Society at large, is indeed, increasingly demanding higher standards of social responsibility from corporations

According to Milton Friedman, the only duty of business is to increase profits. NAB, the fourth largest bank in Australia by market capitalisation, (Ryan, P., Morgan, E. 2011),by Friedman's standard has without doubt, in the year to 30 September 2011, fulfilled this promise.
NAB, saw it's profit up 23.6% to $5.21 billion, with gains in both the personal and business banking sectors. Despite this, NAB chief executive Cameron Clyne, at the time the bumper profit was announced, would not commit to passing on a home loan interest rate cut in full, to his
customers, in response to any rate cut the Reserve Bank of Australia made at their next meeting(Ryan, P., Morgan, E. 2011). Considering that the NAB profit was in part the result of the NAB mortgage book improving growth at three times the rate of the banking industry, the conclusion may
be drawn that the NAB stated corporate responsibility commitment of “doing the right thing”(NAB Corporate Responsibility charter) means delivering shareholders an 88 cents per share fullyfranked dividend, rather than providing lending customers the certainty of an interest rate cut.
Mr Clyne like all business leaders is faced with the legal and moral obligation to strive for profits(Florini, A. 2003), but business as usual, in isolation, without reference to a social contract where doing the right thing means more than compliance with neo-liberalist norms, will not deliver the type of business success that a profit through principles approach (Haas, R, D. 2002) can deliver, for not only the business but for society at large.

Society at large, is indeed, increasingly demanding higher standards of social responsibility from corporations, that go beyond existing business practices (Florini, A. 2003). In her writings for the Brookings Institution, Senior Fellow, Ann Florini, wrote in 2003, drawing from her book “The Coming Democracy” that corporations had no choice to embed in their economic activities a social contract, otherwise face a public backlash. At that time human rights groups had forced pharmaceutical companies to drop a legal battle which was attempting to protect patent rights but by trying to protect these rights hundreds of thousands of South Africans died of untreated AIDS. Though they had dropped the case the companies found themselves labelled as profiteers that were complicit in the deaths of millions (Florini, A. 2003). Florini wrote that the lack of regulation to protect the rights of workers, communities and the environment, was seeing a powerful movement of consumers, pressure businesses to adopt codes of conduct and socially responsible policies. One
of these codes, the Social Accountability 8000 standards was the first global ethical standard and based on conventions of the International Labour Organisation and the Universal Declaration of Human Rights and sought to promote the ethical sourcing and production of goods and services. The Commercial Bank of Dubai (CBD) was seen as a pioneer when in 2008, some 11 years after the setting of the SA8000 standards, they signed up to the code stating that not only was it a
demonstration of their commitment to corporate social responsibility, but that it would allow CBD to build and re-inforce customer and employee loyalty which had the potential for a greater impact on profitability (CPI Financial News, 2008).

There is no guarantee, however, that the adoption of standards or codes of conduct can avert behaviour that is contrary to not only the codes themselves, but of what is good for society and actually meets the ambition of business to make a profit. By focussing only on profit
as a measure of success and by remunerating business leaders on metrics tied to profit, relies on what Lynn Stout, a professor at UCLA, and others call a homo economicus model (Stout, L. A. 2010) that is based on extrinsic motivations such as bonuses that drives selfishness. Treating people to care only about their own material rewards is a fait d‟accompli that they do. Some of the biggest corporate scandals in history, (Enron, WorldCom) are associated with a failure of business ethics and financial services companies, especially banks and brokerage houses present
employees with the homo economicus model where they are conflicted between the pursuit of their own material goals and being honest (Ariely, D., Mazar, N. 2006 and Stout, L. A. 2010).

An analysis of the failures in the financial system that led to the global financial crisis highlighted three themes: a flawed method of remuneration, a failure of government, and a lessened focus on risk (Elliott, D. J. 2010). With regard to remuneration, it was the bonuses paid
to bankers tied to annual profits that saw financial incentives paid to investment professionals for generating short term profits regardless of the risk associated with the strategies adopted. More risk
was taken with less capital and more debt and the distribution model developed had at its core the intent to make risky financial instruments appear less risky and appear to perform well in the short
run. For the sake of profitability, with that being the sole focus and measure of success, people delivered what was required of them and in so doing delivered on the homo economicus model
where the higher the external rewards from being dishonest, the higher the degree to which an individual engages in dishonest behaviour (Ariely, D., Mazar, N. 2006).

Sadly the excesses of the US financial system were not quarantined to the US. Facing increased globalisation, French companies, especially banks, began a decade ago to place close attention to their market valuations to ward off unwanted takeovers. By linking compensation
to performance they began a value based management model linking decisions to the impact on shareholder returns and introduced these new value metrics into their remuneration systems(Ponssard, J-P. 2001). With French banks now owed the order of $450 billion Australian dollars by Greece and Italy, the same drivers of the homo economicus model that crippled the US economy have been at work in Europe with the consequences now playing out as both countries apply austerity measures to avoid sending the financial system into a downward spiral and the French banks into collapse.

There must be more to business success than profit. Responsible commercial success can be achieved and be built on trust and a social contract that not only delivers to society but to the legal beneficiaries of a corporation the shareholders. Robert D. Haas of the Levi Strauss family
advocated in 2002 after the tech-wreck and the shock of September 11, that corporations had to deliver more than growth in shareholder value and that doing the right thing was about business practices that, protected and supported workers, that cared for the environment and that supported
the community through philanthropic activities. Having leaders in the business lead in community service endeavours could see the business win in the battle for attracting talent, improve morale and generate community good will (Haas, R, D. 2002). Haas‟s profit through principles approach,
and Florini's observations that corporations have no choice but to embed such approaches have seen a myriad of companies espouse their commitment to corporate social responsibility (CSR). Businesses like the banks state that their objective is to do the right thing and many have built CSR
statements and programmes that give generously to the community. However whilst the focus and measure of success is profits and increasing profits year on year and whilst remuneration is linked to creating shareholder value, the CSR statements run the risk of being mere aspirations
rather than values to be measured against as a true definition of success.


References

CPI Financial (2008). CBD the „only SA8000 certified bank‟ in the region.
Retrieved from:
http://www.cpifinancial.net/v2/News.aspx?v=1&aid=6520&sec=Commercial%20Banking

Elliott, Douglas J. (2010). Some Thoughts on US Financial Reforms.
Retrieved from:
http://www.brookings.edu/~/media/Files/rc/papers/2010/1201_financial_reform_elliott /1201_financial_reform_elliott.pdf

Florini, Ann. (2003). Corporate Social Responsibility: the new Social Contract.
Retrieved from:
http://www.brookings.edu/~/media/Files/rc/articles/2003/09globalhealth_florini/florini200309.pdf

Haas, Robert D. (2002). Profits Through Principles.
Retrieved from:
http://www.brookings.edu/articles/2002/fall_corporateresponsibility_haas.aspx?p=1

International Institute for Sustainable Development. SA8000.
Retrieved from:
http://www.iisd.org/business/tools/systems_sa.asp

Mazar, N. And Ariely, D. (2006). Dishonesty in Everyday Life and Its Policy Implications.
American Marketing Association, 2006, Vol. 25(1) Spring 2006, 1-000

NAB Corporate Website.
Our Approach to Corporate Responsibility.
Retrieved from:
http://www.nabgroup.com/0,,103023,00.html

Ponssard, Jean-Pierre. (2001). Stock Options and Performance-Based Pay in France.
Retrieved from:
http://www.brookings.edu/articles/2001/03france_ponssard.aspx?p=1

Ryan, Peter and Morgan Elysse. (2011). NAB posts record profits.
Retrieved from:
http://www.abc.net.au/news/2011-10-27/nab-results/3603424

Stout, Lynn A. (2010). Cultivating Conscience: How Good Laws Make Good People.
Retrieved from:
http://www.brookings.edu/~/media/Files/rc/papers/2010/12_conscience_stout
/12_conscience_stout.pdf