the-problem-with-corporate-values

“Don’t be evil” —Google

“Creating a culture of warmth and belonging, where everyone is welcome” —Starbucks

“Include and empower” —Zillow

Corporate values sound really good. They’re positive, optimistic, and assert some sense of moral authority, which has become expected by consumers: A majority say they expect companies to take a stand on issues, whether they agree with the stand or not.

“Moral leadership in this country has been ceded to the corporations now. I don’t think anyone has much faith in politics taking care of people anymore. Corporations are sort of the default, and there’s a lot of pressure on them to do the right thing,” says Tyler Wry, a management professor at Wharton. One way corporations take up that mantle is through corporate values statements.

Corporate values statements are pervasive: About 80 percent of large companies have an official list of values on their websites. At their best, core values are spoken of as hallowed and immutable, the heart and soul of a company.

Despite the language of essentialism around them, though, corporate values don’t always track with company behavior (all the value statements above have come under fire for inconsistencies with action). Some of this is due to a lack of specificity and accountability in their rollout — you can’t expect people to change their behavior if they don’t know why or how — but the primary reason is that, despite lip-service to the contrary, the long-term vision that values require is not rewarded. US corporate governance norms are based on the shareholder value model, which enshrines maximizing shareholder profits as a company’s raison d’être.

This model in its most typical application operates at the expense of a labor and economic ecosystem. Looking at the workforce, we’ve reached a tipping point in this power imbalance triggering both individual and collective action. Employees are resigning at unprecedented rates, with many employees opting out of the system entirely. The gap in sentiment between big business and unions hit a record high favoring unions in 2020, with over half of employees saying they’d vote for a union at work. Labor laws currently favor businesses, but if the federal PRO Act passes, “it will be the most significant pro-labor legislation passed since the New Deal,” Zack Beauchamp wrote for Vox.

Despite rising incentives, when companies are unwilling to make governance and policy changes, it’s hard to see initiatives like extra time off or even pay raises as anything other than an attempt to placate employees in lieu of giving them more power. Without a shift to a more democratic model that emphasizes the health of all stakeholders, we’ll all continue to suffer the calamitous effects of profit maximization.

Corporate values are guiding principles and beliefs that serve as the foundation for behavior. These values are reflected in the decisions the company makes: who gets hired and who gets fired, what gets rewarded and what gets punished. Codifying values as a trend seems to have kicked off in 1994 with the publication of Built to Last: Successful Habits of Visionary Companies, which stressed the articulation of and commitment to core values and “cult-like cultures.”

Broadly speaking, values say what a company cares about. They refer to ethical characteristics like integrity and respect, strategic lenses like customer focus, and ways of working like collaboration (all four values listed appear on about 30 percent of value statements). It’s also become common to see social impacts noted on corporate value statements, like diversity and environmental impact.

Internally, values can guide the day-to-day employee experience, like a culture of feedback or innovation. They speak to expectations, both how employees are expected to behave and how they can expect to be treated. Externally, they articulate what customers and other parties can expect in their experience.

Corporate values’ primary purported purpose is to serve as cornerstones for company culture, but they are also integral as marketing tools, pitched to consumers and prospective employees. Leaders really like to talk about them: More than three-quarters of CEOs interviewed in recent decades in Harvard Business Review spoke about their company values, even when they weren’t specifically asked about them. This value-centric messaging strategy can pay off, at least hypothetically. According to a recent study from the Bauer Leadership Center at Washington University in St. Louis and Vrity, a brand measurement company specializing in values, 82 percent of people say they are willing to pay more money to buy from companies whose values align with their own, with 43 percent of respondents willing to pay twice as much.

On the recruitment side, company values may help attract and retain talent. Employers living core values ranked above benefits in an analysis of corporate culture elements most important to employees. They also may make employees more engaged, and engaged employees are productive employees.

The problem is, research indicates that values often don’t have a significant impact on making the world better. In an MIT Sloan study, researchers found no correlation between a company’s expressed values and how well employees felt they lived up to them. Diversity statements can do more harm than good. Environmental impact commitments fall short. The corporate values trend doesn’t seem to have much to do with values at all; it’s saying the right thing and doing nothing.

The first, perhaps obvious reason is that the highly subjective nature of value statements renders them nearly meaningless. Values are couched in the language of platitudes: respect, integrity, and even having a positive impact on communities mean different things to different people. There are some relative exceptions, like Netflix. Its actual values are no longer novel — they’ve been parroted by many tech companies — but the form embodies best practices, with a highly detailed culture memo of more than 4,000 words that takes a strong perspective on what each of their values means in context.

Netflix’s stated values range from the typical — respect, communication, and inclusion — to nuanced, company-specific norms like freedom as the explicit priority over error prevention. The memo includes statements explaining why they set these norms and examples of actions that support values. In at least some ways, it sets the stakes: The memo talks about compensation in line with values, having a fire-fast culture for those who don’t live up to them, and incentivizing people who want to leave to do so by fully vesting company stock options rather than requiring employees to stay for a certain amount of time to cash out.

In a more typical vacuum of process and operating principles, though, application and enforcement are up to interpretation. Especially as company policies tend to stress independent decision-making, this subjectivity puts employees at risk. In early 2020, for example, a US Bank employee was fired for bringing a customer who was stranded at a nearby gas station $20 with manager approval. (Her manager was also fired for approving the trip; the bank cited “unnecessary risk” and said it does not allow call center workers to meet with customers.) US Bank’s culture statement at the time was, “Our employees are empowered to do the right thing” (the language has since been changed to “We do the right thing”).

Doing the right thing is highly personal, and asks the question, the right thing for whom? The employee and her manager acted in a way consistent with their interpretation of the company values, yet were terminated without severance for “putting herself and the bank at unnecessary risk,” answering the implicit question with “the company.”

reported by Zoe Schiffer at The Verge, the DTC luggage company Away sold a vision of inclusion and a responsibility to make a positive impact. Leadership messaging was stacked with company values but characterized by employees as manipulative. CEO Steph Korey reportedly weaponized Away’s value statements to bully employees. One factor was the company’s insistence that conversations take place on Slack rather than email — ostensibly for inclusion and transparency, but also to monitor employee conversations. In this way, the values of “accessibility” can be used as an excuse to micromanage and “empowerment” as a pretense for overwork.

Inconsistencies in internal value application can attract negative attention and impact brand sentiment, but the effects are often temporary and do not catalyze substantive changes. “To a certain extent, it’s driven by news cycles. The company thinks that they manage these things with PR as opposed to action. I mean, it’s a cheaper solution,” says Wry.

Some of the bad strategy around values can be credited to sloppy implementation or because companies are going too “brand-first,” thinking about how they want to be perceived versus how they want to behave. The root cause, though, is that for most companies, no matter what they say, values simply are not a top priority.

This is not a moral judgment against corporate America but a simple fact of how corporate governance works in the United States. Values are a long-term commitment. Research indicates that prioritizing community and employee satisfaction does have positive long-term financial gains, but to actually live up to their promises takes resources, and as a rule, short-term financial priorities win out over any value statement, no matter how detailed.

This rampant focus on short-term financial gains over long-term sustainability and growth is born out of the shareholder model, which has been the norm of business governance in the United States since the 1970s. Introduced as the Friedman doctrine, it explicitly denounces corporate social responsibility and limits the goals of a company to maximizing shareholder profits. The longstanding defense of the shareholder model is it is the most likely to ensure the survival of the business, which is good for everyone. In practice, though, limiting the end goal of companies to making money for shareholders has shifted gains from worker productivity to shareholders, stagnating wages and stifling economic growth. In 2019, the average CEO made 320 times as much money as the average worker.

As companies create and codify income inequality, they also create and codify unproductive and unsafe communities, says Julie Battilana, a professor of organizational behavior at Harvard’s Business and Kennedy Schools and the author of Power, for All. “Everyone is losing, including the people at the top. They get a large part of the pie, but that pie is getting smaller.”

Counterarguments to critiques of the shareholder value model boil down to, “It works if you’re doing it right, and they weren’t doing it right,” and “the law lets us do it, so it’s fine.” (It’s also hard to convince a person making $231 million annually that the status quo is bad for them.) But if most people aren’t doing it right — with destructive environmental, social, and economic ends — then maybe we should reconsider it as the primary mode of corporate governance in the United States.

Upending hierarchies is a big cultural shift — one that requires a lot of work, process, and bureaucracy, not to mention a departure from current operating norms — but it is long overdue to prioritize the health of our interdependent communities. Working within the current system, the solution is unglamorous: distributing voting power, with stakeholder needs systematically represented, and expanding the definition of success beyond purely the financial and setting incentives and accountability to that end. In short, procedural changes.

They are not without precedent. “If you look abroad at the number of European countries, including one that’s well known for it, Germany, there’s a co-determination system, so by law, employees actually are entitled to have seats on the board. They do not only voice concerns and suggestions. They participate in the key strategy decisions,” says Battilana. There is even a 1919 law still on the books in Massachusetts that regulates employee representation on boards, though it is rarely applied. Similarly, the standards and metrics have been set by external bodies like the Global Reporting Initiative that specialize in sustainability and impact. There is a roadmap to follow.

The move to a power-sharing model allows companies to make their values real instead of hollow intentions, opening the door for actual innovation, integrity, collaboration, and respect. Procedural changes are not as flashy as culture decks, but they are how companies can expand their focus past financial goals. And with a quick reframe, they can sound like the best kind of value statement: articulating a long-term vision and how to execute on it.

By shifting the focus from solely financial goals to a system that incentivizes broader positive impact, companies might be able to think long term and reap the benefits of healthy employees, a healthy economy, and, hopefully, a healthier planet.

It’s subjective, perhaps, but so is “doing the right thing.”

We have a request

In moments like this — as people grapple to understand variants and vaccines, and kids head back to school — many outlets take their paywalls down. Vox’s content is always free, in part because of financial support from our readers. We’ve been covering the Covid-19 pandemic for more than a year and a half. From the beginning, our goal was to bring clarity to chaos. To empower people with the information they needed to stay safe. And we’re not stopping.

To our delight, you, our readers, helped us hit our goal of adding 2,500 financial contributions in September in just 9 days. So we’re setting a new goal: to add 4,500 contributions by the end of the month. Reader support helps keep our coverage free, and is a critical part of sustaining our resource-intensive work. Will you help us reach our goal by making a contribution to Vox with as little as $3?

Similar Posts