A Road Map to Run a Business with Integrity

By Henry J. Schumacher

A business strategy favoring shareholders and short-term corporate management is driving widespread income inequalities, corruption, human-rights violations and unprecedented environmental damage.

Luckily, business leaders increasingly recognize the need to change. There is growing acknowledgement that companies will have to broaden their understanding of purpose, making sustainability, stakeholder partnerships and income sharing the new business strategy.

In redefining the purpose of a company, the company serves its customers by providing value proposition, supports fair competition, has zero tolerance to corruption and pays its fair share of taxes.

Unfortunately, however, numerous attempts to implement positive change by committing to standards such as the UN’s Sustainable Development Goals and voluntary standards on Environmental, Social and Governance have been undermined by the inability to enforce standards in a consistent manner. Inconsistency in practice has resulted in ineffective implementation.

This shift toward a broadened purpose of the company means that corporate anti-corruption measures also increasingly will need to expand their focus beyond their traditional emphasis on anti-bribery and compliance. For instance, a diverse management team can significantly enhance the openness of the leadership environment and mitigate bribery and corruption risks.

Running a global business and supply chain is subject to significant corruption risks, as many negative examples of corruption around the world show. Existing business integrity tools can provide useful recommendations and suggest good practice on how to prevent, or mitigate, corruption risks through comprehensive anti-corruption programs.

On the other hand, if business goals do not take a specific business environment into account, these tools and recommendations can underestimate the potential for tensions between conflicting goals for management and employees.

To enable all stakeholders to better understand a company’s progress to implement and maintain an open, diverse and fair leadership environment, a company should disclose its KPIs, or key performance indicators, measuring diversity at its various managerial levels.

A standard feature of calls for a renewed definition of business purpose is that businesses have a responsibility of improving the societies in which they operate, such as fairly paid jobs, including buying from local suppliers, and paying local taxes while also respecting human rights.

Overall societal vulnerability to corruption may increase if significant parts of society are unable to support themselves through a reasonable household income level, or if public finances are not sufficient to support public services.

In order for people to understand a company’s progress implementing and maintaining its commitment to each of the communities it operates in, a company should be transparent and disclose its corporate ownership structure and country-by-country metrics, in particular around tax payments.

Corporate political engagement can contribute to society, if it advances the interests of a broad range of stakeholders. However, if political engagement creates undue influence on, or unequal access to, political decision makers, there is a risk of skewing policy decisions away from the public interest.

Another key measure that would show companies are truly committed to a new way of doing business would be to enable stakeholders to understand a company’s progress implementing and maintaining transparent and multi-stakeholder engagement processes in a consultative way.

In coming years, as the links between corporate models and behaviors and societal impacts become ever clearer, pressure on companies to prove they are putting words into action is only going to get stronger.