Manufacturing & Society: Leading Execution

June 15, 2005
Once companies define corporate social responsibility and devise strategies, CEOs and other senior executives must creatively and effectively take the next step: lead the implementation.

Defining social responsibility and devising corporate strategies are but two steps, although vital steps, in the difficult, dynamic and continuing job of connecting manufacturing and society. However, without executive leadership, definitions, be they broad or narrow, and strategies, be they simple or complex, aren't worth the computer memory space they occupy.

"What executives in today's world have to do is . . . be ethical leaders," insists R. Edward Freeman, a professor at the University of Virginia's Darden School in Charlottesville and academic director of the recently created Business Roundtable Institute for Corporate Ethics. "Ethics can't be what I like to call laminated ethics -- laminated on a card or plaque."

Manufacturing executives need to be like Steven R. Loranger, chairman, president and CEO of ITT Industries Inc., White Plains, N.Y. "You do have to jump on [ethical lapses] with dispatch," he stresses. In a discussion during the past year about international sales agents and how much completing a business deal is worth to him, Loranger said that if there were any question, any question at all, about the ethics or legality of a deal, he didn't want the business. "I made it clear that I was going to be absolutely non-negotiable on the subject of representation agreements and what constituted the right level of transaction," he relates. Loranger was telling employees not only is it OK to do the ethically right thing, but also it's what he expects. "You [as an executive] have to let the organization know that you are going to back them up," he emphasizes.

To be sure, corporate social responsibility is about ethics. But it's also about respecting human rights, recognizing diversity, protecting the environment, promoting education. Corporate social responsibility is about relating to employees, to customers and to the communities in which the company does business. In bottom-line terms, corporate social responsibility is about creating value with values. And that may challenge CEOs and other senior manufacturing executives in some new ways.

CEOs and other manufacturing company leaders "need to understand all the traditional production issues and marketing issues," acknowledges Jane Nelson, a senior fellow and director of the Corporate Social Responsibility Initiative at Harvard University's Kennedy School of Government in Cambridge, Mass. "But they've got two major new challenges: [first] understanding the complexity of all [the] social, environmental and political trends and what they mean for their industry and companies. And secondly, they've got to be able to operate across traditional boundaries. They've got to understand different stakeholder groups. They've got to be able to develop new kinds of relationships," she says.

"The question is whether the world's most important business leaders can transcend their immediate competitive pre-occupations and formidable strategic requirements to create something more for the society in which the operate and on which they depend," writes Jeffrey E. Garten, dean of Yale University's School of Management, in "The Mind of the CEO" (2001, Basic Books). The answer to the question that Garten posits is, "Yes, they can." But will they? There still are far too few inspiring examples of CEOs and other senior manufacturing executives who have moved from defining corporate social responsibility and devising corporate strategies to creatively and effectively leading its execution.

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