How Do You Balance Social Contribution and Sustainability?

IESE partners debate role of boards in driving change

06/05/2015 Barcelona

Nuria Chinchilla, Jordi Mercader Miró, Salvador Alemany & Luis Egido
(From left to right) Professor Nuria Chinchilla, Jordi Mercader Miró (Miquel y Costas & Miquel), Salvador Alemany (Abertis) and Luis Egido (Logista) / Photo: Roger Rovira

A company is not just an economic institution. It is also a long-term project in the pursuit of excellence. And its excellence should, in part, be measured by its social contribution.

This message was shared by IESE Dean, Jordi Canals at the 28th Annual Meeting of IESE Partners in Barcelona.

With more than 130 senior executives from national and international companies in attendance, the meeting was a reflection on the social and economic challenges facing companies in the current macro-economic climate.

According to Canals, today’s complex economic landscape can be defined in terms of unemployment; a recovery that is "still not yet being felt by the majority of the population;" and by technological breakthroughs that can "improve access to education and consequently become the best remedy against unemployment and social exclusion."

Changing Dynamics in Social Contribution

Against this backdrop, the rules of the game in social contribution are changing, said Canals. New dynamics are emerging – presenting some interesting paradoxes for business. He highlighted three elements in particular:

  • Profits without wealth: This is a new phenomenon in which companies bolster share prices by using profits to buy their own stock, rather than investing in long-term growth. Increased profits do not necessarily result in economic prosperity. "This paradox goes against the laws of the market," said Canals.
  • Activist investors: The emergence of activist shareholders is also affecting the way companies operate. Activist shareholders try to influence or change the agenda of the board of directors – however their activities can be a "waste of time," said Canals. "They end up doing more harm than good."
  • The social role of companies: According to Canals, companies need to go above and beyond their role as economic institutions, regardless of their management model.

Doing Good Versus Doing Well?

In a round table moderated by Professor Nuria Chinchilla, the presidents of three IESE partner companies – Salvador Alemany (Abertis), Luis Egido (Logista) and Jordi Mercader Miró (Miquel y Costas & Miquel) – discussed the ways businesses can balance their social mission against long-term sustainability.

Common to all was the belief that boards have a key role in enhancing the social function of organizations.

"You have to separate the concept of ‘making a company’ from the concept of ‘doing business.’ For the board, building your company is the priority," said Alemany. The company you create is built on a vision and on values. "And your company has to be very clear on where it’s going and what resources it has for getting there."

Challenges facing organizations today include increasing hyperregulation and "bureaucratization," he said – which are "molding the ways that companies function."

Meanwhile, there’s a growing tendency for boards to go beyond their supervisory role, and to proactively shape the future of the company. Mercader Miró pointed to three key factors for successful outcomes: "There should be trust among board members, awareness of the risks they are taking, and the knowledge that their work is especially crucial in times of crisis," she said.

Taking the Long View to Navigate Change

Luis Egido believes that longer-term thinking is key to negotiating times of uncertainty.

Companies need to be thinking more in terms of finding a balance between industry and financial partners to weather the storms of change, he said.

"In recent years this balance has been lost and now companies are focused more on the short term. First business and then finance."

The panelists also pointed to shifting expectations from consumers in terms of transparency and values. Citizens are increasingly demanding that companies "define their position on the issues that matter to them," said Jordi Mercader Miró. "It’s essential for companies today to take a stand on the issues that are important to society."

IESE Partners: Welcome to 15 New Sponsoring Companies

This year 15 new companies have joined a growing community of more than 200 partners. The Dean extended his welcome to Advance Medical; Electrosteel Europe; Eurofragance; Fluidra; Garrido Abogados; Germans Boada; Mirabaud; Merck Sharp & Dohme; Mobility Services Network; Ordesa; Otsuka Pharmaceutical; SCM-Schibsted; Seidor; VidaCaixa and Xerox.

Sponsoring companies are vital to IESE’s progress, he said. "Our partners are key to the development of long-term projects such as research and the incorporation of new faculty members. Their support reverberates across the entire academic community at IESE."