Corporate Social Responsibility: Corporate Counsel Build A Treasury Of Good Will - Part I

Wednesday, December 1, 2004 - 01:00

Part II of this article appears in the January 2005 issue of The Metropolitan Corporate Counsel.

Editor: What aspects of your background caused you to become particularly interested in corporate social responsibility?

Shestack: I have long believed in the responsibility of everyone to advance human worth and dignity. I helped found the Lawyers' Committee for Civil Rights and the Lawyers' Committee for Human Rights and headed various human rights organizations. During the Carter Administration, I served as the United States Ambassador to the United Nations Commission on Human Rights, which was sometimes frustrating, but altogether was an exhilarating experience.

I have been involved with the ABA, as a state delegate, on the Board of Governors, a founder of the Section of Individual Rights and the ABA's Pro Bono Center. I became president of the ABA. In that role, I had a unique overview of the efforts being made in many of the areas that are significant elements in the advance of corporate social responsibility.

Editor: Jerry, how would you define "corporate social responsibility?"

Shestack: One of the terms that is frequently heard these days in boardrooms and stockholder meetings is "corporate social responsibility." To some, that term is just a buzzword or merely reflects a current fad. To others, it reflects a call to the conscience of the corporate world. Speaking broadly, I see it as an effort to enlist corporations in an effort to create a better world. It is an inclusive term covering good corporate citizenship, corporate social involvement and corporate social conscience. Although it has its detractors, it is a concept that has a growing number of supporters.

What do I mean by corporate social responsibility? Corporate social responsibility is directed to what a corporation does in a positive way to improve the conditions in which human beings live. It includes contributing to society through such things as improving the environment through the sustainable development of natural resources, contributing to a cleaner environment, or improving education, health, safety and labor conditions in underdeveloped countries. Many of these positive activities are outgrowths of codes of ethical conduct adopted by companies to govern their conduct. These frequently cover such matters as volunteerism, philanthropy, leadership in the community, and other forms of community service.

Corporate social responsibility is a response to shareholders' expectations as well as to the demands from other stakeholders, including employees, customers, suppliers, communities, nations, NGOs and others. Some see it as most effective when there is collaboration between government, civil society and business to achieve socially worthwhile objectives. There is no one agreed upon paradigm, because the efforts to achieve corporate social responsibility take many forms.

There has been an ongoing debate about the appropriateness of corporate involvement in matters that are not directly related to their businesses. The Chicago school of economists led by Milton Friedman has long maintained that the assets of a corporation should be used only to enhance the return to shareholders and should not be diverted from that goal. Peter Drucker, on the other hand, responded that a corporation is a reflection of modern society and that its power over workers and its relation to consumers gave it a social and political as well as an economic dimension, He said that managers should have the responsibility to fulfill a greater political and social role.

Editor: Do corporate general counsel have sufficient clout to convince their corporations to become more socially responsible?

Shestack: Corporate general counsel often play a unique role in their corporations. They not only view the corporation in the context of the legal environment, but also focus on the role of their corporations in the larger society. Today, the views of general counsel carry much greater weight then they did some ten or fifteen years ago. They now participate at the highest levels in policy formation, are paid commensurate higher salaries, and have critical influence.

The importance of general counsels' role and their status has been immensely enhanced by Sarbanes-Oxley and its progeny. Because of the up-the-ladder reporting provided for in Sarbanes-Oxley and in the ethical rules, independent directors increasingly depend on general counsel to head off wrongdoing and to blow the whistle on illegality. In many corporations, this new role is reflected in formalized meetings of the general counsel with the independent directors without other members of management being present. More and more, corporate general counsel are being viewed as part of line leadership and looked to for guidance on broad policy issues.

Editor: Why do general counsel feel that corporate social responsibility is important?

Shestack: There is a distinct connection between the trust and good will generated by socially responsible behavior and the economic benefits for a company. Corporate social responsibility inspires confidence in a corporation's products and services, enhances its employees' pride in their work, furthers favorable brand recognition, and encourages localities, states and countries to offer incentives for the corporation to do business there.

Hill and Knowlton in a study done in 2001, found that 79% of respondents felt that good corporate citizenship was a factor in buying goods and services and 71% considered that factor in buying a company's stock. Sears partnered with nonprofit cancer groups called the Gilda Clubs. In those cities where it worked with the local Gilda Club, its annual sales increased by 56% as compared with 16% in its other locations.

Ben Heineman, general counsel of General Electric, said that "the potential rewards of pro bono service are enormous." He added that helping nonprofit organizations that serve communities "creates good will for our client and our profession and provides personal satisfaction and professional enrichment for the volunteer corporate lawyers."

The current scandals provide another reason for socially responsible actions. The scandals have created widespread skepticism about corporate conduct that corporations need to overcome. By improving a company's reputation as a responsible citizen, corporate social responsibility helps counter that image.

In summation, corporate social responsibility and pro bono volunteerism strengthens a company's reputation for responsibility, wins consumer acceptance and public approval, boosts morale among the corporation's lawyers and other personnel, and takes into consideration the demands of shareholders and consumers.

Editor: Legal department involvement in pro bono once lagged far behind that of law firms; do you see corporate counsel playing a greater role today?

Shestack: At one time, corporate counsel were reluctant to get involved in pro bono because they feared that management would consider it a diversion of corporate assets and might view pro bono efforts as indicative that they were overstaffed. But, there were voices in the wilderness even then calling for greater corporate pro bono involvement. These included Jack Martin, former general counsel of Ford, Sig Balka, general counsel of Krasdale Foods, and others.

More recently, a growing number of general counsel have been influential in persuading their companies of the value of pro bono for the reasons I mentioned earlier. General Electric is one example. Its general counsel, Ben Heineman, was responsible for the creation of the Pro Bono Partnership, the first pro bono organization operating in Westchester, Connecticut and New Jersey to seek out pro bono opportunities specifically targeted for corporate counsel. GE provided it with its initial funding and provided it with office space. It assigned one of its most senior and talented lawyers to guide it.

Starbuck's in-house lawyers are deeply involved in helping low income tenants in eviction cases. Paula Boggs, its general counsel, said that her department has capitalized on the personal desire of many of the lawyers to further the corporation's strong commitment to corporate social responsibility. Another example is Abbott Laboratories, whose general counsel, Jose De Lasa, has made pro bono a staple of his career. His department has focused on providing pro bono services relating to naturalization and immigration issues. It actively partners on these projects with Baker & McKenzie. Mr.De Lasa personally serves pro bono clients.

Pfizer's legal department, led by its general counsel, Jeffrey Kindler, has served as a model to other law departments by marshalling law firm support for pro bono organizations through holding Angel's Luncheons, by supporting the work of such pro bono organizations as Lawyer's Alliance and MFY, and through the work of its lawyers on projects for organizations supported by the United Way of New York. Aetna's legal department, under its general counsel, Louis Briskman, has a strong commitment to pro bono. Merck has also been a super achiever in the field of pro bono under the leadership of its general counsel, Kenneth Frazier. Merck lawyers provide assistance in child custody and domestic violence matters and helped survivors of 9/11 and the families of victims of that disaster. The Altria legal department under the leadership of its General Counsel, Charles Wall, is well known for its dedication to pro bono. It partners with Arnold & Porter to provide New York's Lennox Hill Settlement House with a full range of legal services. There are many other noteworthy examples.

In short, there has been a sea change among many general counsel of large corporations. They form and encourage pro bono organizations, actively promote pro bono by their staff attorneys, encourage their law firms to engage in pro bono, and they draft codes of ethical conduct and social responsibility for their companies. Of course, the exercise of such responsibility requires much more than public relations rhetoric or lip service. As Roderick Palmore, the general counsel of Sara Lee, cogently noted, a code of corporate social responsibility must be "more than a pious wish," it must be perceived by all "to have universal application."

Please email the interviewee at jshestack@schnader.com with questions about this interview.