Tammy Grimes died earlier this week. For those of you not familiar with that name, you may well know the name of the Broadway musical which catapulted her to fame, The Unsinkable Molly Brown. Grimes garnered a Toni in 1960 for her performance and won a second Toni in 1969 for her performance in the revival of Noel Coward’s Private Lives. According to her obituary in the New York Times, “Ms. Grimes was largely unknown in 1960 when she was cast as Molly, the rags-to-riches turn-of-the-century socialite-philanthropist who survived the sinking of the Titanic. The show’s producers, who clearly considered the music and lyrics by Meredith Willson more marketable than their female lead, declined to put her name above the title, which meant that (because of the Tony regulations of the time) she could be nominated only in the featured-actress category.” Yet she stole the show and made it her own.
Yesterday I concluded a two-part series on the future of stakeholder engagement based upon a Research Report (Report) issued by BSR. In the paper, authored by Alison Taylor and Sara Enright, they argue that transformative engagement for a more inclusive business is not only the right approach to take from a societal perspective but also from the business perspective.
They suggest a number of steps that companies can take to have a deeper, more strategic stakeholder engagement. These steps include companies training both employees and managers to identify pressure points with external stakeholders so they can be engaged in a thoughtful manner. Projects should start with a mapping process of internal stakeholders to ensure that everyone who needs to be involved is informed and prepared. It is better practices for companies to develop engagement plans that account for the whole organization, analyze business-connected activities that affect external stakeholders, and then ensure that the company has feedback mechanisms to capture all grievances and ensure remediation. As with any such initiative it must begin with management support so that key executives will understand the issues and encourage strategic decision-making based on stakeholder input. It is also best practice to form “advisory groups of stakeholders on different strategic issues to help the company engage stakeholders in deep discussions over extended periods of time.”
The steps can help if the company will “proactively reach out to develop a positive relationship with critical stakeholders before a crisis arises. Communicate often, with transparency and integrity, not just when the company needs something.” By committing “to integrating stakeholder input into business-critical decisions and build mechanisms to do so” a company will not only have stronger ties to weather storms but also have the groups in place to provide additional guidance and support when needed.
One of the things Roy Snell and I disagree on is whether a Chief Compliance Officer (CCO) or even the compliance function should be involved in this process. Many think it is too close to Corporate Social Responsibility (CSR) for the compliance function to be involved, let alone take the lead. However, I believe the compliance function is uniquely suited in an organization to help push a company towards the goals as laid out by the Report.
The compliance function should have the most touchpoints within an organization (that is if the CCO gets out of his or her office). By using these corporate connections, a CCO can bring disparate groups together for the engagement. Additionally, the Foreign Corrupt Practices Act (FCPA) compliance community was recently reminded that companies can get into trouble over charitable donations in the Nu Skin FCPA enforcement action. Not knowing to whom you are making a donation can be as FCPA-troubling as not following any other component of your compliance program. You must know the stakeholders you are engaging with and your company must perform a sufficient level of due diligence going forward. Simply reaching out to third parties without following the five-step process for third party management is a recipe for trouble even in the area of stakeholder engagement.
Moreover, what will these stakeholders be doing on your behalf? If they act on your behalf, the Department of Justice (DOJ) and Securities and Exchange Commission (SEC) will likely hold your company responsible if they commit a FCPA violation. This also means that the compliance function should train such stakeholders on what their role might be and then monitor the relationship going forward. While these might appear as impediments to a more robust stakeholder engagement, I believe they will actually enhance any such interactions.
Another reason is the stakeholder engagement and CSR are becoming issues which both companies higher in the contracting chain and governments, such as the US government, are requiring of their contracting counter-parties. I call this ‘business solutions to legal problems’. Scott Killingsworth has called this phenomenon “private-to-private” and has stated, “Embodied in contract clauses and codes of conduct for business partners, these obligations often go beyond mere compliance with law and address the methods by which compliance is assured. They create new compliance obligations and enforcement mechanisms and touch upon the structure, design, priorities, functions and administration of corporate ethics and compliance programs. And these obligations are contagious: increasingly accountable not only for their own compliance but also that of their supply chains, companies must seek corresponding contractual assurances upstream. Compliance is becoming privatized, and privatization is going viral.” This includes both CSR initiatives and stakeholder engagement.
I found the key element of the Report was the business applications of increased stakeholder engagement. Through strategic use of key stakeholders, well beyond simply shareholders, companies can not only increase their strategic outreach but also tap into a new source of business intelligence. The FCPA asks companies to know with whom they are doing business and how that business is conducted. These basic business inquiries can make companies more efficient and better run. By bringing the CCO and compliance function into the loop for increased stakeholder engagement, companies can leverage off compliance internal controls to create the best processes.
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