How Can an Employer Incentivize Social Responsibility?

How Can an Employer Incentivize Social Responsibility?

At an all-company meeting last week, Facebook CEO Mark Zuckerberg announced that the company was retooling its employee bonus system to reflect a new set of priorities, focused on addressing the controversies surrounding the social media giant concerning the proliferation of hate speech and misinformation on its platform. In addition to traditional metrics like user growth and product quality, Facebook will reward employees this year based on their success at promoting the social good including combating fake accounts, protecting users’ safety, and making progress on other social issues affected by Facebook and the internet in general.

The decision to reward employees for doing social good reflects a challenge that many companies, particularly large corporations with major public profiles, are facing today. Investors, politicians, the media, and consumers are paying more attention than ever before to the social, environmental, and ethical consequences of what businesses do. And Facebook is not alone in this desire, for example, Chevron recently announced that it would tie executive compensation to reductions in the energy corporation’s greenhouse gas emissions. This dynamic, in turn, puts more pressure on corporate leaders to deliver sustainability and social responsibility as well as growth.

For Facebook, awarding bonuses to employees for meeting social responsibility goals will inevitably test the company’s ability to live up to two truisms: “actions speak louder than words,” and “what gets measured gets done.” To the first point, companies can articulate all the values they want, but at the end of the quarter or fiscal year, what matters is whether the organization actually lived up to those values in its day-to-day business practices. We’ve seen companies attempt to project an image of social responsibility, only to get called out for not really reflecting that image in their work. The impact of Facebook’s new policy will take time to fully materialize, but when it pays out bonuses for 2019, investors and reporters will be curious to see whether they have really rewarded the kind of choices they say they intend to, and whether those rewards reflect a real change.

As to the second point, Facebook has set itself an ambitious goal of identifying quantifiable metrics by which to determine progress against its goals of social good. Facebook has acknowledged that there is no easy or obvious formula for doing this, but they are looking at targets like number of fake accounts shut down daily or improvements to safety and security as possible metrics. Being a data-driven company, Facebook will likely get more granular and detailed about how it defines success, especially with both the media and governments paying closer and closer attention.

Here are four things that any company considering a similar change should be ready to do to make it more likely that an incentive program like this will be successful:

Read more

US Employers Might Still Think Twice Before Forcing Arbitration

US Employers Might Still Think Twice Before Forcing Arbitration

The US Supreme Court ruling on Monday upholding employers’ right to include arbitration agreements and class action waivers in employees’ work contracts is being celebrated by business associations and employer-side attorneys as a major victory, mitigating the risk of expensive litigation over labor disputes that may arise from honest mistakes rather than deliberate malfeasance. Advocates of arbitration say it is faster and cheaper than a courtroom trial and that the confidentiality of arbitration is a benefit to both employees and employers (though critics, of course, disagree on all of these points).

What individual arbitration does not protect organizations from, however, is reputational risk. We’ve seen this in the public blowback against companies whose arbitration policies are interpreted as them trying to hide ongoing discriminatory behavior. Within the past six months, companies like Microsoft, Uber, and Lyft have abandoned forced arbitration of harassment cases to guard against this risk. The public relations downside to handling these matters quietly may be growing to outweigh the upside in terms of cost and legal risk.

Read more

More than 3 in 4 UK Companies Pay Men More than Women, Gender Pay Gap Reports Show

More than 3 in 4 UK Companies Pay Men More than Women, Gender Pay Gap Reports Show

The deadline for UK companies with at least 250 employees to publish their gender pay gaps arrived on Wednesday. According to the BBC, more than 10,000 companies in total submitted their data, 1,000 of them waiting until the last day to do so. Overall, the median pay gap among those reporting stood at 9.7 percent, with 78 percent of firms paying men more than women, 14 percent paying women more, and 8 percent reporting no pay gap at all. An analysis in January had predicted that a significant number of companies would ultimately miss the deadline, and indeed, hundreds have failed to report, Rebecca Hilsenrath, chief executive of the Equality and Human Rights Commission, told the BBC:

“We’re looking at approximately 1,500 companies which haven’t reported,” she told the BBC. “We’re obviously pleased with the rate of reporting, but it is the law, it’s not an option. It is the right thing to do, and we will be enforcing against all those organisations which failed to meet the deadline.”

In practice, this would mean a statutory investigation process, she said. The EHRC will be sending letters to all of those organisations on Monday. They will then have 28 days to respond. Terms of reference will then be issued for the enforcement process, which will be made public. “This is going to be a very public affair. It will impact quite considerably on members of the public, people who work for them, and you’ll see a growing backlash against people who aren’t complying,” she said.

The EHRC had previously warned that organizations face “unlimited fines” for failing to comply with the gender pay gap reporting law. The more effective punishment, however, may be the “very public affair” Hilsenrath is promising. Senior British professionals indicated in a survey late last year that they believed revelations of large gender pay gaps would hurt companies’ reputations and cause them to lose employees, with more than a third saying they thought this issue would be even more reputationally damaging than corporate tax avoidance.

At CEB, now Gartner, our latest research into pay equity finds that perceptions of pay inequality can be just as harmful to employee retention as pay inequities in fact—and the perceptions tend to be even worse than the facts.

Read more

Could Google’s Good Reputation Backfire in Discrimination Suits?

Could Google’s Good Reputation Backfire in Discrimination Suits?

Google is widely recognized as a good company to work for, offering competitive compensation, world-class benefits, and ample opportunities for learning and career development. Among large employers, Google ranked fifth in the US and took the #1 spot in the UK on Glassdoor’s Best Places to Work list for 2018, based on thousands of employee reviews.

In the age of HR as PR, a reputation like Google’s is more valuable than ever. On the other hand, the tech giant has also been at the center of several controversies in the past year concerning diversity, inclusion, and discrimination in the tech sector, including allegations from the US Department of Labor that it engaged in gender pay discrimination and a lawsuit by several former employees also claiming that the company systematically discriminated against women in pay and career development. (Google is not alone among tech employers in this regard; Microsoft is also facing a number of gender discrimination claims.)

In this instance, Google’s prestige could turn into a liability, business professors Mary-Hunter McDonnell and Brayden King explain at Quartz. That’s because of a phenomenon McDonnell and King found in their research that they call the “halo tax,” in which companies with good reputations are punished more severely when they are found liable for employment discrimination:

Using a unique database of more than 500 employment discrimination lawsuits between 1998 and 2008, we concluded that the greater the company’s prestige, the less likely it would be found liable because of the halo effect. However, once a prestigious company was found liable, punishments were more severe, which shows that prestige can be both a benefit and a liability, depending on whether a company is defending itself or its blameworthiness has been firmly established.

Read more

CEOs Disband White House Business Councils in Wake of Charlottesville

CEOs Disband White House Business Councils in Wake of Charlottesville

Underscoring the increasingly central role CEOs of major US companies are playing in the country’s public and political debates, a number of business leaders abandoned President Donald Trump’s American Manufacturing Council this week in response to the president’s remarks regarding violence that occurred at a white supremacist rally in Charlottesville, Virginia last weekend. Ultimately, according to the Wall Street Journal, members of both councils decided to disband—although Trump later claimed on Twitter that it was his decision:

On a 45-minute conference call that started around 11:30 a.m. ET Wednesday, members of the President’s Strategic and Policy Forum decided to dissolve the group. Blackstone Group LP chief Stephen A. Schwarzman, who organized the conference call, called the White House and spoke with Jared Kushner, Mr. Trump’s son-in-law and a presidential adviser, to give him the news, according to a person familiar with the call. Around the same time, the manufacturing council also had a call and decided to disband. …

“It became clear very quickly that there was a consensus” to disband the group in total, one participant said. “It was important that it be addressed as a group and not a drip-drip.”

The CEOs have taken care to frame their departures from the councils as something other than partisan political opposition to the president or unwillingness to work with his administration, as IBM chief Ginni Rometty did in a communication to her employees:

Read more

More CEOs Losing Their Jobs to Ethics Scandals

More CEOs Losing Their Jobs to Ethics Scandals

In the past few years, CEOs have become substantially more likely to be removed from their positions due to ethical misconduct or scandals, even though the number of CEOs dismissed for such reasons remains quite low overall, according to a new study by Per-Ola Karlsson, DeAnne Aguirre, and Kristin Rivera of PwC/Strategy&. At Strategy+Business, the authors lay out their findings and discuss their implications:

Globally, dismissals for ethical lapses rose from 3.9 percent of all successions in 2007–11 to 5.3 percent in 2012–16, a 36 percent increase. The increase was more dramatic in North America and Western Europe. In our sample of successions at the largest companies there (those in the top quartile by market capitalization globally), dismissals for ethical lapses rose from 4.6 percent of all successions in 2007–11 to 7.8 percent in 2012–16, a 68 percent increase.

Our data cannot show — and perhaps no data could — whether there’s more wrongdoing at large corporations today than in the past. However, we doubt that’s the case, based on our own experience working with hundreds of companies over many years. In fact, our data shows that companies are continuing to improve both their processes for choosing and replacing CEOs and their leadership governance practices — especially in developed countries.

Instead, Karlsson, Aguirre, and Rivera suspect this increase to be related to changes in the business environment that make unethical behavior at the top of the corporate pyramid more likely to come to light and amplify its reputational risk. They identify five specific trends driving this change:

Read more

Does ‘HR as PR’ Generate Revenue?

Does ‘HR as PR’ Generate Revenue?

Companies continue to promote their talent practices as a competitive differentiator not just to recruit talent, but to recruit customers as well. American Express recently pushed the frontier on this by announcing the changes to their family leave, adoption and fertility benefits, while Lyft has launched an aggressive ad campaign arguing that riders should pick Lyft over Uber because of how they treat their drivers (hint: you get to tip them). New research from Pew provides some insight into whether or not this strategy works:

Around half of Americans say the question of working conditions is indeed important to them, though fewer are actually willing to pay more to support businesses that are seen as worker-friendly, according to a Pew Research Center survey conducted in late 2015.

A little more than half (53%) of U.S. adults say that when deciding whether to use a particular service or shop at a particular store, it’s important for them to know something about the pay and working conditions of those who work there. But only a slightly smaller share (46%) say that worker treatment is not important to their purchasing decisions. … Only around one-quarter (28%) report that they often pay extra to support these types of businesses.

While the framing of this study is negative, Pew’s headline that customers don’t generally respond to how companies treat their employees misreads the tea leaves from their data. In fact, companies pursuing HR as PR strategies should take these results as evidence that the strategy should work. Think about this for a second: More than one out of every four customers is willing to pay more money to a company that values its employees. What other strategies can a company pursue that can get 28 percent of their customers to accept a price increase?

Read more