Beyond Profits: CSR and Ethics as Pillars of Leadership

Corporate social responsibility (CSR) and ethical leadership have now become more important than widely highlighted shareholder value, market capitalisation and enterprise value. With more and more companies fighting it out in the open, it has become clear that CSR and ethical leadership are no longer optional but essential characteristics to build a sustainable world. In today’s mind-numbing race of quarter-on-quarter growth and profit-making, companies and leaders forget the core of a sustainable society: ethics, empathy, compassion and integrity.

Today, no one wants to be part of another organisation like Enron or WorldCom, which blatantly breached the codes of ethics and integrity. A ruthless and pathologically ambitious leader is no longer in vogue. People are willing to invest in companies that care for the environment, their employees and external stakeholders, including their customers. An out-and-out salesman who could sell a comb to a bald man is no longer considered ideal.

Satya Nadella, with his empathetic worldview, is considered a better leader than his predecessor Steve Ballmer, who was more aggressive and ruthless. No doubt, Microsoft’s corporate slogan changed from “A computer at every desk” to “Empowering every person and every organisation on the planet to achieve more”. A basic paradigm shift has taken place in their approach — it’s not about forcing someone to buy a computer regardless of need, but about empowering and enriching their life with technology.

 

From Shareholder to Stakeholder Capitalism

 

Today, investors do not only talk about shareholder value but also want to discuss stakeholder value. Shareholders are but one subset of stakeholders. Though a key one, they do not completely define the overall spectrum. The stakeholder spectrum is much broader and more responsible than the shareholder spectrum.

Stakeholders include shareholders, people, the environment, customers, government, regulatory authorities and even competitors. As an organisation, one has to play a fair game with competitors, just as it is called the “spirit of sportsmanship” in cricket or football, where fairness towards opponents is paramount. There is no need for racial, religious or personal sledging — or a subsequent headbutt from an opposing team member, as happened in the 2006 FIFA World Cup final between Italy and France.

 

The Cost of Ignoring Ethics

 

Gone are the days when leaders could prioritise profit over fundamental human needs without consequence. Water, for instance, is life — yet some companies have treated it as just another commodity to exploit, ignoring the long-term harm. Short-term gains from such recklessness often backfire, as profits are eventually swallowed by litigation, reputational damage, and costly settlements.

A stark example is the case of Pacific Gas and Electric (PG&E) Company. Groundwater in the town of Hinkley, California, was contaminated by hexavalent chromium, a carcinogenic substance (used because it was cheap and efficient), and PG&E officials kept lying to Hinkley residents, claiming they had been using safer chromium. Erin Brockovich, a legal clerk, took the time to talk to almost every single resident of Hinkley and prepared a watertight case against PG&E. It took the efforts of a determined, divorced single mother with three children to fight for the people of Hinkley. The judge ordered PG&E to pay $333 million in compensation to the hapless residents.

This case highlights how PG&E’s CEO prioritised profits over the well-being of Hinkley residents, who faced life-threatening health risks —including cancer — from prolonged chromium exposure. The company’s deception ignored the irreversible danger posed to an entire community. The CEO and his leadership team did more damage to PG&E by adopting unethical leadership than they would have otherwise.

An organisation’s goal should not be profit-making at the cost of the environment or lives of people. This is not sustainable leadership. Sooner or later, it will be called out.

I would argue that CSR and ethical leadership are the two shining pillars of corporate governance today. If history teaches us anything, we must learn from it and become wise enough to implement these practices in our day-to-day corporate lives — whether as an employee, an investor or a management team member