People + Strategy sat down with three prominent directors to discuss their timely insights on the role of board members in crafting company stances on ESG issues.
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The Boardroom Perspective on ESG
How can boards of directors juggle the increasing demands of employees and customers to be good corporate citizens while staying true to what's important to shareholders and the company's growth?
Dawn Zier, Directors Roundtable Editor, and
Adam Bryant, Articles Editor, interviewed three leading directors with deep board experience for their timely insights. Their comments were edited for space.
People + Strategy: Let's start with big picture. What role should companies play in society?
Glenn Welling: I saw the results of a survey recently that asked a large group of people who they trusted most—the government, the media, their employer, among other constituents. The most trusted constituent was their employer. Most people want companies to fulfill an obligation to be fair, transparent and impartial. They want to be proud of the place they work and want their company to be a good corporate citizen. I think the reason employees trust their employer more than others is because companies don't have a political bone to pick. We've all seen the backlash that's happened when companies stepped outside of the middle. My advice, to those inside the boardroom, is that we're not here to take sides. We're here to be good corporate citizens. We're here to engage our employees, give them a place where they can feel good about what they do when they come to work, and make a difference in the lives of people who use our products and services.
Andrea Weiss: All good businesses, in my view, have always thought about their community and where they do business. They've thought about their employees. They've thought about wages. They've thought about compliance to regulation. That's what good companies do. But I don't think that all companies belong on the point of the spear in trying to drive societal change. And what I'm seeing, at least from the standpoint of overall valuations, is that many of the companies that have chosen to go to that point have suffered from that, and their shareholders have suffered from that, too.
Susan Silbermann: There's been this interesting pivot toward companies as another major slice of the societal pie—but now a
talking slice—that we're actually expecting to hear from. We have issues that are so cross-cutting that I can't imagine that even the smallest company might not have to pipe up and answer questions such as,
What are you going to do for abortion? What are you going to do for same-sex couples who want to adopt a child? What are you going to do in light of the bathroom debate and transgender kids? Before, very few companies felt like they had to make a statement about it, internal or external. Now, regardless of what the issue is, you've got to really consider how it positions you, especially if you're a public company.
‘We’ve all seen the backlash that’s happened when companies stepped outside of the middle. My advice, to those inside the boardroom, is that we’re not here to take sides.’—Glenn Welling
P+S: Companies are facing a mounting list of demands from stakeholders. How should they prioritize these demands while staying focused on what's important to the business?
Weiss: There's a very small subset of stakeholders that is getting a very loud voice, and sometimes drowning out more centrist point of views. However, I do believe that it's important to listen to these challenges that come from various perspectives and to understand what they're trying to say. And when you do that, you'll find in some cases that the demands have very little to do with stakeholder interests, employee interests, community interests or even the shareholder interests. But clearly boardrooms are being particularly targeted to try to force action on some of these point-of-the-spear issues. We cannot and should not take a stand on all things.
Silbermann: You don't have to directly take a position on every issue. Sometimes you can align yourself with other organizations that will speak for you. In this new era of companies as spokespeople for society, liaisons with civil society—for example, nonprofits or nongovernmental organizations—have become even more important. If you pick the right partners, they will sometimes speak for you or at least stand with you—or you will stand with them. There are organizations that, while they may have had their own issues (like the Human Rights Campaign), they are still trying to make sure that companies are committing to the right political positions and policy positions in line with their mission and goals. They can be formidable foes, but they can be really important allies for companies, as well.
Welling: I think there's only one guiding light, which is to make sure all stakeholders are rewarded by focusing on creating and sustaining shareholder value. Why do I say that? If you focus on optimizing and sustaining value for shareholders, you have to provide great products and services to customers. You have to treat employees fairly so you have an engaged workforce. And you have to treat your suppliers fairly so you get the inputs you need to succeed with your business.
You're really seeing the impact of this now more than ever. I don't think there's ever been a time where the relationships with your employees and your suppliers were more important. There's no question the demands on managers today are at a level that I don't think any of us have seen in our careers. But, again, I think the guiding light is if you focus on creating and sustaining shareholder value over time, and you don't think of it as a short-term decision, then the prioritization and figuring out what's important really does fall into line.
‘I’m a bit jaded now because I see “purpose” being bounced around as a marketing buzzword, and there’s really not very much substance in some cases behind that.’—Andrea Weiss
P+S: Every company these days seems to be saying it is mission-driven and purpose-driven, but often there's a gap between what they say and what they do. How do companies move from being purpose-driven to having purposeful impact and do all companies need to pursue a loftier goal?
Silbermann: This is where the interplay comes in with the investor community. I don't think any company can pivot on a dime. So when you think about mission statements of large companies that have been around for decades, they've always had some sort of a vision or mission statement that made it sound as if you were practically joining the Peace Corps—that they're going to do such good things for the environment, for the people they serve and the communities they work in. Then you look at the reality and it's not entirely true—maybe not even entirely possible—because in the end they were, and still are, more beholden to their shareholders who are investing in them than they are in the environment, for example.
The reason companies are starting to pivot is because both investors and talent are changing. The new generation of talent as well as that of investors are taking these commitments more seriously and demanding action. They don't want to be a part of, or an investor in, a company that offers just lip service.
Welling: Every company is different. Some are created to be purpose-driven organizations and others just aren't. And that's ok. For example, we've all been to Peet's Coffee—nice coffee shops, good cup of coffee. I like their banana bread and muffins. But I don't think of Peet's Coffee having a purpose other than fulfilling my need for caffeine and sustenance in the morning. If the company has a purpose, it's unbeknownst to me, and I'm probably in there once a week.
On the other hand, I sit on the board of Black Rifle Coffee Company. We're a public benefit corporation founded by veterans. Over 50 percent of our staff are veterans or veteran spouses. We donate millions of dollars of our revenues and product to veterans, law enforcement and first responders every year. We're having a big impact on that community and that's why we were founded. But if we didn't have a great product with engaged employees delivering at a margin and a growth rate that generates wealth for shareholders, we couldn't fulfill our mission.
Two companies, similar businesses, but one of them was founded for a purpose. In that company, if you come to work there or if you come into a coffee shop to get a coffee, you know you're supporting the veteran, law enforcement and first responder communities. That's a purpose-driven organization. You can succeed as a purpose-driven organization and as a business that also generates wealth for shareholders. You can do both. But not every company needs to do both. I think it's an aspirational thing for companies to want to be purpose-driven. But to be genuine, it has to be part of the ethos of the company.
Weiss: I'm a bit jaded now because I see "purpose" being bounced around as a marketing buzzword, and there's really not very much substance in some cases behind that. When I see a company that has gone that route, it calls into question for me the authenticity of the organization's leadership on every dimension.
So when people pop it up on the website or put it on the pages of a pledge in
The New York Times, my radar is up because many of these organizations never had those purposes before and they've suddenly found them. They may be well-intended but they may not be going deeply enough into the power of what a real purpose and mission statement can do for the success of a company. By putting that thin veneer on it, they actually discredit the organization long term. People see hypocrisy and they see lack of authenticity, and in many cases, they quietly withdraw from that business.
‘From a talent attraction perspective, if you want to have a diverse organization—because you believe all the studies that diversity leads to better results—you’re going to have to work really hard to make sure that your policies and your positions attract people of all sides and don’t alienate people who don’t believe in the same thing.’ —Susan Silbermann
P+S: How do you foresee the current tug of war between employer and employee getting resolved?
Welling: When I ask managers what their biggest challenges are today, most of them show me an org chart with holes in it. This tug-of-war is simply a supply and demand equation. Given the flood of money the government injected into the economy, coupled with the lack of legal immigration over the last five to six years, we are short employees. Then there's the impact of the pandemic, and some people haven't been able to come back into the workforce. And you have the impact of people not wanting to come back to the workforce because they got paid to stay home. So, as a result, employees have more bargaining power and they're going to take advantage of that.
I believe people need to get back to their office to feel better about what goes on every day. I don't think that people being out of the office and out of that environment has helped this situation. It's much easier to resign when you're not seeing your friends and your boss every day. It's much easier to quietly quit if people don't see you. It will revert eventually, but right now and I believe for the foreseeable future, we're going to have more jobs than people.
Weiss: The future success model of work is tied to an engaged workforce. At one of the companies where I was a director, we put a tremendous amount of effort in valuing every single employee in every single role and tied them into the mission of that company to help people lead a healthier lifestyle. It didn't matter whether you were working at the call center, in marketing or packaging our goods. Everyone felt that they had some value in doing something that was important to the health of the people who were purchasing our product. One of the most important parts of our lives is work, so if people do not feel valued—I don't mean just compensated, but appreciated and connected—then it's not going to work.
There are ways for organizations to engage their employees in the decision-making process and make them feel heard. CEOs and human resource executives need to have great listening skills and seek to understand the employees' voice. Executives also need to have a voice to explain why certain things can or cannot be accomplished within the current structure of their company. There needs to be a dialogue. Shouting past each other is not going to solve for the dynamic of the future.
Silbermann: Employees always had more power than the employer, but they didn't have a voice. They didn't have people supporting that power, that ability to force a decision on something. The proverbial war for talent has made employers say, "If I want to attract the next generation of scientists and engineers and operators and customer service reps, I'm going to have to listen a little bit harder. I can't just shut it down, give them a raise and move on. I'm going to have to think about flexible work policies. I'm going to have to think about sabbaticals. I'm going to have to think about remote work and real community outreach. These are things that I never had to worry about before, because if they didn't like it, they could lump it and I'd go find somebody else."
One of the most important decisions you make is the hiring decision. If you're not getting candidates, it's because they don't want to work for your organization. And you as a people leader aren't going to want to work there either because you're held accountable for what your team can do.
I've always believed a good team and a mediocre product can still get great results, but a mediocre team and a good product are going nowhere. So the quality of the talent in an organization is critical, and if employers didn't recognize it before, they sure are recognizing it now.
P+S: Do you worry about politicization of the workplace?
Silbermann: While it has always been there, I feel that politics entered the workforce in a big way in 2016. It's going to be a long time before it recedes, and I doubt it will ever recede to the way it was before, when people would say, "You don't talk about this at work." I do think we're going to see companies that are affiliated more with the right and/or the left. I think you're going to get management teams that are being pushed to commit to where they stand on issues. And from a talent attraction perspective, if you want to have a diverse organization—because you believe all the studies that diversity leads to better results—you're going to have to work really hard to make sure that your policies and your positions attract people of all sides and don't alienate people who don't believe in the same thing.
Weiss: The biggest concern that people have is being cancelled. I've had people who have said to me, I'm afraid I can't express that perspective, whichever way it goes, because I'll be cancelled. And these are people who have important things to say. I feel like the pressure is everywhere. It's in journalism, it's in the boardroom. I've been fortunate as my boards have been more balanced. We're having more centrist conversations because we believe that a lot of the best thinking is ultimately much more toward the center than it is out on the extremes. I'm finding that my boards are trying to embrace a nonpolitical, more centrist approach. I have a lot of empathy for people who are in a position where they accepted a board or management role and they find that they are politically not aligned with other colleagues, and they're feeling the pressure.
Welling: Our world has gotten so politicized. This isn't the America we all grew up in. The survey I mentioned earlier tells me that most people want their employers to stay impartial. The loudest voices in the room may feel otherwise, but the majority just want to work in a safe place where they can do good things, make a good living and socialize with their co-workers. So yeah, I believe corporations should just stick to generating good returns, because by doing that they have more money to pay their employees. They have more money to pay their shareholders. They have more money to help their communities thrive. To me, this is simple and uncontroversial.
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