Hallmarks of a Socially Responsible Corporation

Social investors expect a company to sell its product or service fairly and accurately, and they want the company to respect every person who gets that product to market, including vendors, customers, and employees.

Every day companies enter into relationships with others. A company must interact with the companies that supply it with inventory and other goods and services needed to make the business run; with its customers, who keep it in business; and with the regulators who ensure that the company follows applicable laws.

Companies can choose policies that are good for everyone involved, or they can choose policies that make the company better off while making everyone else worse off. If you care about how companies that you invest in do business, you need to pay attention to these areas. The following are characteristics of a socially responsible company:

  • They build good relationships with suppliers. Good supplier relationships tend to be collaborative, with the suppliers helping the customer and the customer paying the supplier for the value added. Some companies go so far as to draw up a code of conduct for prospective suppliers, setting out how they expect suppliers to behave when calling on them, and setting forth environmental, labor, quality, and financial standards that they expect their suppliers to meet. These standards may be backed up with a certification program or audits that the supplier must pass if it wants to keep the contract.

  • They promote good customer relations. Businesses have to have customers, regardless whether those customers are other businesses or private individuals. Any company in any industry will run into occasional problems, so investors shouldn’t view a problem as a sign that a company isn’t responsible. Instead, they should watch to see how the problem is handled and whether it was an unusual event or an indicator of loose tactics. A responsible company stands behind its products and addresses customer complaints promptly and politely.

  • They maintain government relations. Every business faces an army of regulators, whether local, state, or federal. There are taxes to pay, licenses to hold, and rules to follow covering everything from the sizes of entryways to the management of retirement plans.

    Like them or not (and most businesspeople don’t), regulations are a fact of doing business. The responsible way to approach government regulations is to follow them. The irresponsible way is to ignore regulations as long as possible and then try to bribe one’s way out of them or to take other approaches, with the goal being to avoid the regulations.

  • They treat employees well and create good working conditions. Factors that impact the quality of work environment include

    • Having policies in place to avoid discrimination and harassment and to address any complaints

    • Offering domestic partner benefits

    • Providing all employees with sick leave and access to health insurance and retirement plans, and other benefits like vacation leave, tuition reimbursement, child-care reimbursement, and extended family leave

    • Enabling employees to hold company stock, through programs like employee stock purchase plans, 401(k) plans, employee stock ownership plans, and more

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