared. So we have a divorce between say financial performance and the wellbeing that economies are meant to serve, right? We have wealth divides, we have the inability to respond to threats around climate. We have lots of systemic issues, and these employees in a way are the voice of those systemic issues.
So companies could either try to appeal to employees or they could look at how do we get these systems to really work. We've had a shift where companies narrowed their political and civic engagement to just what benefited their shareholders in the near term. This might be a call for everyone to invest for the long term.
And I think one way that would show up that I'm not seeing enough of is for companies to look at how are we already involved in questions around social mobility, for example, and opportunity. For example, many companies lobby for tax exemptions at the local level, the state level, and that directly affects public education, and that can be quite shortsighted. So I think if employees are the spark, this can start companies in rethinking the foundations of our systems and having all of us invest for that longer term. The rising tide lifts all boats.
Tony Lee:
Yeah. Now companies are not a monolithic group obviously. You've got public companies that have an obligation to shareholders and you've got small, private companies. So how do you distinguish between what the company responsibility is based on size, scope, a number of employees, that type of thing?
Elizabeth Doty:
Yeah. It's interesting. If you look deeper into the trust data, small business is really widely trusted right now. I think that they have the highest level of trust if you look at the main 2021 Edelman trust barometer. Those are the heroes in business, and I think they are often the ones that see the human impacts. And I think the challenge for small businesses would be to insist that their trade associations represent the interests of all business, right? Like chambers of commerce or local chambers that are part of the US Chamber, how is the US Chambers policy position? How are their policy positions representing the small business?
And I think small businesses, they don't have a lot of time, but they could get together to say, let's address carbon more proactively to create an environment for all of us, let's address antitrust in a way that makes sure that small businesses still have a future.
Larger businesses have more internal challenges to weigh, more internal trade offs, more constituencies, more visibility, more scrutiny. But when they make a change, it can signal a sea change for everyone as we've seen recently say with Exxon Mobil's board, or in Europe [inaudible 00:10:43] that's Shell, on carbon. Those companies could get a little more proactive about we're going to make a shift and invest for that longer term. And I think that they would probably need to focus more on internal weighing of trade offs. When would it be time to shift our position and start to weigh towards the future?
Tony Lee:
Right. So I guess the other challenge with small companies is why get involved at all? I mean, you've got a lot of small companies that are private, they're run by perhaps an owner or an ownership group, and their goal forever, as you know, is let's boost revenues. All boats rise at this company when our revenues go up. Isn't there a risk associated for a company leader at a company like that to say, "I want to take a stand on a social issue"? Is it not easier to simply ignore it and say, "That's not my role"?
Elizabeth Doty:
Well, I can completely understand. And I think many of us could, largely because of the time commitment, and not having a lot of spare attention, if we know how small and mid-size businesses run. However, the environment for that business and the ability to compete based on the value you create in the marketplace, this is the essence of free enterprise, that is already directly affected by public policy, right?
If we end up with unmanaged carbon emissions and we don't address climate change, that is going to directly affect the environment within which those small businesses operate. So as much of a hassle as it is thinking through what your longer term interests are public education, perhaps single payer healthcare might reduce administrative costs for small business, tariffs and subsidies and tax exemptions. They don't have the ability to compete. Asking for their trade associations to represent that voice, that is a very, most efficient way for them to do so, and I think it's actually beneficial to the bottom line. It's not window dressing for them, it's actually going to be critical to their ability to provide jobs, to grow, and to be the promise of opportunity that they've been for the US.
Tony Lee:
Yeah. Well, I mean, SHRM and others have done research showing, for example, that having a more diverse workforce is certainly good for the bottom line. It's good for the society as a whole, as well as the bottom line. And I'm sure there are arguments to be made for doing the same with frankly, a lot of social issues. I guess my question there too is, how do you bring your clients on board? How do you bring your customers on board, assuming that your employees are are of one mind? Doesn't it take a bigger effort there to make sure that everybody's aligned with the direction the company is taking?
Elizabeth Doty:
I think there are a couple things. First thing is I don't think your employees are going to all be of one mind. I think that part of the process is that deliberation and making sure you're listening to the diversity of views. Some voices right now may be louder than others. So even within the employee base, there's that process of weighing out different positions and ensuring you have common fact base.
The same is true with clients and providing vehicles for listening and engaging. And then back to those principles, being clear about why you're engaging, when you're engaging, how you're engaging, do you view it as legitimate to invest in campaign contributions or do you want to just articulate your business's point of view. Articulating that so customers and clients know where you stand and why can both help them make sense of something that on the surface may seem unnecessary or out of your remit, but it can also attract the clients and customers that you want.
But I want to clarify one thing, Tony. Some of this seems like it's optional and the business is deciding whether to step into the fray, and I think that's a risk because business is already an incredibly active player that is shaping our civic and political debates. Sometimes simply by the size, the sheer magnitude of its role in political spending, of its role in lobbying and advocacy. 80% of registered lobbyist organizations now are business, not civil society or ideology, 60% of political spending. So I think we need to look at how are we engaging, not shall we start.
Tony Lee:
Right. Yes. And of course, again, it depends on company size. There are a lot of small companies that have done very little beyond local community involvement, which is a great thing. But let me ask you a little bit about the point you just made. So a lot of the company efforts, or at least the perception of company efforts, is not necessarily altruistic. It's advancing a company goal while being socially responsible in a certain area, but is that not necessarily the future? I mean, do you feel like that companies are stepping beyond what may benefit them directly to, as you say, helping society as a whole because it would lift all boats?
Elizabeth Doty:
Well, that's difficult to discuss in a 20 minute... This is complex stuff. But I think you're naming kind of the unspoken agreement that companies will only engage in the civic and political arenas where it advances their business and stay out of what will benefit society as a whole. And I think that's what we need to question.
For one thing, the foundational economic principles don't work if companies alter regulations or subsidies or tax policy to benefit the business in a way that undermines society as a whole, right? So we need to put boundaries on that first category that you say has been perceived as more legitimate, but it's got consequences and we need to look at that. And the second is business, including small businesses through their associations, have an enormous effect on what benefits society as a whole. But I think the distinction you're pointing to is whether they invest in the institutions in whether markets provide opportunity, for example, versus societal outcomes and trying to mandate income distribution, and that gets a little trickier because businesses for sure are not elected, not accountable, don't go through the civic deliberations or elections and all that. So that's where I would draw the line. Does that make sense?
Tony Lee:
It does, that makes perfect sense. There's one other area I wanted to discuss with you, which is, we have seen a real change from a generational standpoint in terms of employee involvement in social issues and social change and the pressure that they're putting on their companies. I'm just wondering if you think that the generational differences are coming to play, or if you feel like everyone's kind of joining together, and what we can expect moving forward, as I guess, generation Z becomes even more vocal about what they expect from their employers.
Elizabeth Doty:
Yeah, that's right. We do surveys in our dialogues with our network, and everything we're hearing is the employee voice, particularly the younger employees where companies need to recruit, retain and motivate talent, that's the primary impetus and motivation right now. And as I said, I think that's a sign of systemic issues. But that younger generation is really calling companies to this. And we've even heard examples where executives don't see the societal issues as legitimate. For example, aren't convinced that climate change is real or human caused, but do respond because their employees are concerned. So we are seeing that.
I guess, we need to have an intergenerational dialogue. Many young people are questioning capitalism and they're questioning it because of how it's currently practiced. And I think the common ground is where does business intervene in the economic rules of the game and how the free enterprise system is working. I think that's a place where we could actually clarify common ground and a legitimate role for companies, where some of the older generations right now are hesitant to follow where the younger folks are leading.
Tony Lee:
Boy, talk about a topic that we can spend more time on.
Elizabeth Doty:
Yeah.
Tony Lee:
That's a big one.
Elizabeth Doty:
It is. I can't think of a more important conversation right now though, can you?
Tony Lee:
No, I think we'll have to have you back. A huge thank you to Elizabeth Doty for joining me to discuss business's expanding role in addressing social issues. Before we get out of here, I want to encourage everyone to follow All Things Work wherever you listen to your podcasts. And also listener reviews have a real impact on a podcast's visibility. So if you enjoyed today's episode, please take a moment to leave feedback and help others find the show. Finally, you can learn more about All Things Work and find all our episodes on our website at sherm.org/ATWpodcast. Thanks for listening, and we'll catch you next time on All Things Work.
Speaker 1:
All Things Work is sponsored by UKG. Your business is important to you, and the best way to improve your business is to improve the lives of your people. UKG develops HR and workforce management solutions designed to take care of your employees, because when they feel supported, connected, and appreciated, your business will transform from a workplace into a work of art. UKG, our purpose is people.