Taking Concrete Actions on Corporate Philosophy
January 18, 2017
Mr. Shigeru Nakajima
Attorney at Law,
Nakajima Transactional Law Office
A Corporate Philosophy is a brief statement which outlines the overall direction where a company aims to head towards. Companies stipulate the Corporate Philosophy and the Code of Conduct for two main reasons. Firstly, a company needs to clarify the goal for its own employees as well as for diversified stakeholders outside the company. Internally, employees can unite under the same slogan and boost the “corporate power.” Externally, a company can gain more “social trust” in the course of time. Secondly, a listed company is now required to stipulate and disclose its Corporate Philosophy. The Tokyo Stock Exchange formulated the Corporate Governance Code and set this rule, which came into effect on 01 June 2015.
Now, what is a Corporate Philosophy? I would say it is “a set of values” that a company aims to achieve through its business operation, besides profit-making. A stock company can expand its business by securing funds from shareholders and making good profits to be distributed to shareholders as dividends, and thus, there is nothing wrong with profit-making. The point here is companies must identify the “values” they seek through business operation. There are two indicators, “compliance” and “CSR (Corporate Social Responsibility).” Here in Japan, “compliance” is interpreted as to operate in conformity with laws and regulations. But the true meaning of “compliance” in English is “to behave in response to a request” or “an act of kindness.” Companies are expected to act beyond legal requirements and meet expectations of different stakeholders, including customers, consumers, employees, local communities and shareholders. The words from the Gospel of Matthew “So in everything, do to others what you would have them do to you” are suggestive. In making ethical decisions, we must ask ourselves what others expect of us and put ourselves in their shoes. CSR is also based on the principle of “responding” to social expectations. The word “responsibility” combines the two words, “response” and “ability.” Society makes a judgement on whether a company is engaged in CSR with integrity. If a company fails to respond to social expectations, it can suffer serious consequences, including consumer boycotts and its stock plunges.
Let me also emphasize the importance of “taking concrete actions on Corporate Philosophy.” It is not enough to have an ambitious Corporate Philosophy and encourage your employees to give their moral support. You must align your actions to the Philosophy and inform how your behavior is consistent with the words to the general public through the media.
Based on my experience as a corporate lawyer for 37 years, let me share some episodes that exemplify how to match the philosophy of “customer first” with action.
The first episode is a hospital that declares to “become a facility where you feel comfortable having your parents treated.” Based on the principle that an ideal hospital is a place comfortable for both patients and their family, this hospital provides tailored services for individual patients. Also, staff members are appraised on the basis of “how dedicatedly he/she serves the patients.”
The second episode is a food manufacturer dedicated to “provide the best quality products and services to customers.” Due to subtle difference in the manufacturing process, the taste of the products was slightly changed. Some employees supported product recall, while others opposed, insisting that it did not violate the Food Sanitation Act and the recall would be a waste of money and resources. The CEO made the final decision to recall the products because the company should not betray the customers’ trust. Similarly, another company dedicated to “satisfy the customers’ wish” decided to recall its defective product. The CEO instructed to highlight the possible risk associated with the product in bold letters for the recall announcement in newspapers. I was impressed by the openness of this company.
The last episode proves the value put on shareholders by the management. In the 1990s, there were many corporate racketeers who preyed on general shareholders’ meetings. Not a few companies asked the police to guard the meeting and sometimes the chairman’s podium was surrounded with bulletproof glass. At that time, I had to make a request to one of my client companies to set a tiered platform for the directors to be seated so that any possible skirmish could be avoided. But the CEO refused to “look down at shareholders” from the platform because many of them were former part-time employees who had worked together when the company was founded. I was moved by the sincerity and faithfulness of the management team.
Before I close my speech, let me highlight the importance of “nurturing hopes of the young people.” I find the Rotary Code of Conduct encouraging, especially Article 3 which reads “Use my professional skills through Rotary to mentor young people….” Every year the Japan Institute for Social and Economic Affairs conducts a questionnaire on the trustworthiness of companies. The results show 43% had responded positively in 2014, but unfortunately, it dropped to 37% in 2015 due to some corporate scandals. But there are some promising signs. In this survey, the young people aged 29 or younger gave a higher support of 47%. We must not betray them. Let me call upon you, who are playing a leading role in business and society, to take concrete actions on Corporate Philosophy and build a society where people are encouraged to pursue their dreams.