| The Business Ethics Exchange May 2012 |
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| Bi-monthly news from the Center for Ethical Business Cultures |  |
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Restoring Hope in Wall Street Leadership Insights By Ron James
Delivering the keynote address at the 13th Annual Minnesota Business Ethics Awards Luncheon, John Taft, chief executive officer of RBC Wealth Management – U.S., addressed the pressing need for restoring hope in Wall Street. Taft candidly stated that “the Wall Street culture is broken and needs to be fixed.” In his address, Taft traced the events of the 2008-2009 financial services crisis in the U.S. wherein investors watched almost 50 percent of their savings decline. Investors were dazed—like the passengers of US Airways Flight 1549 piloted by Capt. Chesley Sullenberger in the “Miracle on the Hudson.” Just as those passengers stood on the wings of the plane in the icy waters of the Hudson River facing potential death, investors witnessed the terrifying spectacle of a near-collapse of our financial services system. Congress moved swiftly with the passage of the Dodd-Frank legislation in 2010. The key aim of this legislation was to curb excessive risk-taking and to establish safeguards to prevent future breakdowns. While it is a good start, Taft believes it is not enough. The financial services industry needs to return to its roots: stewardship. Citing passages from his just-released book, Stewardship: Lessons Learned from the Lost Culture of Wall Street, Taft defined the role of the financial services industry as an intermediary, bringing together those who have money to invest with those who have a need to deploy money. The financial services industry, he said, is a means to an end and not an end unto itself. Both the investor and those who deploy money benefit when the money is profitably put to use. Taft defined stewardship as “a choice to serve others” with purposefulness, humility, accountability, foresight and integrity. He challenged the audience to embrace stewardship as a way of doing business, because stewardship is not limited to the financial services industry. Serving others should be our way of life. |
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CEO’s Report: Balancing the “What” and the “How” of Executive Compensation Ron James 
I recently traveled to New York to participate in a panel discussion hosted by Corporate Board Member at the New York Stock Exchange in New York City. I joined Marty Evans, board member and compensation committee chair for Office Depot and board member of Weight Watchers, and Gary Hourihan, senior vice president of Farient Advisors, LLC, a compensation consulting firm. Together, we explored the challenges boards face in attracting, retaining and incentivizing executives of major companies. It is certainly a delicate walk to find the right balance between creating competitive compensation that stands market tests in the war for the retention of top talent while being mindful of the growing gap between those at the top and those on the front lines. Compensation systems should always be linked back to the basic foundation of the business: mission, vision and values. That is to say, compensation is a means to an end and not an end unto itself. The ultimate end should be to provide appropriate incentives for achieving business goals that include perpetuating the purpose of the business within certain behavioral standards. Incentive systems should be aligned with the shareholders’ interests. Those who have made investments in the business have a right to a fair return, but so do the other stakeholders in the business: employees, customers, suppliers and community. These other stakeholders contribute to the success of the business, and their interests should be looked after as well. The pay of executives has to be linked to their impact on the performance of the business. But it should not stop there. “How” the results were attained is just as important as “what” results were attained. Results need to be achieved within the boundaries of the law and behavioral standards expressed through the shared values and codes of conduct of the business. |
Upcoming Events
CEBC 7 Part Series - Beyond Compliance Corporate Responsibility: The American Experience CEBC Membership To learn more about becoming a member, please visit the Center's website at |
13th Annual Minnesota Business Ethics Awards
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| l-r, representatives of: Murphy Automotive, Western National Insurance Group and The Schwan Food Company |
Minnesota business and professional leaders gathered Wednesday, May 16, to honor three companies with the 2012 Minnesota Business Ethics Award (MBEA) recognizing Minnesota businesses that exemplify and promote ethical conduct in the workplace, the marketplace and the community. The honorees are:
- Murphy Automotive, Inc.
(small size company category)
Founded in 1976, Murphy Automotive is a privately-owned company with five automotive mechanical repair facilities and one fuel/convenience store. The company, with its distinctive customer and employee policies, is headquartered in Lakeville. - Western National Insurance Group
(medium size company category)
Western National Insurance Group is a 110-year old property and casualty insurance provider for businesses, individuals and families in the central and western U.S. Launched in 1900 as the Mutual Creamery and Cheese Factory Fire Insurance Company of Minnesota in St. Paul, the company is now headquartered in Edina. - The Schwan Food Company
(large size company category)
A private, multi-billion dollar company, The Schwan Food Company sells branded frozen food through home delivery, the food service industry and grocery stores in North America. The company, headquartered in Marshall, started in 1952 with the delivery of 14 gallons of ice cream to rural families.
The MBEA luncheon also celebrated five other finalists for the award, each of which has made exemplary strides and accomplishments in creating a business culture that aspires to high ethical standards: Boy’s Electric LLC; Cummins Power Generation; Independent Packing Services, Inc.; Lurie Besikof Lapidus & Company; and, Maslon Edelman Borman & Brand, LLP.
Since its inception, the MBEA has recognized more than 38 Minnesota-based businesses ranging in size from less than 10 to more than 150,000 employees.
The MBEA was founded in 1999 by the Minnesota Chapter of the Society of Financial Service Professionals and the Center for Ethical Business Cultures at the University of St. Thomas Opus College of Business, with the Minnesota Society of Certified Public Accountants joining in 2009.
Nominate a company for the 2013 awards »
CEBC Continues 7 Part Series of Conversations on Ethics
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| Mike Balay |
On April 27, 2012, CEBC conducted its sixth session in the series Beyond Compliance: Conversations about Strategies and Practices for Sustaining Ethical Cultures. The session focused on the importance long-term perspective plays in shaping and sustaining ethical cultures. A range of CEBC member company representatives from different disciplines and experiences engaged in a lively discussion.
Our conversation starter was Mike Balay, head of global strategy at Cargill. Balay’s particular interest in the structure and behavior of complex adaptive systems, strategic choices under uncertainty, and the role of time in strategy added a rich dimension to the conversation.
Balay explored several themes important to strategy and ethical culture: guiding principles in practice; what to do when guiding principles are not enough; how guiding principles are changing; and fundamental challenges that need to be addressed to insure the long term.
The group addressed the responsibility of leaders to look after the long term; to ensure the sustainability of their business and, in doing so, to carry on the legacy of those who established the business and hand it over to the next generation of leaders.
You Can Double Your Money!
There is still time! Double the impact of your contributed dollars by investing in the Center for Ethical Business Cultures which is included in the current Opening Doors Capital Campaign at the University of St. Thomas. We have raised $2.2 million dollars to date toward a $5 million goal.
Generous anonymous donors have committed challenge grants to the University and offered to match every gift of $1,000 or more. So a gift of $1,000 is immediately matched and becomes $2,000. The more you give, the larger the match.
But this is a limited opportunity in which we compete with many other priorities. So if you are willing, please act fast by contacting Ron James at rjames@cebcglobal.org or Brendan Bannigan at babannigan@sthomas.edu. If you support the work we are doing and want to be a part of perpetuating the legacy, please respond.
Research Spotlight
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| Plate 27: “Concerning a Growing Menace,” chromolithograph by Joseph Keppler, Puck, September 30, 1903. This image, one of 119 in the history, highlights the search for balance as President Theodore Roosevelt chastises both big business and big labor for trampling on the law. Courtesy of the Library of Congress. |
We’re getting close!
Last fall, we reported the center was planning the release of its landmark book, Corporate Responsibility: The American Experience, in September 2012. Working closely with Cambridge Publishing of the United Kingdom, we are on track!
Observers of today’s social, economic and political debates will find numerous déjà vu moments in the center’s release. The operative question for the authors: “to whom and for what is the modern corporation responsible?” Across the past 200 years business has been a focus of debate in American life – applauded for its innovation and productive power; challenged and derided on grounds of fairness and justice. Debates about the role and responsibilities of business ranged from intellectual discourse to violent clashes in our public squares. Is business just about making profits for shareholders and owners, or is there more to the purpose and responsibilities of business and the corporation?
Historical debates re-emerge in America’s current events and controversies. Today’s major corporations have made remarkable progress and embrace a broad definition of their responsibilities and rights. Many current trends signal a deep commitment to addressing and communicating openly on questions of corporate responsibility:
- innovative community initiatives, volunteerism and giving
- industry-wide principles on human rights, investment and labor
- metrics and reporting frameworks that measure and monitor performance
- collaboration among companies and across sectors
But the progress of the last few decades, and even the last few years, nonetheless finds corporate responsibility at a crossroads. As General Mills’ CEO Ken Powell notes in his foreword to the volume, “Understanding the lessons of Corporate Responsibility: The American Experience will help show the way. We need only to rededicate ourselves to the wisdom and necessity of the task.”
For more information, please contact David Rodbourne at dhrodbourne@cebcglobal.org.
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