Welcome to the Age of Damage. We have seen, from Washington to Wall Street, numerous examples of irresponsible leadership over the past decade. The younger generation, in particular, and rightfully so it seems, feels that the irresponsible pursuit of profit for profit’s sake is one of the leading reasons for the economic mess and its attendant problems.
It should not come as a surprise, then, that capitalism came under the microscope during The World Economic Forum’s annual meeting in Davos this past January. Discussions and workshops on how to create a more sustainable, responsible kind of capitalism were high on the agenda and income inequality was identified as the number one risk facing the world.
We’ve seen how unfairness, spurred by the connectivity that technology now provides, can exacerbate social unrest.
This shift in power is at the heart of what I call the Age of Damage. People have been empowered by social media to take down leaders and laws they don’t like. From the Arab Spring, Occupy, and BP to News International, and Komen we are seeing more and more tangible demonstrations of this.
A recent example of this power shift from companies to consumers is Bank of America’s halting a plan to charge a $5 monthly fee for debit card purchases after one woman collected more than 300,000 petitions. Similarly, Verizon dropped a $2 charge for certain types of bill payments just 24 hours after announcing it when roughly 100,000 people voiced their anger.
The power of the boardroom to keep companies on track has now been outsourced to Twitter.
In the finance world, some banking CEOs are starting to realize this and are responding accordingly, encouraged by added pressure from government leaders who are applying more scrutiny to ensure that failure is not rewarded.
Recently in the United Kingdom RBS CEO Stephen Hester declined a $1.5 million bonus that had drawn criticism from politicians after a public outcry. And days later the previous RBS CEO Fred Goodwin, was stripped of his knighthood after a damning report into the 2008 banking meltdown identified his reckless risk-taking as being a significant cause.
Young people are the beating heart of this movement. The Millennial Generation, also known as Generation Y, regardless of where they are from, is ready to challenge the status quo. They accept that business should and has to make money, as they are currently the biggest losers when it comes to unemployment. But they also believe business must make a profit responsibly. They are demanding that business behave in a better way -- one where results are measured by more than profit, and where social responsibility is at the heart of business strategy rather than in a corporate social responsibility (CSR) silo or marketing campaign.
Furthermore, they want to work for companies that share their values. A global study commissioned by One Young World, the organization that I founded with Kate Robertson, found that 64 percent of respondents’ career ambition is to work up to the top of an established business they admire. Roughly 60 percent say they will only work for a company that shares their values.
Interestingly, according to this study, a majority of young people entering the workforce today would work for a lower salary at a company whose values they believed in, rather than at a higher-paying competing firm they viewed to be less socially responsible.
While many of the world’s largest businesses are genuinely making their operations more socially responsible, and a growing number of political leaders are also getting on board, the banking and finance sector lags behind. The biggest risk posed to economic recovery is if that sector remains trapped in the old model that prioritizes irresponsible risk-taking to drive annual bonuses over genuine, long-term, sustainable profit and value-creation.
Wall Street should get on board because appealing to young people’s sense of social responsibility is also where competitive advantage lies. A 2010 report from Accenture found that the top 50 most sustainable companies (taken from a cross industry group of 275 companies from the Fortune Global 1,000) outperformed shareholder return of the bottom fifty by 16 percentage points over three years and by 38 percentage points over five years.
I believe the banking and finance sector will catch up. CSR has been taken out of the silo and put in the P&L statement thanks to the revolution in communications that has empowered ordinary people to sanction those who don’t behave the way they want them to. The most successful businesses of the next decade will be the most socially responsible. They will reap huge benefits from the power of social media, as employees, shareholders and consumers become passionate advocates for their brands and businesses. And the most talented young people will want to work for them.
And to those that don’t: Welcome to the Age of Damage.