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A New Era of Ethical Leadership?

Leon Kaye | Wednesday November 9th, 2011 | 2 Comments
Tel Aviv Protests Aug 2011 (courtesy Wiki Commons)

Tel Aviv Protests Aug 2011 (courtesy Wiki Commons)

“You can work hard for 70 years to build trust and lose it in a second.” – Olfa Strauss

At at time when social movements including the Tea Party, Occupy Wall Street, the Indignados and the Arab Spring have all dominated headlines for the past two years, the global business community now has a pivotal opportunity to lead and push for positive change. At first such a statement may sound counterintuitive when many people are protesting what they see as too cozy of a relationship between corporations and the government.

But while governments across the globe are consumed with vicious internal politics and distracted by series of financial crises, there are companies that are pushing ahead and tackling problems from climate change to human rights to health. The reasons vary: a genuine concern for people and communities, the desire to avoid additional regulations, reducing costs while increasing revenues and of course, enhanced brand value and building trust with customers and stakeholders. That trust and brand value, however, can take years or decades to build, and in an instant can be washed away. Olfa Strauss, chair of Israel’s largest food company, Strauss Group, shared her experience and gave a frank assessment of what was a difficult summer for herself, her family’s company and her country during last week’s BSR Conference in San Francisco.

The Strauss Group has been in business for 70 years. It now sells its products in 17 countries and has partnerships with Danone, Haier and Pepsi, the latter with which it manufactures its line of Middle Eastern foods under the Sabra brand. What began as a story about an immigrant family starting life over in northern Israel with two cows is now a diverse business that includes dairy products, coffee, chocolate and home water purification systems.

Strauss Group found itself in the middle of an angry summer that fomented from Israelis’ growing anger at the rising cost of food and the perception that wealth was becoming too concentrated in the hands of a few. That anger manifested itself in several ways, from street demonstrations to Facebook postings and finally, protesters who arrived at Strauss’s home to share their grievances and confront her.

That Strauss Group would be a company caught in the eye of the storm is at first a surprise. Many Israelis have a deep affinity with the company and its brand portfolio, and the Strauss family’s story of renewal in a new land is one with which many Israelis can identify. The company, and Ms. Strauss herself, frequently land on top 10, 50 and 100 domestic and international lists that track the most respected, successful and powerful people and organizations. Strauss Group has a reputation of treating employees of all religious backgrounds fairly, and its factories did not close during the Arab-Israeli wars as both Jews and Arabs over the years have found rewarding employment at the firm. A dedication to corporate governance, transparency and corporate social responsibility are evident in the company’s quarterly and annual sustainability disclosures. Executive pay is lower than at peer companies. And all of this is occurring within a privately owned and family run firm. Such disclosure and transparency are rare for any private firm, let alone a Middle Eastern one. Over 90 percent of companies in this region are family owned and therefore resist sharing internal information–the measurable and non-measurable–with outsiders.

So what happened? Ms. Strauss’s experience and how her company handled the fiery situation will be an enduring case study for other companies in the Middle East. Throughout a region, constituents will demand more accountability and dignity from their leaders–and to that end has replaced several of them this year.

The spike in food prices–including cottage cheese, an Israeli staple–was the kindle that immolated anger in a populace already upset with high prices, wealth inequality and increasing problems with the education and health care systems. And Strauss Group’s history of high performance, trust and quality in a perverse way made the company an even bigger target. As Ms. Strauss told the audience, “The better you are, the more disappointed people are in you.”

After some protesters showed up at her front door–an easy task in a small nation of 6 million people where everyone knows where everyone lives–Ms. Strauss spent seven hours painful and uncomfortable hours listening to what was upsetting the protesters. Her takeaway from that afternoon was that the old ways of doing business in a hyper-connected world are no longer enough. “I didn’t know,” or “I had no idea” are responses that go nowhere. Companies who thought they were raising the bar on compliance and responsibility will have to go even further and even then will face unrelenting criticism.

Now it is not enough for companies to talk to their stakeholders. Rather, stakeholder engagement means talking WITH them. Ms. Strauss stressed that businesses will have to redefine their roles in society. At a time when governments are flailing, business can push for ensuring human dignity, basic fairness and democratic values. Those ethical decisions will require a dialogue with stakeholders and a sincere commitment to listening to what they have to say.

Those boundaries maybe constantly moving, but businesses will have to expand the limits that they set with their stakeholders and consumers–or the boundaries will be set for them. Companies must now go beyond compliance and stop viewing their relationships with customers as a mostly transactional one. As the world’s resources diminish and become more expensive, the relationship that companies have with the products they sell will also change as they will not only have to track their effects once they are sold and leave store shelves, but monitor them throughout their entire life-cycles.

An even larger commitment to ethics and openness may rankle company executives who view such a new world as one full of regulations and demands. But as Ms. Strauss repeatedly emphasized, these are the new expectations and the world in which we are now living. In the end, a healthy society means healthy businesses and vice versa. So across the Middle East and beyond, the rules of business conduct and stakeholder engagement are evolving in ways unimaginable only a couple years ago.

 

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Leon Kaye is a consultant, writer, and editor of GreenGoPost.com and also contributes to The Guardian Sustainable Business; you can follow him on Twitter.  He is currently traveling in Japan and Korea.


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  • http://www.leadership-quotes.org/ benkinte

    I beleive we are getting to a point where not only is running a business more ethically the right thing to do but also the most profitable and sustainable way. People are getting tired of being trodden on and when they reaslise they dont have to be its the enethical companys which will suffer. And this attitude has already come about in the middle east and is now spreading throught the world

  • Maxwell Pinto

    Ethics is concerned with “doing the right thing” in terms of morals, fairness, respect, caring, sharing, no false promises, no lying, cheating, stealing, or unreasonable demands on employees and others, etc. In addition, business ethics calls for corporate social responsibility (CSR) and addressing social problems such as poverty, crime, environmental protection, equal rights, public health and improving education. We need a practical approach rather than a philosophical one, with “leadership by example.”

    Business decisions often concern complicated situations which are neither totally ethical nor totally unethical. Therefore, it is often difficult to “do the right thing,” contrary to what many case studies will have you believe!

    Is it the seller’s duty to disclose all material facts regarding the product/ service in question or is it the buyer’s responsibility to find out the pros and cons of what he or she is getting into? Should the seller answer each question exactly as it was asked, and ignore some pertinent information? Or should he or she merely address the spirit of the question? Is the buyer responsible for due diligence? This is a gray area.

    For free abridged books on leadership, ethics, teamwork, women in the workforce, sexual harassment and bullying, trade unions, etc. send an e-mail request to maxpin1@hotmail.com.

    Maxwell Pinto, Business Consultant and Author.
    http://www.smashwords.com/profile/view/MaxPinto