Are CEOs Responsible for Repairing the Social Contract?

November 15, 2022
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As the threads of how we operate businesses in a capitalist democracy unravel, the role of the corporation (and its leader) is up for debate. At a human level, a damaging amount of stress around cost of living, healthcare, personal safety, food and energy security, and the climate emergency is being borne by individuals. Given the power of corporations, to what extent should its leaders step in where the state cannot deliver? 

The social contract between individuals, communities, and governments is a complex and fundamental societal structure. Many of its tenets, such as health outcomes, education opportunity, and job security, can be provided—and some would argue bettered—by private-sector employers. But should leaders consider doing so? 

When institutions like government are slow to act or fail to preserve important values, I believe corporations have a responsibility to their employees and communities to take a stand on issues that threaten their workforce or the communities in which they do business. But not everyone shares this view, and it’s something I work through with many of the clients I coach. 

Where does responsibility lie? 

For an alternative view, investor and author Vivek Ramaswamy argues that however fractured governments are, anything on the ESG agenda is the job of politicians to fix and that companies committed to the ESG movement are purely “dousing themselves in morality.” 

Those who know me will have guessed I strongly disagree with this sentiment. In a world where a multinational tech platform can be larger than a nation, there must be a new social contract between individuals, corporations, and the state. And while some companies have appeared to backtrack on their ESG commitments lately, I see this more as a lack of skill, expertise, and experience in dealing with the expectation that they must perform and be a force for good in the world. 

Based on conversations I’ve had with global leaders on this topic, the leaders who are successfully navigating this area do these things well:

  1. They think paradoxically. Successful leaders can navigate paradox and make sense of complexity because they understand the interconnectedness of all phenomena. They acknowledge this is not an either/or choice; companies have to perform, and they also have to manage broader risks to change the narrative from risk mitigation to opportunity capture. These leaders are adept at handling multiple perspectives and multiple truths.
  2. They are inclusive. Some of the most diverse places on Earth are our corporations. Even with the failings of business, they invest time in policy that puts them ahead of most societal institutions because they are conscious of the need to prevent a damaging loss of talent. In many ways, corporations role-model the values of society and need to hold themselves to the highest of standards. Leaders who do this well sponsor learning innovation, collaboration, well-being, and psychological safety.
  3. They have a lens on legacy. More leaders are starting to think about their role in terms of the legacy they will leave rather than absolute ownership of an idea. Of course, some companies have a longer legacy than others, and those that realize they have caused harm sometimes struggle to accept accountability. This is a dilemma for leaders, but those who own their legacy and adapt their strategy around a clear purpose find a better way forward.
  4. They think regeneratively. In my opinion, ESG is a temporary catch-all for a range of ideas, metrics, concepts, and aspirations. The big question underpinning it is, “Is the world better off because our company is in it?” The most adaptive and agile companies weave their DEI, sustainability, and regenerative aspirations into their strategy. These leaders are bought into the reality that companies with a long-term view outperform their peers on key economic and financial metrics.
  5. They are authentic and compelling. Those who are leading well in an age of activism and managing multiple stakeholders are purpose driven, courageous, resilient, and humble. They are self-aware and intentional about their own personal development, relentlessly curious, and comfortable with not knowing all the answers.

Difficult Conversations

The playing field is far from level when it comes to the big questions about our contract with the planet and what we owe to future generations. Until then, leaders must work through these intellectual, moral, and ethical conversations one by one to do the right thing by their community of stakeholders.

David Astorino is a senior partner and member of RHR International’s operating committee. For more than 20 years, he has been applying his expertise to complex client engagements, helping CEOs and boards of directors successfully drive the human side of transformational change within their organizations.