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October 27, 2009
Shared Value—The Future of Corporate Philanthropy
I had lunch today with Charles Moore, President of the Committee Encouraging Corporate Philanthropy. It is the tenth anniversary of the CECP, which was founded by the late actor Paul Newman, John Whitehead, former CEO of Goldman Sachs, and real estate magnate Peter Malkin. Today there are 150 members, from GE to Time Warner to GlaxoSmithKline.
Moore described the changed mindset of corporate chieftains about corporate philanthropy, namely “companies are merging business strategy with social strategy, with a goal of maximizing profit. The new mantra is Shared Value.”
Moore stated that companies embracing Shared Value are no longer content to make donations to non-profits. “Companies will sub-contract the implementation of Shared Value programs to non-governmental organizations but will retain the general contractor role for themselves.” Therefore the non-profit sector must adapt from complete programmatic control supported by philanthropy to partnership with private sector with tangible outcomes.
“The smart enterprise will go into the community to find relevant issues, then will do a test phase. The evaluation will be based on Outputs (e.g.--how many bed nets are distributed to fight malaria) and Outcomes (did the incidence of malaria drop in test markets and was the program run in efficient manner). Moore cited statistics from CECP, whose members spend 38% of total dollars in strategic corporate philanthropy, 10% in cause related marketing and 50% in reactive charitable donations linked to executive membership on boards or community requests.
The role of the Chief Giving Officer, often the director of the corporate foundation, will likely evolve, given the new demands for programs where “green is green.” Moore praised a GE effort to build health clinics in four African nations, using its power and medical equipment. He suggested that every annual report should have a section on Shared Value, not be relegated to the annual corporate social responsibility report. The programs must also “make sense to the employees. The employee must be able to connect to the values of the company.”
The concept of Shared Value squares with the demand for Mutual Social Responsibility pointed up in the Edelman goodpurpose Study of 6,000 people in 10 countries released this week.
We found that social purpose is the new status symbol, with:
- 66% said that it is not enough for business to give money for causes; they want CSR ingrained in the business operations.
- 54% said they would prefer a job in a company that gives back to society above a job that offers more annual income.
- 67% said they would switch brands if the competitor supported a cause
- 67% said they were more likely to trust a company that addresses social concerns
- 67% prefer a hybrid over a luxury car
- 83% would be willing to change their consumption if it helped make the world a better place to live
- 56% believe the interests of society and the interests of businesses should have equal weight in business decisions
We are in an Age of Immediate Justification, replacing the Age of Immediate Gratification.
Posted by Edelman at 6:08 PM |
Comments
Richard - very interesting topic here with several great takeaways.
You've highlighted this topic at a macro-level, mentioning global enterprises such as GE, Goldman Sachs and Time Warner. My curiosity peaks in how corporate philanthropy and the emerging "Shared Value mantra" lives at a micro-level, small business scale. Of course, Fortune 500 enterprises (such as those mentioned in this post) have incredible resources driving both a substantial and measurable Output and Outcome. However, what application can be applied from the perspective of a small business? As PR agents, should we make a point to encourage our clients of this Shared Value notion, while being sure to practice what we preach? I'd would say yes, especially to the latter.
I think the lesson to be learned here is that there must be a goal - as in any successful PR/business campaign - regardless of the corporate philanthropic reach. After all, the SBA recently reported that small businesses encompass more than half of the private sector employees.
The potential reach to do good is pretty incredible, wouldn't you say? More importantly, for those in the very early stages of their career, like myself, we must be aware of how we can accept responsibility and help drive this notion of accountability.
Great lessons to be learned at any level though, Richard.
Posted by: Steve Mnich at October 28, 2009 5:26 AM
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| TrackBackOctober 19, 2009
Under the Buttonwood Tree
I attended the Economist Magazine’s First Annual Buttonwood Conference on Friday, which offered a perspective on the future of the financial services sector. The event could not have been better timed, given Goldman Sachs’ announcement that it would accrue a record $16.7 billion in bonuses for 2009, while Bank of America CEO Ken Lewis forfeited his 2009 compensation. I was one of the speakers on a panel on Restoring Trust in the Financial System. Here are key points made during the day:
1) Larry Summers, chief economic advisor to President Obama, said that it is not appropriate for government to set levels of compensation for bankers but it is entirely reasonable for government to have a voice in the structure and form of incentive compensation. “The system will work best if there is a new regulatory framework,” he added. “All financial institutions benefited from the government bailout. The banks and insurance companies were saved by the American taxpayer for the greater good, not their own good. This has created a new social compact between the financial sector and society. We do not have to bribe those responsible for the problems to accept a consumer protection agency—it is a matter of Profit and Prudence.”
2) Professor Jeff Sachs, Columbia University—“There was a level of recklessness by regulators. How can you allow credit default swaps to grow to $62 trillion in value in 2007 without regulatory review?”
3) Professor Niall Ferguson, Harvard University—“Let’s not go back to financial services of the 1970s when we had exchange controls, interest rate equalization and national markets. This was a problem of insufficient capital reserves, excessive leverage and excess consolidation of financial institutions.”
4) Elizabeth Warren, Chair, TARP Congressional Oversight Panel—“We need a consumer protection agency. How can we allow banks to cash customer checks at the end of a day to maximize overdraft fees? When you go through to the last two lines of the small print on your VISA card statement, you notice a provision that allows the issuing bank to charge whatever rate of interest it deems necessary. Is this right?”
5) Deven Sharma, President, Standard & Poor’s (disclosure: Edelman client)—“We need a new level of transparency in the markets. S&P is now explaining its models, how it came to its ratings on a given security. The assumptions we use are now in the public domain.”
It is a moment of great peril for the financial sector. There is a “disconnect between Main Street and Wall Street,” said Summers, particularly around incentive compensation, both in its size and terms. A return to the status quo, where banks put capital to work in high risk trading ventures and not into loans for small and medium enterprises, is not acceptable to stakeholders except for the shareholders. Perhaps it is time to take a page from the playbook of the technology sector, the highest ranked in terms of trust. Tech is a success because it provides products that improve our lives, is an enlightened employer and has leaders willing to stand up as advocates on important global issues from literacy to competitiveness.
Matthew Bishop, US business editor of the Economist and author of a forthcoming book, The Road from Ruin, says it eloquently, “Though it is often possible for firms to increase their profits in the short run by doing things that hurt society, long term profit maximization for business as a whole requires that companies operate sustainably and give back to society…for too long capitalism’s supporters have been content to agree with its opponents that it is a system built solely on greed. ..The road straight ahead involves preserving the much that is good in capitalism while finding ways to make it work better.” Following Bishop’s advice, bankers should construct a virtuous circle of innovation, explanation of product, regulation to assure good behavior, fair pay to attract talent and strong returns to shareholders.
Posted by Edelman at 4:53 PM |
Comments
Russell L. Ackoff, one of America’s premier system thinkers, advocates idealized redesign to dissolve tomorrow's crisis...today. Idealized redesign assumes that the system at issue was destroyed overnight and policy makers attempt to design a new system not be solving its current problems but to DISOLVING the system’s problems. Dissolution is attempted by considering all meritorious features worth considering, on the bases that all options are available for consideration.
Few can argue that we haven’t had a “catch-as-catch-can” style of financial innovation, since the repeal of Glass-Steagall, i.e. regulators being behind the curve on innovation. This is not tolerated in the Pharmaceutical Industry, thanks to the Food and Drug Administration.
If Pharma’s innovation can thrive, with pre-approval, why can’t Wall Street’s?
Posted by: Hugh Campbell at October 19, 2009 10:06 PM
Richard:
I so appreciated that you reported on this. The fact that Goldman could announce in this economic climate the massive bonuses that are in the works, is not only outrageous, but a bad PR move. The fact that they have launched a PR campaign that includes an "explanation" of their rationale to possibly offset the expected outrage, is in itself a strategic misstep. I just wrote in my blog today www.pollackblog.com, a suggestion for a different stance that would make for a far better story and one that could possibly turn exiting negative perceptions of the company round.
Noemi Pollack
Posted by: Noemi Pollack at October 21, 2009 3:57 PM
Great blog posting. I particularly liked the Summers' quote about "the disconnect between Wall Street and Main Street." That has never been more true, although that gap exists even in good times.
I look forward to more informative postings like this!!
Respectfully yours,
Jeffrey Krames
jeffreykrames.com
Posted by: Jeffrey Krames at October 26, 2009 9:56 PM
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| TrackBackOctober 12, 2009
The First Tycoon
Over the weekend, I read T.J. Stiles’ biography of Cornelius Vanderbilt, titled The First Tycoon. For those of you who pass through Grand Central Terminal in New York City, built by Vanderbilt to house his multiple railroad properties that converged at 42nd street, take a look above the clock on the south side of the building to see a giant statue of the entrepreneur (it was originally above his West Side freight terminal near our new office near the Holland Tunnel). Vanderbilt emerged from humble roots to dominate first steamships, then railroads, amassing a $100 million fortune before his death in the late 1870s. He perfected the modern corporation, using the public company structure to raise the vast sums necessary to build railroads or acquire weaker competitors.
As I finished the book, I pondered the relevance of Vanderbilt and his railroads to today’s economic issues. Stiles observes that post Civil War America was in transition from an agricultural economy in which business was “limited in size and personal in nature.” The huge amounts of capital required for rail infrastructure required “corporations that were a means of financing large public works without inflating the size of government---yet they were private property.” Stiles notes, “The power of the railroads gave rise to demands for a stronger government to control them…To the American public, Black Friday suddenly illuminated the way in which new corporate and financial reality inundated the national landscape. Now because of the increasing financial integration of the country, the fears and hopes of a few hundred men on Wall Street could shake the nation.
In the wake of the stock market crash and subsequent recession in 1873, Charles Francis Adams (grandson of one president, son of another) wrote an article on the Erie Railroad scandal, in which Wall Street tycoons Fisk and Gould battled Vanderbilt for control, stating, “The American people cannot afford to glance at this thing in the columns of the daily press and then dismiss it from memory. It involves too many questions; it touches too nearly the national life…Already our great corporations are subjecting the state to their own control…Vanderbilt has combined the natural power of the individual with the factitious power of the corporation….he is but the precursor of a class of men who will wield within the state a power created by it but too great for its control….As trade now dominates the world, and the railways dominate trade, his object has been to make himself the virtual master of all by making himself absolute lord of the railways.”
Ultimately, Vanderbilt became the benefactor of a new university bearing his name in Nashville, Tennessee, which softened his robber baron reputation. He also engaged with financial reporters to explain the Panic of 1873, decrying the use of excessive borrowing for reason of financial speculation. In the end, he is seen as a swashbuckler, a self-made man and unreconstructed capitalist. But the period that followed his death saw the Grange movement in the heartland, demanding rate regulation of railroads, and investigation of Wall Street practices.
The financial services industry is to global commerce what the railroads were in the 1870s. The bankers hold same power over farmers, entrepreneurs, and communities, given that access to capital is the key to business success. All business is affected by the negative perceptions of Wall Street. Financial innovation, from collateralized debt obligations to securitized investment vehicles, is now regarded with suspicion. Given the necessity of government bailouts of financial institutions a year ago, there is general resentment of outsized incentive compensation based on short term performance. Banks and insurance companies rank at the bottom in trust in our most recent Edelman Trust Barometer data from June, 2009, while reducing excessive compensation is the number one way for business to regain trust.
It is necessary for bankers to understand the need to explain the “how and why” of specific financial instruments (eg credit swaps) and the benefits of their activities. There is also public demand for shared sacrifice; the risk of populist backlash at the end of the year is substantial given that 2009 bonus accruals at Goldman Sachs are now at 2007 levels. I will be on a panel entitled ‘restoring trust in the financial sector’ at the Economist Magazine’s Buttonwood conference on Friday. I will post over the weekend to give you a sense of the discussion.
Posted by Edelman at 5:40 PM |
Comments
Richard,
The banks and insurance companies are easy targets as regards financial outrage and malfeasance, but this is not new. It has been one year, and you read the same things I do in the NYT-it is business as usual, and the lack of contrition by the banking heads has become a non-story.
There should have been a 9-11 styled commission to investigate what they knew and when, but it won't happen now, unfortunately.
For heads of multinational banks-who are paid a good sum to anticipate turns in the market-and engage the best minds to do such forward planning, it boggles the mind to have seen them sit in front of a Congressional panel, all say they had no idea, never saw it coming, if only they could have known better..Outrageous, and no one disagreed. How do you expect them to explain credit swaps, and at this point, who cares?
Restoring trust goes well beyond the scope of reducing excess compensation (and "excess" can be argued ad infinitum).
I suggest the only way to do it is from the ground up. Have those in financial service institutions who are not highly paid but highly motivated get actively involved with reputation management and take some of it away from the Comms people. Reputation management resides with each person within the company, not merely those at the top. If (and a big "if") they care about their company, theyre far and away the best spokespeople.
Curious what comes out of your roundtable.
Posted by: Neal Horwitz at October 15, 2009 4:12 AM
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| TrackBackOctober 2, 2009
57 Years Young
We held the official opening of our New York office last night with a reception for clients and staff. The party was timed to coincide with the 57th anniversary of the founding of the company by Dan Edelman. I thought you would enjoy seeing the painting of my father that is in the 16th floor lobby at 250 Hudson Street.
Why did my dad, who was director of the Toni Company, decide to go out on his own? He was prompted, according to family lore, by a visit from Bill Ruder, co-founder of Ruder and Finn, who sought the Toni account. Dan was not overly impressed by the RF offer, nor was he happy about Mr. Ruder flirting at dinner with his then girlfriend, now my mother, Ruth. Dan walked into the CEO’s office at Toni, unveiled his plan, and was told to pack his bags. But the co-owner spoke to Dan a half hour later and promised that Toni would become Edelman’s first client.
I recited a prayer for a new office given to me by my Hebrew tutor (yes, even at my late age, trying to master the language), followed by the poem "To Succeed” by Ralph Waldo Emerson. I attach them for your reading pleasure.
May the owner of this business be blessed
And always find success in whatever he faces.
May his livelihood increase in abundance
And may it always be close to the city.
May God send this business success and much goodness
And in this place may happiness be forever pervasive.
To Succeed…..
To laugh often and love much, to win the respect of intelligent persons, and the affection of children; to earn the approbation of honest critics and endure the betrayal of false friends; to appreciate beauty, to find the best in others; to give one’s self; to leave the world a bit better, whether by a healthy child, a garden patch or a redeemed social condition; to have played and laughed with enthusiasm and sung with exultation; to know even one life has breathed easier because you have lived – this is, to have succeeded…. Ralph Waldo Emerson
I concluded by paying tribute to our clients and to our people. They have enabled us to operate as a private, ethical and creative enterprise.
Posted by Edelman at 2:49 PM |
Comments
Huge congratulations to you and the juggernaut known as Edelman! What a company have created. I wish you all only the very best in the coming exciting years.
Barry
Posted by: Barry Collodi at October 2, 2009 4:45 PM
Great story and posting! Still one of the highlights of my time at Rockfish Interactive has been the meal and visit with Dan and your family in his home. What a terrific entrepreneur and successful company to admire and learn from. Thank you!
Posted by: Kenny Tomlin at October 2, 2009 11:10 PM
Thanks for sharing the insightful anecdote on the founding of Edelman - and for ending with some of Emerson's most inspirational words. I've had that poem tacked up on every desk/office wall since I began my career and turn to it often.
Posted by: Jess Flynn at October 5, 2009 9:40 AM
Thanks for sharing the RF and Toni story, and continued best of luck to you and your NY office.
All my best, Thomas
Posted by: Thomas Graham at October 9, 2009 1:19 AM
Congratulations to you and your talented team. The story presents an interesting image back to the 50s.
Posted by: Johnny Zhang at October 12, 2009 3:30 AM
Your blessings so thoughtful, and kind.
Best wishes for continued success in a crazy world that needs more dreamers and visionaries who can make things happen with integrity, collaboration and considered impact.
C
Posted by: Carol Cone at October 12, 2009 6:32 PM
CONGRATULATIONS!! Belatedly. So delighted for your blessings!
Posted by: Linda Stone at October 16, 2009 2:44 AM
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| TrackBackOctober 1, 2009
Comments: Appropriate Forum for PR?
One of the joys of web-based media is the continuing conversation in the wake of posting of an article. The ability of readers to add to story, to bring colorful anecdotes or personal experiences to bear, shows the wisdom of BBC’s Richard Sambrook, who said that, “The crowd is on the field and playing in the game.” The launch of Google’s Sidewiki earlier this week, prompted me to think about -- how should PR folks participate in robust discussions?
I posed the question to Raju Narisetti of the Washington Post, Larry Ingrassia of the New York Times, Alan Murray of the Wall Street Journal, Eric Hippeau of the Huffington Post and David Weinberger, senior research at Harvard's Berkman Center.
1) Tone: Statements that are considered offensive are taken down or never posted. Readers can also object to comments that have been posted and persuade editors to take them down. Ingrassia of the NY Times said “We winnow out comments that are nasty or personal or off-point.” Different sites will have different rules for what's offensive.
2) Who Can Post Comments: The Wall Street Journal limits comments to subscribers or those registered to leave a comment. The WSJ also enforces a real-name policy, which Murray contends “has a wonderfully beneficial effect on the quality of our comments.” There is a screen that allows users to limit comments to only those from subscribers.
3) Who Decides Which Comments Are Posted: At the NY Times, an editor or web producer “looks for a variety of viewpoints on a topic.” At the Washington Post, the “call is made by editors in the Interactivity group, “said Narisetti.
4) Eliminating Trolls: To prevent “astro-turfing by trolls who generate massive numbers of form letters,” the Huffington Post actively moderates its comments (note that it has two million comments per month and considers this citizen journalism as important to its community as original articles on the site).
5) Third Party Comment: Weinberger believes it's perfectly acceptable for PR people to prompt a third party expert to jump into the commentary. “These comments must add to the discussion,” he noted. It is not necessary for the expert professor to disclose that he had been contacted by a PR firm asking him/her to make a comment. If the professor is under contract to a client, such disclosure is mandatory, he added.
6) Sidewiki: Weinberger told me about the new Google tool that allows readers to post comments on Google spaces that are appended to relevant articles. This is a way to guarantee that your point of view is posted, even if not on the media’s own server. In fact there will be parallel conversations ultimately on media sites and on Google Sidewiki.
The best practice for a PR professional is to be an active participant in conversations--as long as we are transparent about our clients and motives—by providing substantive material that contributes to peoples’ knowledge, in addition to working with the client to contribute to media’s discussions on their own sites, blogs etc. Sidewiki is a helpful new tool but does not replace the need to rapidly submit comments to media that help correct the record.
Speaking of comments, as always, I appreciate hearing your views.
Posted by Edelman at 3:36 PM |
Comments
I agree 100% that PR professionals should be able to participate in online conversation. Commenting creates dialogue that can point out issues or problems and jump-start the solutions. Both of these can be invaluable to a company and its products or services. As long as you're forthcoming and transparent about who you are, I see no problem with engaging in conversation.
Tessa Carroll
VBP OutSourcing
www.vbpoutsourcing.com
Posted by: Tessa Carroll at October 2, 2009 11:10 AM
Ironically (sort of), I should point out that I am currently engaged in a for-pay consulting project for the Edelman company, not directly related to Richard's post. Also, I count Richard as a friend.
While I'm here, I might as well reinforce one of this posting's views. I think one of the ways a PR group can help a company engage in the new conversational world is to help that company think through the "rules of the road" for comments, i.e., a list of what's permitted and what isn't, easily findable by those who are thinking of responding. In particular, the PR folks can help the company commit to maintaining the maximum degree of openness it can.
Posted by: David Weinberger at October 2, 2009 2:59 PM
One other important consideration is, "Who reads the comments?" In the UK, for example, some journalists who blog regularly read the comments they get, whilst others pretty much totally ignore them (not ideal, though perhaps understandable if they get very large numbers).
If a journalist reads the comments on their own piece, then that opens up a different route to engage with them, especially if they are someone you wouldn't otherwise get a conversation with.
Posted by: Mark Pack at October 3, 2009 8:53 AM
As a student of PR and currently working as an intern for Brigham Young University's PR department I find this information incredibly helpful. It's hard to know if we or one of our professors should try to be part of the conversation and what exactly is being transparent to a reporter and to their readers.
I really like that Weinberger stated he is accepting of PR professionals prompting a professional to add to the conversation, I feel that many of our professors at BYU can add greatly to a discussion about current research in the area. I have two question I would like to pose to you, that maybe you were able to learn from your conversations. Is it okay for a media manager or PR professional to add to the conversation for their expert, being completely transparent of course, if they are adding to the conversation and stating the research? And how can PR professionals can become part of the conversation on new media such as in Facebook groups or on Twitter?
Posted by: Ashley Fickenwirth at October 6, 2009 12:16 AM
Really like the idea expressed in the statement about the Huffington Post about how they get "two million comments per month and considers this citizen journalism as important to its community as original articles on the site". This seems to capture perfectly the current malleability of ideas on the net.
Google Wiki takes this to its next logical level where the line between original post and comments suddenly blurs even more. Take that even further by applying the ideas that lie behind Google Wave and suddenly a blog post becomes more like a construction site with multiple authors building a single article at once, discussing and amending the text in real time. In such a dynamic environment, there is certainly an opportunity for a PR professional to co-exist but only as a fellow collaborator.
Posted by: Kevin Broome at October 13, 2009 12:14 PM
The idea of having an open channel of communication between the PR professional has not only become a useful tool but also a necessary device to acquire feedback and criticism of whatever is being discussed.
There is nothing more valuable in marketing and public relations than knowing what people are thinking and feeling. Before the use of social media, this kind of information was available, but not at the level it is today.
Although there has to be a certain level of control in regards to the feedback that is posted, readers should be privy to the comments others have made, rather than creating a conversation with just the writer. Furthermore, the PR professional should be the most active in the conversation in order to gather as much information as possible as well as provide as much information as possible.
If in fact there is too much censorship and control over the conversation, in regards to what is being posted or commented on, doesn't it defeat the purpose of creating this social media outlet altogether?
Posted by: Jeff Wood at November 2, 2009 8:03 AM