Character of the Corporation: ESG

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The following is an excerpt of a conversation that took place at MLR Media's Character of the Corporation conference.

Byron Loflin: What are the opportunities in ESG today that you’ve seen that companies or board members can think about?

John Wilcox: I think if you do a materiality assessment and determine which E and S issues are relevant and material to your business and how they are material, and what policies you adopt to deal with them, and how those policies are then in turn going to create value for shareholders or increase your sustainability or avoid risk, that is what you should be reporting.

Charles Elson: You’ve seen the television news. You’ve got one company that’s decided to go after one audience, and another company another audience. But that’s a little unusual in the sense that you’re cultivating a specific audience. When you talk about environmental or social issues, that’s hard because you want as many customers as you possibly can. That’s, to me, where it enters in. When you go beyond that, it becomes tougher. You never talk politics at Thanksgiving dinner. There’s a good reason for it. It ruins it. The more I’ve seen it play out, the more I think it became counterproductive.

Wanda Lopuch: Certainly, the line between politics and the strategy of the company is one of the top items that keeps CEOs awake at night. We all are trying. CEOs are trying to get a hold of the best people today. The best people have certain values. I was involved in a boardroom discussion where the company was debating the next location for operations. Three states were considered: Tennessee, Michigan and Texas. The argument was made that we have young people working for us with family, and these families have certain values. Women’s rights are human rights. And our employees will look upon that. The abortion stance of the state of Texas was an important issue in terms of the strategy of the corporation. From that perspective, it’s not that the companies are taking sides or trying to address social issues.

Elson: But in the state of Texas, or any state for that matter, if abortion is an issue in which this country is apparently very closely divided on both sides of it, any position you take is going to get someone angry. You’re offending those in your workforce who, in fact, oppose abortion. It’s an issue that I’ve always thought I’d leave it up to the courts and leave that up to the legislature. You can always justify one way or the other. Ultimately, you’ve introduced your personal values, your personal concerns, which are heartfelt and legitimate, into a process where others may have heartfelt views the other way. Is that the appropriate forum to resolve it? You don’t like a voting law. That’s why you have a Supreme Court. If you don’t like a decision on abortion, that’s what the electoral process is about. It’s hard sometimes to separate out one’s social or political viewpoints from one’s economic viewpoints, but I think you’ve got to in the corporate setting. Otherwise, everyone will be at each other’s throats. 

Wilcox: But you may not be able to exclude it. In your hypothetical, you would look at the abortion law, you would look at what the implications are, but then you also look at whether Texas is offering you a great deal of tax incentives. Maybe there is a labor force there that is excellent. Maybe those economic factors outweigh the political issue. Then you have to say, “If we’re going into Texas, this is going to be a political issue. This is going to be a human capital issue. How can we manage that? Well, we can have a health insurance policy that will finance the travel of our employees who need an abortion outside of Texas.” I think the more complex question is, if you make that decision, if you go to Texas and you do have these compensating strategies, do you also make a public stand? My personal view is that companies should, in most instances, try to avoid becoming a poster boy for a particular political issue. But, if asked, they should emphasize the economic, strategic and internal reasons why they’ve made decisions and de-emphasize the political aspect. 

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