VALUE SHIFT: WHY COMPANIES MUST MERGE SOCIAL AND FINANCIAL IMPERATIVES TO ACHIEVE SUPERIOR PERFORMANCE

Abstract

Value Shift: Why Companies Must Merge Social and Financial Imperatives to Achieve Superior Performance, by Lynn Sharp Paine, is reviewed.

VALUE SHIFT: WHY COMPANIES MUST MERGE SOCIAL AND FINANCIAL IMPERATIVES TO ACHIEVE SUPERIOR PERFORMANCE Lynn Sharp Paine. New York: McGraw Hill, 2003, 302 pages.

This book about the importance of the organization's ethical culture is a manifestation of the newer areas in which internal auditors are being asked to develop expertise. The Sarbanes-Oxley Act's requirements relating to ethics have resulted in stock exchange listing rules mandating all listed companies to initiate and maintain codes of conduct and ethics. Internal auditors are becoming more involved in ethics, as the literature of the internal auditing profession states that internal auditors should be advocates of a strong ethical culture. Specifically, International Standard for the Professional Practice of Internal Auditing No. 2130 states, in part,"The internal audit activity should assess and make appropriate recommendations for improving the governance process in its accomplishment of the following objectives: Promoting appropriate ethics and values within the organization. . . ."

The author, Lynn Sharp Paine, is a celebrated professor of ethics at Harvard Business School and is known for her superior research and writing. She has a well-deserved reputation for being on the leading edge of business issues. Her prior books and articles are well referenced throughout the volume.

Value Shift is divided into three parts. The first describes what the author terms the "turn to values." This is the growing global emphasis on good corporate behavior-a focus on strong ethics, good citizenship, interests of stakeholders, and values. Ms. Paine relates and comments on what many company executives say about these topics and why they have endorsed initiatives to promote them. The second part offers Ms. Paine's interpretive comments-what is motivating the shift of values, and why it is significant. She believes the phenomenon reflects an evolution in the culture of an organization, the attributes that define its essential characteristics. The third part outlines the implications for corporate leadership, decision making, and organizational design.

The basic premise that Value Shift explores is that today's leading companies are expected to act ethically as well as create wealth. As such, they should adhere to basic ethical principles, exercise moral judgment in carrying out their affairs, accept responsibility for their deeds and misdeeds, be responsive to the needs and interests of others, and manage their own values and commitments. One of the major reasons for the corporate shift away from short-term shareowner wealth as a sole concern is the realization that corporations benefit from having an ethical orientation. Corporate reputation studies, best-company rankings, citizen polls, and expanding investor concerns all indicate that a company's mission cannot be measured in terms of profitability alone. Concern for stakeholder interests delivers rewards in terms of better productivity, greater customer loyalty, lower employee turnover with reduced training costs, and better reputation leading to lowered costs of capital.

Chapter 8, "A Compass for Decision Making," presents a workable description of four lenses through which managers can test the various aspects of their decision making:

* Purpose - Will this action serve a worthwhile purpose?

* People-Does this action respect the legitimate claims of the people likely to be affected?

* Principle-Is the action consistent with relevant ethical or moral principles?

* Power-Do we have the power to take this action?

Value Shift is an important tool that internal auditors can use to increase the breadth of their competencies in this field of expanding interest to them. Internal auditors can also use it to maintain awareness of corporate developments that affect their ability to deliver long-term value to their organizations. It is highly recommended reading for all internal auditors.

Sidebar

INTERNAL AUDITORS ARE BECOMING MORE INVOLVED IN ETHICS, AS THE LITERATURE OF THE INTERNAL AUDITING PROFESSION STATES THAT INTERNAL AUDITORS SHOULD BE ADVOCATES OF A STRONG ETHICAL CULTURE.