To be fair, ‘survival of the fittest’ was a scientific theory on evolution over generations of living species. But much of its meaning has evolved as well, I have observed, because of how we’ve used the idea: in a race, in a scramble for position, in business, in life.
I can’t argue that it has its appeal because of the truth in it. But allow me not to hesitate this Sunday to call it also as the root of many unintended evils. For one, it is a very individualistic mindset. As a lawyer, I have known of many crimes or infractions committed in the name of trying to survive. And in that justification also lies the mitigation, if not the defense.
In this pandemic normal, survival is very much in play. So it’s easy to understand the significance of business groups recently coming together to sign and declare a “Covenant of Shared Prosperity”. It is about a commitment to take care of stakeholders that include employees, customers, suppliers, communities, the environment, and all stockholders. This coming together of business groups led by the Management Association of the Philippines (MAP) for stakeholder centricity may yet prove to be the one that can move the needle in a big way, although it is certainly not the first day for this idea or direction of travel.
You may be familiar with the Code of Corporate Governance (CCG) issued by the Securities and Exchange Commission (SEC). It imposes a higher level of governance on publicly listed companies because they receive and handle “other people’s money”. Publicly listed companies are accountable to the investing public but the SEC made sure they are accountable to all their stakeholders. The new CCG, in force for more than three years now, was a much-needed game changer for the country’s listed companies that lagged behind its peers in the Asia Pacific in respect of governance ranking. For publicly listed companies with an expansive web of value chain, attending to all stakeholders is anyway crucial for their sustainability.
The fresh advocacy therefore of the Covenant for Shared Prosperity is that all business entities, even if they are not listed, should be fair and should care for all their stakeholders. A great question was asked during the convocation of the Covenant Shared Prosperity a couple of weeks ago, about how one achieves the balance among competing stakeholder interests. And to this, the answer really depends on what is more valuable to the company, given its purpose. An even sharper question was raised about whether big companies would be willing to be less profitable for the sake of implementing stakeholder-centric policies. The answer to that, given by no less than Jaime Augusto Zobel de Ayala, is yes, as in fact, their conglomerate has been doing so. It’s the same message from Hans Sy, of the powerhouse SM conglomerate.
All good and welcome answers, which take us to the more difficult question: Can smaller companies afford it when they believe their survival is in play?
The truth of the matter is that principles require some investment costs because they have real values. In fact, private equities now put a premium on stakeholder practices of target companies not only in respect of their employees and suppliers but on the environmental and social capital they invested. A company’s governance around all these areas impacts the go or no-go decision for an investor.
It would not be wrong to say that many of the good stakeholder practices are not extra requirements – but musts. And yet they can be done relatively free or cheap.
For example, if you are a retailer that sells ladies’ shoes, you would not want to sell shoes where the sole separates as soon as it hits any puddle of water on the road. If you exercise quality assurance and choose your suppliers well, your products and brand will be trusted.
If you have a number of lowly paid workers whose literacy is not high enough, you may not have the resources (or the desire) to pay them more. But if you teach them basic English and Math, you may be surprised that this is a big help to them and that can bring out their potential and confidence even outside the company.
There is also no cost to a two-garbage system in the workplace, and there are non- fiscal, yet very personal ways to help communities.
It’s still early days for the Shared Prosperity initiatives for non-listed companies. A separate Code of Corporate Governance tailored for MSMEs (with recommendations and explanations for the rules like what the SEC did when it issued the CCG for listed companies) would be a worthy project as it can speed up the spread of best practices into normal practice.
If we rephrase the question here: Are shareholders’ interest at odds with the interest of the rest of the other stakeholders? The answer lies in what shareholders want today. It is quite possible they want the same thing for stakeholders, that they value, just as much, psychic income from doing good. What a golden opportunity to climb back from this pandemic depth to a better place, where it is no longer about the survival of the fittest, but surviving together.
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Alexander B. Cabrera is the chairman and senior partner of Isla Lipana & Co./PwC Philippines. He is the Chairman of the Integrity Initiative, Inc. (II, Inc.), a non-profit organization that promotes common ethical and acceptable integrity standards. Email your comments and questions to aseasyasABC@ph.pwc.com. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.