CRO Spring Conference Jumpstarts Efforts
Practitioners, providers at New York event offer insights into corporate transformation
By Dennis Schaal
Being a good corporate citizen can be a combative and transformative endeavor and nearly 300 advocates of the art form gathered at the Spring CRO Conference at the Union League Club in Manhattan March 27 to hear corporate responsibility veterans relay their war stories, advice and battle plans for sustaining the drive.
In his morning keynote address, Andy Bryant, Intel’s Chief Administrative Officer, said the chip maker’s goal has been to create a corporate responsibility culture.
“To build a culture is hard work that never ends,” Bryant said. “You can’t do it with a PowerPoint presentation.”
Intel, which took top honors in the CRO’s 100 Best Corporate Citizens 2008 ranking, constantly must set strategy and make a business case for initiatives, balancing the desires of competing stakeholders, Bryant said.
For example, Bryant recalled the flak that Intel received from some shareholders who didn’t see the need for the company to spend millions of dollars annually on Intel Teach to the Future, a global program that has trained millions of teachers in techniques to integrate technology into their classroom instruction.
Bryant said he had to explain to some shareholders that the program is “not a quid pro quo investment” with an immediate return, but that Intel would have been shortsighted if it didn’t view the training program as integral to its business.
On the way to its No. 1 ranking on CRO’s 2008 100 Best list, Intel experienced some growing pains that were encapsulated in the company’s introduction of a Pentium chip in 1993, Bryant recalls.
In 1994, with the chip on the market, a bug was discovered: In a very small number of cases, the Pentium chip produced division errors when PC users performed calculations, Bryant said.
Bryant explained that Intel at that time had not shed its roots as “a small electronics company,” and ignored the flaw. “It seemed, at first, barely worth our attention,” he said.
But after Intel’s largest customer, IBM, halted shipments of PCs with the Intel chip, the national media picked up the story, and the Pentium chip became the butt of Internet jokes, Intel’s views changed. The company offered to replace the chips, and eventually took a $457 million charge against earnings for the damage.
“Corporate responsibility meant treating these issues with the utmost seriousness,” Bryant said.
Interspersed between his one-liners, lunchtime keynoter Andy Savitz, the author of “The Triple Bottom Line,” delivered a serious message about how expectations about the role of corporations have been altered radically since the 1950s, when it was assumed that the corporations’ role simply was to make money and do a little philanthropy.
Today, Google is being attacked about censorship in China; Nike has spent millions of dollars on building a socially responsible supply chain; and Wal-Mart and The Home Depot, among others, began delivering supplies to ravaged neighborhoods and turning on the electricity after Hurricane Katrina, and “a week before FEMA figured out where it was,” Savitz said.
“This age of accountability just grows and grows and grows,” he added.
Cynthia Cooper, the former Vice President of Internal Audit at WorldCom, knows something about accountability. In her opening keynote to the conference, attendees were riveted as she recounted the steps she took to expose what was then the largest corporate fraud in history.
And, as she told anecdotes about her experiences, and those of coworkers who went along with the fraudulent accounting, Cooper made a plea for businesses and citizens to find the courage to make ethical choices in their everyday endeavors.
Cooper recalled that she was having her hair done at a salon one morning in 2002 near her home in Mississippi when WorldCom Chief Financial Officer Scott Sullivan called her up and “chastised” her for informing the company’s auditor, Arthur Andersen, about improper accounting entries and transfers for line costs that had no support or foundation.
The dressing down from Sullivan was only the beginning of the rough treatment and periods of duress for Cooper. What followed included unwarranted allegations that her whistle-blowing activities stemmed from her being a scorned lover, visits from the FBI, subpoenas, reporters canvassing her neighborhood, and ultimately bouts of weight loss and depression.
“For me, this has been the most difficult thing I have gone through in my lifetime,” Cooper said.
“There were times when I was scared to death,” she recalled, adding that she had to dig down to find her courage and push forward.
That push helped bring about the collapse of WorldCom in what was then the largest fraud in corporate history. It culminated in one-time CEO Bernie Ebbers getting a sentence of 25 years in prison, five employees copping pleas to securities fraud, and Cooper being named one of Time’s Persons of the Year in 2002.
“It’s really a story about people and choices,” Cooper said of the WorldCom fraud. “We all have the power. No one can take it away from us.”
Cooper recounted part of the WorldCom story through the perspective of Betty Vinson, the ex-director of management reporting who was sentenced to five years in prison, and Troy Normand, the former director of legal entity accounting, who got probation.
Both caved into pressure from superiors at WorldCom to fudge the financials to help the over-extended company meet Wall Street analysts’ expectations.
Cooper noted that WorldCom was the only Fortune 500 company in Mississippi and that both Vinson and Normand wrote resignation letters out of concern about the fraud, but never submitted them out of fear of losing their jobs.
Sullivan had appealed to their loyalties and assured the duo that if anyone got into trouble for the accounting irregularities, it would be him, Cooper said.
“If anyone tells you that, don’t believe them,” Cooper said.
She added that Vinson and Normand were just average citizens “who made very bad decisions.”
Cooper said that she too had to deal with the loyalty issue, as do corporate employees today who might be asked to cross an ethical line. She said she had respect before the fraud was uncovered for CFO Sullivan and Max Bobbitt, who chaired the board’s audit committee, and then had to watch as WorldCom collapsed and thousands of her neighbors and coworkers lost their jobs and their life savings.
Fear, false pride and greed all came into play at WorldCom, Cooper said, just as they do every day in people’s lives.
The lessons of WorldCom, showing that people need to be strong and exercise their power to make ethical choices, can be applied in everyone’s lives, Cooper said.
While ethics was the dominant theme in Cooper’s talk, it was just one of the components on the agenda in an afternoon panel, “The Presidential Debate: CRO’s 100 Best Corporate Citizens and Other Rankings—Do They Matter?”
Joe Wolfsberger, Vice President of Environment, Health and Safety at Eaton Corp., said corporate responsibility rankings help the company identify other firms, such as Intel, “to see how we can mutually raise the bar.”
Wolfsberger described Eaton, the electrical systems and component manufacturer that was No. 2 on CRO’s 100 Best list, as “the $16 billion company that nobody knows.” He said “this type of visibility helps get the message out;” assists the Cleveland-based company in recruiting on college campuses; and facilitates establishing benchmarks to ascertain how the firm stacks up against other companies on issues like governance and transparency.
And Suzanne Fallender, Intel’s Corporate Responsibility Communications Manager, agreed, noting that the firm “pokes at the list,” discusses it internally and digs into subcategories to find ways to improve performance and reporting.
Said Fallender: “It’s hard to fake it on these lists.”