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Is corporate culture like friendship: based on trust and investment?

Should companies get the benefit of the doubt? Ioannis Ioannou argues we need to accept companies can be good and bad at the same time.

By Ioannis Ioannou 11 September 2012




Despite its revival in the media as the potential source of all evil in the business world, corporate culture remains a concept that is difficult to define. The lack of a clear definition means some people use a vague notion of corporate culture as a scapegoat for accidents such as the Deepwater Horizon oil spill, or for potential cases of corruption like the Libor scandal.

It is important to note that UK corporations may be convicted of manslaughter or even homicide under the Corporate Manslaughter and Corporate Homicide Act of 2007. Specifically, section 8(3)(a) states: "The jury may also consider the extent to which the evidence shows that there were attitudes, policies, systems or accepted practices within the organisation that were likely to have encouraged any such failure as is mentioned in subsection (2), or to have produced tolerance of it."

The wording of this part of the law perhaps also reflects the way many people perceive the modern corporation. We tend to anthropomorphise businesses, treating them in the same way we treat our friends. If our friends "betray" us by not acting in the way we expect of them in terms of loyalty and honesty, we lose trust in them and may even cease to be friends. Similarly, if businesses engage in "bad" practices that do not follow some code of conduct that we, as a society, deem appropriate and acceptable, we discontinue our transactions with them.

A number of surveys suggest that trust in business has been steadily declining in recent years because of major scandals, such as Enron, and the financial crisis itself. Yet in an era in which humans are for the first time having an adverse affect on the Earth's ecosystem, trust in business is a topic within the broader discussion of whether modern corporations will contribute to a resolution of the planet's most urgent and challenging problems.

This is also an era in which the very notion of sustainability for corporations is extending beyond the economic domain; instead becoming the foundation of business models that synergistically generate social and environmental value, as well as economic. It does this by harnessing innovations that address the long-term needs and expectations of numerous stakeholders while trading-off short-term pressures.

We would be suspicious of a person who behaves ethically and unethically at the same time, but we should understand that the case is different when we talk about corporations; especially for those that have embarked on a journey to become sustainable. To anthropomorphise corporate cultures – as we do for legal reasons – would be equivalent to demanding they do "good" things all the time. Yet what we need to accept is that companies, unlike individuals, can be "good" and "bad" at the same time.

For example, there have been serious concerns raised about whether some of PepsiCo's products are linked to obesity and diabetes, yet the company has cut its global water consumption by 16 billion litres since 2006: an impressive achievement.

So, is corporate culture like our friends? Well, in some ways it is. Friendships are based on trust and cultivated over time, requiring effort and investment. The same is true when deciding whether to trust a given corporate culture as a sustainable one. We need to understand that such cultures take time to emerge; they require the establishment of a strong foundation in the form of organisational governance, stakeholder engagement, longer-term horizons, transparency, accountability and trustworthy communication with constituencies.

In the same way that our friends' characters evolve, corporate cultures also evolve and adjust, but they are susceptible to more errors, given the tremendous task of embedding and mobilising a diverse community of individuals. Accordingly, I would argue, they are entitled to be given a larger benefit of the doubt; particularly when they make significant effort to rectify past errors. Public opinion data from GlobalScan suggests BP is gaining back some of its environmental reputation as a result of its response to the Deepwater Horizon spill.

Of course, not all businesses are capable of establishing sustainable corporate cultures that allow us to trust them fully to be "good" all or even most of the time. But then again, we do get to choose who to trust as our friends, don't we? Even if they sometimes make mistakes.

This article first appeared on the Guardian here

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