While companies must take care of shareholders, they must also address the concerns of other stakeholders, such as consumers and corporate employees, and be socially responsible corporate citizens, according to a senior member of a world business leaders’ forum on corporate governance.
Businesses must take a more proactive stance in addressing such issues as consideration for the environment, employees, customers, suppliers and competitors, said Dominic Tarantino, global vice chairman of the Caux Round Table, an international network of senior business leaders that meets every year in Caux, Switzerland.
Tarantino visited Tokyo earlier this week to promote its activities and encourage more Japanese business leaders to join the Caux cause.
“People are complaining about unsafe working conditions, environmental issues, fair wages for all . . . those are the issues global companies from any country are facing,” Tarantino, former chairman of Price Waterhouse World Firm Ltd., said in an interview with The Japan Times.
He said globalization may be the best answer for prosperity, “but globalization hasn’t made life better for so many people of this world.”
About 40 members from Japan have participated in the Caux meetings, including executives from NEC Corp., Nissan Motor Co., Canon Inc., Tokyo Electric Power Co. and Nifco Inc.
CRT was established in 1986 by business leaders from Europe, Japan and the United States to seek solutions to growing trade tensions between Japan and the West.
CRT will hold this year’s annual meeting in September in Singapore, the first time a meeting will be held outside of Caux.
Tarantino says CRT aims to expand its ideas to other countries in Asia. “Japanese influence in these countries in a business sense will be very important to the expansion of the CRT principles,” he said.
CRT adopted its “Principles for Business” in 1994, the first such cooperative effort by business leaders from Japan, the U.S. and Europe to set common guidelines on how companies should behave.
The principles call for, among other things, transparency, abandonment of bribery and money laundering, and the responsibility of businesses to serve all stakeholders.
While improvement of transparency is a hot topic especially in Japan, how much information companies should disclose is an ongoing issue that needs to be addressed at CRT.
In Japan, tendencies to hide things have led to numerous financial scandals. In 1995, it was revealed that a bond trader at Daiwa Bank’s New York branch had been engaged in unauthorized trading for 12 years and racked up $1.1 billion in trading losses. In 1996, the chief copper trader at Sumitomo Corp. was also found to have been engaged in off-the-book trading for 10 years, which eventually cost the trading giant $2.6 billion.
“That’s one of the issues (that) needs to be put to the round table for them (business leaders) to talk about,” Tarantino said. “We’ve talked about trying to promulgate minimum standards of transparency,” he said, adding that setting such standards is difficult, especially for nonfinancial issues such as human rights and employee safety.
Another issue for CRT is making a rating system to evaluate companies according to their level of compliance with the Caux principles, according to Stephen Young, associate director of CRT’s U.S. secretariat, who visited Japan with Tarantino.
In the U.S., investment companies are licensed to use the Caux principles as a criteria for rating companies on nonfinancial factors, Young said. “This encourages all companies to monitor their behavior . . . and this is an option that could be brought to Japan.”
Tarantino says corporate governance is not more of a problem among Japanese companies. “It is a world challenge . . . the combination of better corporate governance and corporate social responsibility are the key to making globalization really work,” he said. “We’re trying to make CEOs be more aware of that.”