The UK and Europe is so far ahead of the US when it comes to Corporate Responsibility. If I only had a penny for everyone who said this. I hear this almost every single day. And not just from those in England who have a slightly superior attitude when it comes to corporate responsibility. I hear it from people here in the US just as often, if not more. The truth is that we are comparing apples and oranges. Is cricket better than baseball? Only if you are from England. Although you wouldn’t know that from recent results. And you would only like cricket more if you enjoy sitting in the sun and rain for five days and still not get a result. But I digress. They are both ball sports but they are vastly different. They might even share a common history, but that is where it stops.
In the US they believe in Corporate Citizenship and in the UK they believe in Corporate Responsibility. More or less the same, but different just the same. Corporate Citizenship is about what you do in your community. How you interact and how you support them. Corporate Responsibility is about how you run your business – it’s about operations and how you work. The impact is important to both, but in Corporate Citizenship you look at your community and their needs first and the way you work in your community might have something to do with the way you operate, but does not have to. In Corporate Citizenship you focus on your role in society through your operations and the impact you have, and then you improve on these. Through these operational changes you will have a more positive impact on society. Both benefits society, but they have slightly different points of departure.
The reason why the community focus is so central in the US is because there is less of a safety net in the US than in most of Europe. People do not expect government to solve their problems or protect them from every single little thing in life. No, people do that themselves and they tend to look after themselves and after each other. They expect to solve issues themselves. Americans like the idea of less interference by government and more control by themselves in taking responsibility of their own lives. It might have something to do with the open spaces, but Americans do not like people telling them what to do. They want to be masters of their own destiny. Less government and more power to the people.
In the UK and much of Europe there are much more of a reliance on government to interfere in daily life. People expect government to take more control of their daily lives and maintain the rules of how society engage and organize themselves. The rules of engagement. And they want government to identify the common areas of good that will help improve society. Government will tell you what is bad and help you to become better. All that is left for companies to do is ensure they do their best through operations and compliance to government regulations.
That brings me to a second point of difference – regulations and compliance. Corporate behavior is managed through regulations and compliance in the UK and Europe. Everything you do is regulated and not left to the company to try and innovate on their side. Any leadership position you develop is very quickly turned into a government requirement. (Your window of opportunity to show true leadership will stay open for a very short period in this environment). It helps that there is a strong central government in Europe. It makes it easy to push through new regulations. And it is even easier in Europe where the European Commission is hardly held responsible by ‘the people’ and have an almost free ride in bringing in new regulations. No wonder that Europe brought out regulations to define what a banana is – up to the curve needed to be defined as a banana. And I am not joking…
And it is also easy to bring in new regulations in the UK. It is a small island with a central government that runs the rule over everyone. Yes, Scotland and Wales have some autonomy, but the UK is still pretty much ruled from London. It is easy to understand the drive towards more regulations with so much power in the hands of a central government. It is in the nature of government to try and rule their own way. And each new government want to leave behind some kind of legacy. And what is easier than to bring in new regulations that can be sold as ‘for the good of everyone’.
It is different in the US. States control their own destiny much more than any regional authority in the UK. The federal government do not have the power to control everything. Even taxes are different from state to state. And some states like Massachusetts might regulate more towards the protection of people than those in say Texas, but it is up to each state to decide what is most relevant for their state. Federal government can provide guidelines and try and push through federal laws, but this is generally fought tooth and nail by states. The art of the federal government is to try and keep a balance between inching forward on the regulatory front and encouraging states to take control at a local level. But change happens at state level and not federal level.
This approach allows for companies to take more risk in trying out new practices and to develop a leadership position. They know they can bring in these practices without the danger of it being regulated to death. Yes, it is a fine balance. They still have to tell the truth in advertising and not make claims that can’t be backed, but they can be more risky in taking chances. Over in the UK it is slightly different. The aim of regulations is not to bring best practice into law, but to rather identify the lowest common denominator that could be passed as acceptable behavior by companies. I know, both have a place – best practice and lowest common denominator. In the US they lean more towards the former and in the UK more to the latter. It fits their societal and political needs.
Of course the US does have one thing that ensures that the lowest common denominator is ‘self regulated’. The I-will-sue-you culture. You make one mistake and the consumer will take you to the cleaners. Yes, it is out of control, but it creates an incentive for business to not do something that can harm the public. There are enough lawyers here to ensure that you will get sued. Businesses in the UK can hide behind compliance of law and it is much more difficult to sue someone if they haven’t broken the law instead of suing because they didn’t look after the public interest.
And some of the regulations make the way companies act very different. For instance, both the UK and US have regulations regarding how foundations are run. And these are very, very different. US corporate foundations are not allowed to do any work that can directly benefit the company. This was put in place to ensure that companies do not see this as a way to hide money, and to ensure they spend their foundation money on what is good for society as a whole. Very different in the UK. Much more freedom to be strategic in the way they spend their foundation money. They can spend the money on helping suppliers of the company and still write it off under foundation rules. The unbelievable work the Shell Foundation (UK) has done in development in poorer countries would not be allowed under US rules.
The US also likes rock stars and celebrities more than anything else. Man, their news are pathetic over here – give me the BBC please. Every second story is about some celeb and their latest escapade. And that plays out in the way company CEO’s act as well. The CEO and Chairman tend to play a major role in the public view of the company. Bill Gates is Microsoft. Howard Schultz is Starbucks. Steve Jobs is Apple. And each one have to make their mark in this world. Not because they want to, but because people expect them to do their thing from the front – lead the way in how and what they give and the way they run their company. They are the people others look up to and aspire to become. These leaders drive change across all businesses and are needed in a less regulated business environment. They are by default the people who drive real change through their own commitment to making business and society better. Thank God for them.
Less so in the UK. Companies are seen as more important that the individual. A few has made it to the front – Richard Branson as one. But they stand out because they are so different from the rest. The focus tend to be on the company and not the individual who runs it. Yes, they play a role, but the company is seen as less dependent on the CEO and/or Chairman than in the US. Another reason why the UK loves splitting this role while the US wants the same person in charge. Two big egos would be difficult to control in the US.
One area where the US is way ahead of the UK is in communicating their corporate citizenship. They tend to focus on the communications part more while the UK tend to focus more on the operational changes. Maybe it is because the UK society is more reserved than the US, but it means that Ben and Jerry’s is more respected in the US than Unilever. But in the UK it is the other way around. Of course this can be exploited and can confuse the consumer. A classic example is the current discussions in Washington about ‘green’ advertising and marketing. But the best tend to rise to the top and consumers do know to take things with a pinch of salt.
In short, the US is different because it fits in with the way their society organizes itself compared to the UK. Both approaches have real value. Both approaches will improve the world little by little. Both approaches will have failures and successes. But the one is not better than the other. Just different. Dealing with their own little peculiarities in their society and political systems. Both work. And both fails. I don’t need to remind you of the current economic failure in the US thanks to a regulate-yourself culture. But the US is not in any way behind the UK when it comes to the role of business in society. No. They are just different. A US approach won’t last a second in the UK. And the UK approach won’t survive a second in the US. The real challenge for them both is to adapt when they are outside their own borders, culture and comfort zone. For example, neither will last long in China or South Africa if they just try to continue working the way they do in their country of origin. New rules and new ways of operating is needed. They have to bring the best of their world and merge it with the societal and political expectation in these new countries. And that won’t be better either. Just better for that specific country.
Bu the discipline of business in society benefits from this dynamics – bringing different approaches to the table. And it is when these merge and mingle that we move further ahead in this world of ours. Of course there is one approach that works no matter where you are. The South African approach. But I won’t be giving away our secrets just yet. No, I am way to responsible to do something like that.