OECD head: Large corporations must regain public's trust

The events of 2007 gave rise to a “crisis of legitimacy” for governments, institutions and large corporations, says Angel Gurría.

By NADAV SHEMER
June 6, 2012 23:38
2 minute read.
Angel Gurría

Angel Gurría. (photo credit: REUTERS)

 
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Large corporations must focus their efforts on regaining public confidence lost since the global financial crisis, OECD Secretary-General Angel Gurría said in Tel Aviv Wednesday.

He made the comment while addressing a corporate-responsibility conference hosted by the Justice Ministry, the Industry, Trade and Labor Ministry and the Manufacturers Association of Israel.

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The events of 2007 gave rise to a “crisis of legitimacy” for governments, institutions and large corporations, said Gurría, who was on a two-day visit to the country. Overcoming this crisis is not just a question of achieving economic goals or restarting job growth, but also of rebuilding the trust that was lost.

“In this respect, responsible business conduct is more important than ever,” he said. “[It] generates trust in markets and trust in entrepreneurial activity. It strengthens the basis of mutual confidence with societies and helps improve the investment climate.”

Governments have reached an “unprecedented moment of international convergence” on the issue of corporate responsibility, Gurría said, referring to a series of recent international agreements, including the OECD’s own updated Guidelines for Multinational Enterprises (GME), which has been signed by the organization’s 34 member states plus 10 more countries.

“[This represents] convergence in the baseline standards for how businesses should understand and address the social risks of their operations; convergence in the understanding of how governments should support and promote responsible business conduct,” he said. “The outcomes of these developments speak for themselves: clearer and more predictable standards that empower enterprises to meet their social responsibilities and that empower stakeholders to hold them to account.”

Israel, one of the 34-nation Organization for Economic Cooperation and Development’s newest members, is a signatory to its GME and Anti-Bribery Convention. As a party to these agreements, “Israel sets an example both globally and here in the Middle East for fighting bribery and promoting responsible corporate behavior,” Gurría said.

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Momo Mahadav, CEO of Ma’ala, an umbrella organization of about 130 of Israel’s largest companies that is dedicated to promoting corporate social responsibility, said last summer’s public protests over socioeconomic issues presented the perfect opportunity for companies to address their behavior.

There has been a correlation in the growth in companies addressing corporate responsibility, adopting codes of ethics and making financial contributions to the community on the one hand, and growing public distrust of the companies on the other hand, he said. What this proves is that CSR indexes must used be for internal purposes only, but that “in the end the public will be the judge,” he added.

Mahadav demonstrated his point with an analogy.

“There was a time when the police would hold a press conference every year, in which they would declare that they had managed to reduce crime by X%,” he said. “The media and public would say, ‘Big deal, just because you said you reduced crime from 12% to 11% doesn’t make us feel any safer walking the streets.’ The police eventually understood this and started using these data as internal indexes to assess their performance, while broadcasting different messages to the public.”

If companies really want to deal with corporate responsibility, Mahadav said, they must embrace a number of new tactics, such establishing a “never-ending” forum between senior management and employees, in which attention can be raised to the hard issues.

This would help the companies demonstrate that they are more genuine and will ultimately benefit them, he said.

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