A New Approach to CSR - Business Roundtable Institute for ...

Bridge PaPer 

Company Stakeholder Responsibility: 

A New Approach to CSR 

R. Edward Freeman 

S. Ramakrishna Velamuri 

Brian Moriarty 

Featuring a Thought Leader Commentary 

with Charles O. Holliday, Jr. Chairman and Chief Executive Officer, DuPont

© 2006, Business Roundtable Institute for Corporate Ethics 

www.corporate-ethics.org 

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Bridge PaPers Uniting best thinking with leading business practice.

CoNteNtS 

Foreword ....................................................................................................2 

introduction ..............................................................................................2 

Company stakeholder responsibility in Practice: 

Four Levels of Commitment to the stakeholder approach ...................4 

Ten Principles of Company stakeholder responsibility .........................5 

a New Csr – Company stakeholder responsibility ..............................8 

Thought Leader Commentary with Charles O. Holliday, Jr. ...............9 

about the authors ...................................................................................13

FoRewoRd 

The Business Roundtable Institute for 

Corporate Ethics is an independent 

entity established in partnership with 

Business Roundtable—an association 

of chief executive officers of leading 

corporations with a combined workforce 

of more than 10 million employees and 

$4.5 trillion in annual revenues—and 

leading academics from America’s best 

business schools. The Institute, which 

is housed at the Darden Graduate 

School of Business Administration, 

brings together leaders from business 

and academia to fulfill its mission to 

renew and enhance the link between 

ethical behavior and business practice 

through executive education programs, 

practitioner-focused research and 

outreach. 

Institute Bridge Papers put the 

best thinking of academic and business 

leaders into the hands of practicing 

managers. Bridge Papers convey 

concepts from leading edge academic 

research in the field of business ethics 

in a format that today’s managers 

can integrate into their daily business 

decision making. 

Company Stakeholder Responsibility: 

A New Approach to CSR is an Institute 

Bridge Paper TM based on the research of 

R. Edward Freeman and S. Ramakrishna 

Velamuri. Based on a stakeholder 

approach, this paper outlines a new 

capability for organizations to develop. 

The accompanying interview with 

Charles O. Holliday, Jr., Chairman 

and Chief Executive Officer, DuPont, 

provides a CEO perspective on how 

to embed a Company Stakeholder 

Responsibility mindset across the 

enterprise and in a firm’s overall value 

proposition. 

BRIDGE PAPER: Company Stakeholder Responsibility: A New Approach to CSR 

3

iNtRoduCtioN 

Assume that the CEO of a wellrespected 

corporation is asked the 

following: “Your company’s products 

improve consumers’ lives. Suppliers 

want to do business with your company 

because they benefit from this 

relationship. Employees really want 

to work for your company, and are 

satisfied with their remuneration and 

professional development. And, you’re a 

good citizen in the communities where 

you are located; among other things, 

you pay taxes on the profits you make. 

You compete hard but fairly. You also 

make an attractive return on capital 

for shareholders and other financiers. 

However, are you socially responsible?” 

If a company like the aforementioned 

organization is enriching the lives of its 

stakeholders, then asking the additional 

question of whether or not it is “socially 

responsible” simply makes no sense—it 

is a meaningless question. If a firm is 

doing all the things that this company 

does, then it deserves to be applauded 

and offered as an example for other firms 

to emulate. If it is not doing them as 

satisfactorily as particular stakeholders 

think it ought, then these stakeholders 

could perhaps offer to help it do them 

better, rather than appeal to actions and 

responsibilities that lie outside its day to 

day activities. 

By talking of business and social 

responsibility as if they are two separate 

things, we unintentionally promote the 

idea that they involve discrete thought 

processes and activities. The challenge 

is to promote a different way of doing 

business that integrates considerations of 

business, ethics, and society. 

Herein lies the problem with 

“Corporate Social Responsibility.” 

Corporate social responsibility (CSR) 

reinforces the “separation thesis”—the 

idea that we can separate “business” 

from “ethics or society.” This separation 

is an idea that reaches very deeply into 

Western culture. It is reinforced by the 

disciplines of business, by our major 

theoretical frameworks in management, 

and by many executives and business 

thinkers themselves. At its worst it 

generates an absolutely destructive idea 

of capitalism—that capitalism is about 

“anything goes.” After all, the theory 

says, “it’s just business.” Viewed in 

this way, corporate social responsibility 

becomes an “add-on” to ameliorate the 

supposedly harsh consequences of this 

view of capitalism. 

Let us go back to the example of 

the previously described corporation. 

By hiring employees, has it done 

something that is “for the business?” 

The answer to that question is a 

resounding and unqualified, “Yes.” Has 

it done something that is “for society?” 

The answer to that question is also a 

resounding, “Yes.” So, how do matters 

of employment count—in the social 

ledger or the business ledger? A similar 

argument can be made for customers, 

communities, suppliers and financiers. 

These individuals and organizations are 

all full-fledged members of society—if 

they benefit in their dealings with a 

company, then society benefits too, 

directly and indirectly. 

Corporate social responsibility is 

often about seeming to “do good works.” 

And, while there is certainly nothing 

wrong with doing more good, there can 

be an implication that companies need 

to do good works because the underlying 

structure of business is not good, or 

morally neutral. This is a destructive 

idea—it fails to recognize the central role 

4 Business Roundtable Institute for Corporate Ethics

usiness plays globally in improving the 

well-being and prosperity of hundreds 

of millions of people. And, it can cause 

companies to act in bad faith and get 

involved in matters where they have little 

expertise. 

This is not Milton Friedman’s 

argument that the only social responsibility 

is to increase profits; rather it is a 

practical matter—giving money to the 

opera doesn’t make up (in any moral 

sense) for short-changing customers 

or communities. 1 We need to focus on 

how value is created in the basic business 

proposition. How does this company 

make customers, suppliers, communities, 

employees, and financiers better off? 

Capitalism is a system of social cooperation—a 

system of working together to 

create value for each other, value which 

none of us could create on our own. In 

this sense, business is already an enterprise 

with moral ramifications. Seeing it 

any other way can lead to dangerous social 

policies, and to the tarnishing of the 

one institution—business—that still has 

to play a central role in lifting hundreds 

of millions of more people out of poverty 

across the globe. 

The second problem with corporate 

social responsibility is that it is focused 

on “corporate” social responsibility. 

Why is it not called “business social 

responsibility?” The focus on “corporate” 

implies that corporations, due to their 

size and success and perhaps their 

shareholding pattern, have to shoulder 

responsibilities that smaller and more 

closely held businesses do not. Why? 

This view is highly problematic when 

companies with fewer than 50 employees 

employ more than three times the 

number of U.S. workers (47,347,000) 

than companies that have 1,000 or more 

employees (15,138,000). 2 

In short, if you take a “creating value 

for stakeholders” approach to business, 

and if you acknowledge that ethics 

and values are as important in these 

relationships as they are in our other 

relationships with one another, then the 

idea of “corporate social responsibility” 

is superfluous. A conceptual scheme 

that separates the social responsibilities 

of a corporation from its business 

responsibilities has long outlived its 

usefulness. 

It is time to replace “corporate social 

responsibility” with an idea of “company 

stakeholder responsibility,” assigning a 

different meaning to CSR. 3 This is not 

just semantics, but a new interpretation 

A conceptual scheme that separates 

the social responsibilities 

of a corporation from its business 

responsibilities has long 

outlived its usefulness. 

of the very purpose of CSR. “Company” 

signals that all forms of value creation 

and trade—all businesses—need to be 

involved. “Stakeholder” goes back to 

the first paragraph of this paper and 

suggests that the main goal of CSR is to 

create value for key stakeholders. And 

“Responsibility” implies that we cannot 

separate what we do in the workplace 

from ethics. 4 


5

CompANy StAkeholdeR 

ReSpoNSibility 

iN pRACtiCe: 

Four levels of Commitment to 

the Stakeholder Approach 5 

Company stakeholder responsibility 

requires that companies be committed to 

a stakeholder approach to management 

on the following four levels. 

Level 1 - Basic Value Proposition 

At this most basic level, the entrepreneur 

or manager needs to understand how the 

firm can make the customer better off, 

and simultaneously offer an attractive 

value proposition to employees, suppliers, 

communities, and financiers. 

• How do we make our stakeholders 

better off? 

• What do we stand for? 

Level 2 - sustained stakeholder 

cooperation 

The competitive, macro-economic, 

regulatory, and political environments 

are so dynamic they necessitate constant 

revision of the initial stakeholder 

arrangements. Each revision upsets 

the delicate balance struck in the 

basic value propositions to various 

stakeholders. Managers must have a deep 

understanding of how these trade-offs 

affect each stakeholder, the amount of 

sacrifice a given stakeholder will accept, 

and how these current sacrifices can be 

compensated. 

• What are the principles or values 

on which we base our everyday 

engagement with stakeholders? 

Level 3 - an understanding of broader 

societal issues 

Today’s managers must recognize 

and respond to a rising number of 

international issues, without the moral 

compass of the nation, state or religion 

as a guide. Managers may need to take 

positions on issues that apparently are 

not purely business related. A proactive 

attitude is necessary towards all 

stakeholder groups, both primary, i.e., 

those that have direct business dealings 

with the company, and secondary, such 

as NGOs and political activists, who can 

affect the operations of the company. 

• Do we understand how our basic 

value proposition and principles 

fit or contradict key trends and 

opinions in society? 

Level 4 – ethical leadership 

Recent research points to a strong 

connection between ethical values and 

positive firm outcomes such as sustained 

profitability and high innovation. 7 

Proactive ethical leadership is possible 

only if there exists a deep understanding 

of the interests, priorities, and concerns 

of the stakeholders. 

• What are the values and principles 

that inform my leadership? 

• What is my sense of purpose? What 

do I stand for as a leader? 

There are 10 general principles that 

collectively develop a “mindset” 

necessary for entrepreneurs and managers 

to understand and practice all four levels 

of Company Stakeholder Responsibility. 


teN pRiNCipleS oF 

CompANy StAkeholdeR 


(1) Bring stakeholder interests together 

over time. 

The very idea of managing for stakeholders 

is that the process of value 

creation is a joint process. Companies 

need to show returns to its shareholders, 

meet obligations to debt holders, banks, 

and others. Profits don’t conflict with 

other stakeholders—they are a scorecard 

indicating how well the company is 

managing the whole set of stakeholder 

relationships. Managers must keep these 

stakeholder interests in balance, hopefully 

mutually reinforcing each other. 

The online auction firm eBay 

constantly updates its user interface 

and back office processes to meet the 

expectations and desires of multiple 

stakeholder groups—in particular, 

people who use the site to buy and 

sell goods. The company’s ability to 

consistently meet the needs of a broad 

range of consumers and sellers—from 

small startups to leading national retail 

operations—has also been of great 

benefit to the firm’s shareholders, with 

the stock price increasing roughly 400% 

from 1999 to 2006. 

(2) recognize that stakeholders are real 

and complex people with names, faces 

and values. 

We often make assumptions that 

business people are only in it for their 

own narrowly defined self-interest. Most 

human beings are more complicated. 

Most of us do what we do because we 

are both self-interested and interested in 

others. Business works in part because of 

the urge to create things with others and 

for others. 

Employees are far more motivated 

to give their time, energy and creativity 

when they believe in their firm’s overall 

mission and goals. The firm in turn needs 

to live its values. 

For example, Merck’s stated mission is 

“to provide society with superior products 

and services by developing innovations 

and solutions that improve the quality 

of life and satisfy customer needs, and to 

provide employees with meaningful work 

and advancement opportunities, and 

investors with a superior rate of return.” 8 

Led by CEO Roy Vagelos, in 1987 

Merck decided to develop, produce and 

distribute millions of doses of a medicine 

to treat river blindness—a terrible flyborne 

parasitic illness affecting tens of 

millions of the world’s poorest people 

in the African and Asiatic tropics. 9 This 

was an extraordinary action, because 

Merck did it free-of-charge—the people 

in need of the drug could not afford it. 

In so doing, Merck lived its value of 

“preserving and improving human life,” 

and showed all of its stakeholders that 

the core purpose of the company was 

alive in practice. 

(3) seek solutions to issues that satisfy 

multiple stakeholders simultaneously. 

Issues and problems come at 

managers from many sources, in many 

forms. Managers need to find ways to 

develop programs, policies, strategies, 

even products and services that satisfy 

multiple stakeholders simultaneously. 

The first step in that process is to 

actually recognize the need to look for 

simultaneous solutions. 

In developing new products, Sun 

Microsystems focuses on both customer 

needs and environmental impact. When 

the company launched its Sun Fire x64 

servers, the product consumed about one 

third the energy and cost half as much 


7

as comparably configured servers—while 

providing one-and-a-half times the 

performance. Sun was able to offer its 

customers great value—with the bonus 

of cheaper energy costs—by having a 

sustainability mindset in their product 

development. 10 

(4) engage in intensive communication 

and dialogue with stakeholders—not 

just those who are friendly. 

Obviously we need intensive 

dialogue through multiple methods 

with customers, suppliers, employees, 

and shareholders, but communities, 

the media, critics, and other secondary 

stakeholders count as well. Critics are 

especially important dialogue members— 

they represent unmet market needs. 

After declining to issue a corporate 

responsibility report for three years, 

Nike decided to issue a comprehensive 

report in 2005. As part of this process, 

The very idea of managing 

for stake-holders is that the 

process of value creation is a 

joint process. 

Nike invited experts from academia, 

trade unions, NGOs and the investment 

community to help them shape a report 

that for the first time not only listed the 

company’s 700 active contract factories, 

but also graded each of these factories in 

terms of safety and labor conditions. 11 

Within a span of months, Nike transformed 

itself from being a routine 

target of these secondary stakeholder 

groups to a leading model of corporate 

transparency. 

(5) Commit to a philosophy of 

voluntarism—manage stakeholder 

relationships yourself, rather than 

leaving it to government. 

The challenge for managers is to 

reorient their thinking and managerial 

processes voluntarily to be more 

responsive to stakeholders. A situation 

where a solution to a stakeholder 

problem is imposed by a government 

agency or the courts must almost 

invariably be seen as a managerial failure. 

Spurred on by Warren Buffett, the 

widely-admired Chief Executive of 

Berkshire Hathaway and corporate 

investor, the Coca-Cola Company and 

The Washington Post Company have 

been leaders in the movement to count 

stock option grants to employees as 

compensation. Both companies began 

reporting these awards as compensation 

in 2002, well before the U.S. Securities 

and Exchange Commission began to 

consider requiring similar reporting 

measures in January, 2006. 12 

(6) generalize the marketing approach. 

We need to “over-invest” on 

understanding stakeholder needs, 

using marketing techniques to segment 

stakeholders to develop a better 

understanding of their individual needs 

and using marketing research tools to 

understand the multi-attribute nature 

of most stakeholder groups. “Investing” 

may be in terms of more time, more 

energy, or whatever the relevant resource 

that is required by a given stakeholder 

group. 

Johnson & Johnson ( J&J) is one 

of the biggest investors in terms of 

proactively assessing stakeholders’ needs 

and taking the pulse of their firm’s 

reputation among various groups. By 

all accounts this investment has shown 


In today’s world no one “gets it 

right” all the time. Whatever 

your interactions and strategies 

are with stakeholders, they can 

always be improved. 

great dividends in the company’s brand 

strength, with J&J garnering the top 

ranking in Harris Interactive National 

Corporate Reputation Survey for seven 

consecutive years. 13 

(7) Never trade off the interests 

of one stakeholder versus another 

continuously over time. 

Just as many successful companies 

think in terms of “how to serve the 

customer” or “how to serve the 

employees,” it is possible to generalize 

this philosophy to “how to serve our 

stakeholders.” 

Consider the example of a company 

that trades off the interests of customers 

in order to maintain its stock value 

for shareholders. In August of 2000, 

Firestone recalled millions of their 

tires deemed to be defective. Firestone 

managers had been aware of the 

problems associated with this product for 

years before they became public, but they 

had chosen “to settle cases confidentially, 

one at a time, making it difficult for 

consumer watchdogs or government 

regulators to discern a pattern that 

could have pointed to a broad public 

safety issue.” 14 When these settlements 

became public, the Firestone brand was 

essentially destroyed. 

(8) Negotiate with primary and 

secondary stakeholders. 

If a group or individual can affect a 

company or be affected by a company 

then there needs to be some interaction 

and some strategic thinking. In our 

relatively free and open society, the 

consequences of not negotiating with a 

broad range of stakeholders is that they 

use the political process to “negotiate” 

indirectly by pressuring government to 

enact a set of rules that is not likely to be 

optimal to company interests. 

(9) Constantly monitor and redesign 

processes to make them better serve 

stakeholders. 

In today’s world no one “gets it right” 

all the time. Whatever your interactions 

and strategies are with stakeholders, they 

can always be improved. 

Penske Truck Leasing owns 216,000 

trucks in 750 locations. Because 

Penske’s back office processes were not 

centralized, customers would receive 

accounts payable calls from 10 or more 

different agents and often the calls would 

continue well after payment had been 

received. This process was not only highly 

inefficient for Penske, it was terribly 

annoying for their customers. After the 

company outsourced and centralized 

several of its back office processes, 

customers with payments 38 days past 

due receive a single phone call about 

their invoice, delinquent payments have 

been reduced and the staffing for this 

area has been cut by 30%. 15 

(10) act with purpose that fulfills 

commitments to stakeholders. act 

with aspiration towards fulfilling your 

dreams and theirs. 

Businesses can have a purpose. 

Purpose is inspirational. The Grameen 

Bank wants to eliminate poverty. Fannie 

Mae seeks to make housing affordable 

to people at every income level. ITT 

Industries tries to make products that 

improve people’s lives. All of these 


9

organizations have to generate profits, or 

else they cannot pursue their purposes. 

And, they cannot generate profits or 

fulfill their purpose without intense 

engagement with their stakeholders. 

A New CSR—CompANy 

StAkeholdeR 


Corporate Social Responsibility has 

outlived its usefulness, because it is 

flawed in two respects. First, it promotes 

the “separation thesis,” the idea that 

business issues and social issues can be 

dealt with separately. This endorses the 

destructive idea that the underlying 

structure of business is either not good 

or is morally neutral. A stakeholder 

approach acknowledges the intertwined 

nature of economic, political, social, 

and ethical issues. Centered in the 

practice of management, it provides the 

manager with a pragmatic framework for 

action. The second flaw with Corporate 

Social Responsibility is its focus on 

corporations. Social responsibility does 

not only apply to corporations—it 

applies to all organizational forms. A 

stakeholder approach applies as much 

to an entrepreneurial start-up and to a 

mid-sized closely-held firm as it does to 

a corporation with diffuse ownership. 

Based on a stakeholder approach, 

a distinct CSR—Company Stakeholder 

Responsibility—outlines a new capability 

for organizations to develop. 

A stakeholder approach applies 

as much to an entrepreneurial 

start-up and to a mid-sized 

closely-held firm as it does to 

a corporation with diffuse 

ownership. 


ten principles for Company Stakeholder Responsibility 

1. Bring stakeholder interests together over time. 

2. recognize that stakeholders are real and complex people with 

names, faces and values. 

3. Seek solutions to issues that satisfy multiple stakeholders 

simultaneously. 

4. engage in intensive communication and dialogue with 

stakeholders not just those who are “friendly”. 

5. Commit to a philosophy of voluntarism—manage 

stakeholder relationships yourself, rather than leaving it 

to government. 

6. generalize the marketing approach. 

7. Never trade off the interests of one stakeholder versus 

another continuously over time. 

8. Negotiate with primary and secondary stakeholders. 

9. Constantly monitor and redesign processes to better 

serve stakeholders. 

10. Act with purpose that fulfills commitments to stakeholders. 

act with aspiration toward your dreams and theirs. 


11

A thought leAdeR CommeNtARy with 

Charles o. holliday, Jr., Chairman and Chief executive 

Officer, DuPont 

Q: How do you identify your stakeholders 

and balance their interests in today’s 

rapidly changing environment? How can 

business leaders best engage stakeholders 

who may be critics of their firm or 

industry? 

Charles O. Holliday, Jr.: We have 

traditionally identified four stakeholder 

groups important to DuPont— 

shareholders, customers, employees 

and society. We fully understand the 

shareholders are the owners. Their best 

interest is served by the other three. At 

different times in our history, emphasis 

has shifted among those stakeholders. 

But that set provides us with an enduring 

template for identifying and engaging the 

people and groups who are vital to the 

continued success of our enterprise. We 

balance their various interests by listening 

and through dialog. We regularly poll our 

employees to find out how they see the 

company and how they feel about their 

ability to contribute to its growth. Our 

public affairs and issue scans enable us to 

maintain a good sense of the trends and 

developments important to stakeholder 

groups. 

I personally participate in conferences 

and other events where I am able to 

state our company’s position relative to 

public issues and to talk with others who 

There is really no substitute for 

some first-hand interaction 

with leaders in other sectors, 

whether friends or critics. 

Charles O. Holliday, Jr. 

approach the same issues from different 

points of view. So while we rely to a great 

extent on information that we gather, 

there is really no substitute for some firsthand 

interaction with leaders in other 

sectors, whether friends or critics. 

Q: How else does the company embed 

the Company Stakeholder Responsibility 

mindset, discussed in this Bridge Paper, 

across the enterprise in its overall value 

proposition? 

Holliday: First, DuPont is a leader 

in terms of Company Stakeholder 

Responsibility through safety. For more 

than 200 years, DuPont has placed a 

concern for safety above all others. We 

have the most stringent and effective 

safety policies in our industry, which 

our trading partners, suppliers, and even 

competitors use as a benchmark. In 2000, 

we created a safety consulting business 

now worth over $100 million annually 

to provide training, certification and 

development around safety issues. 


Second, the shift of DuPont’s 

products from a chemical basis to 

a biological basis has allowed our 

products to have a substantially 

smaller footprint on the environment. 

Having a diversity of disciplines as the 

foundation of our science allows us to 

invent and manufacture products that 

are both innovative and socially and 

environmentally responsible. Our regard 

for the environment is what will allow 

DuPont to thrive and survive in our third 

century. 

Q: DuPont has an over-200 year-old 

legacy supporting its core values of safety 

and health, environmental stewardship, 

ethics, and respect for people. In 

particular, DuPont is well-known for 

its “safety moments” that are deeply 

engrained in all DuPont employees. How 

would you advise corporate leaders whose 

companies don’t have such a long legacy 

and want to build similar lasting core 

values? 

Holliday: Because our core values have 

been part of our company’s culture for so 

long, it’s hard for us to imagine operating 

without being able to consistently refer 

back to the values that drive us. As we 

moved through a historic transformation 

of the company in the past eight years, 

we indicated that everything was open 

to change except our core values. What’s 

more we measure and gauge our progress 

opposite those values with a lively set 

of metrics that employees have access 

to. For example, any employee can see 

our statistics on year-to-date safety 

and environmental performance every 

day by clicking on a link accessible 

through our daily electronic newsletter. 

In every written letter or video message 

to employees I make some mention of 

core value performance – and in those 

rare few instances when I didn’t, I heard 

about it! Our core values work for us. 

They make us a more desirable company 

to do business with or have operating 

in your back yard. They give us a set of 

standards that make good and capable 

people want to work for DuPont. They 

give real backbone to interaction with 

our stakeholders. 

For us, core values are central to our 

identity of who we are as DuPont, and 

they are the link through the generations 

of DuPont employees over our 204 

year history. For companies that don’t 

have a set of values that can help them 

accomplish that, I would recommend 

As we moved through a 

historic transformation of 

the company in the past eight 

years, we indicated that 

everything was open to 

change except our core values. 

that they take the time to understand 

and identify what values inform their 

behaviors and underlie their operating 

principles and the way they do business. 

Once those values have been identified 

you have to drive them everyday in what 

you say and what you do. You have to act 

in a way that proves beyond a doubt that 

they are true non-negotiables. You have 

to measure your performance against 

them, and where you don’t measure up, 

your stakeholders have to see you make 

the necessary adjustments to get on track 

and stay there. 

Q: You have been at DuPont for 36 

years. During that career progression, 


13

what are some defining moments that 

have contributed to both your own 

and DuPont’s current approach to 

sustainability? 

Holliday: As a company, we have learned 

from scientific insights into the safety 

of our products and from changes 

in environmental laws. In the 1970s, 

DuPont was the world’s largest producer 

of CFCs. As CFCs became more closely 

linked to environmental change, we 

started the process of eliminating CFCs 

from our product offerings. 

As a global leader in sustainable 

business practices, DuPont now works 

to direct the chemical industry toward 

developing more environmentally and 

socially friendly products. We influence 

the chemical industry most by constantly 

setting the bar higher on what is 

expected of a chemical company, by 

creating more biology-based products, 

and by considering the needs of the 

communities our business affects. For 

example, DuPont is the world’s leading 

producer of soy protein, which is now 

being used in various products that were 

traditionally chemically-based, such as 

printers ink. 

Personally, I have learned more from 

interacting with our many talented 

employees – engineers, scientists, managers, 

front-line plant workers, and others 

– based in over seventy countries. Interaction 

with leaders of other companies 

and with U.S. and international government 

leaders has also taught me a great 

deal. There are various trade and development 

organizations DuPont is part of. 

Recently, I represented DuPont at meetings 

of the World Business Council for 

Sustainable Development and the World 

Economic Forum. 

Q: You are the Chairman of Business 

Roundtable’s Environment, Technology 

and the Economy Task Force, you have 

served on other leadership groups like 

President Bush’s National Infrastructure 

Advisory Council, and you have coauthored 

the book Walking the Talk, 

which outlines the business case for 

sustainability—what drives you to lead 

change in this broader arena outside of 

your own company? 

Holliday: DuPont’s long history has 

demonstrated to us that no company, 

however strong and competitive, can 

go it alone. Involvement in outside 

organizations and endeavors is a way 

of learning and leading. Working with 

other companies, we can learn from 

the rich variety of experiences that 

they share. I never walk away from a 

Business Roundtable meeting without 

a new insight that affirms something 

we’re doing or challenges me to think 

in a very different way. The S.E.E. 

Change initiative we kicked off a year 

ago was aimed at precisely that—dozens 

of companies visibly doing creative 

things to work more sustainably so their 

successes might trigger equally good but 

different ideas among their peers. The 

whole idea of sustainability as a realistic 

goal for industry came about because 

organizations like the World Business 

Council for Sustainable Development 

kept hammering away at it and offering 

up real life examples. 

We can lead in those areas where our 

experience positions us to effect positive 

change. Ultimately, all this is good for our 

company and makes a lasting impression 

on our stakeholders. 

Q: This paper argues that business 

leadership involves setting industry 


standards, not just following them. Why 

is it important for firms to manage 

stakeholder relationships themselves 

rather than leaving it to regulatory 

agencies? How can government and 

business work together most effectively 

to set standards that create value for 

multiple stakeholders? 

Holliday: The complexities and 

opportunities of modern business and 

industry are too great to assume that 

regulation alone can get us where we 

have to go. Regulation, as we have seen 

historically, is not a precision tool for 

change. But it can overcome inertia 

and gets things going. The landmark 

environmental legislation of the 1970s 

and 1980s set in motion the kind of 

change that in the U.S. has led to cleaner 

air and water. No one doubts that. But 

how would you go about regulating 

sustainability? We can expect that 

government will identify some pressure 

points where regulatory instruments can 

advance the cause. But real progress in 

sustainability will come from what we 

build into products and services, in the 

way we design and operate our plants 

and distribution networks, in the way 

we think about the ultimate disposition 

of the things we make, even – and 

especially – in the way we direct our 

research and development. It’s hard to 

imagine regulatory protocols that can 

encompass all of that. 

Industry has to be imaginative 

and proactive and show that we can 

accomplish the things our stakeholders 

expect of us, especially those things 

that go beyond the letter of the law. We 

reduced our greenhouse gas emissions 

by 72 percent since 1990 because our 

stakeholders expected us to be proactive 

and lead in this area. Right now one 

Industry has to be imaginative 

and proactive and show that 

we can accomplish the things 

our stakeholders expect of us, 

especially those things that go 

beyond the letter of the law. 

of the most exciting things we’re doing 

at DuPont in sustainability is the 

construction of a plant for a bio-based 

route to a key ingredient for our Sorona® 

polymer. It will be on stream this year. 

To be sure, work we did in bio-refinery 

development funded by the Department 

of Energy helped us understand the 

potential of such processes. But no one 

told us we had to do it. We worked 

with a business partner to make this 

happen because we think this is the way 

profitable businesses will operate in the 

future. Our stakeholders understand this 

and they expect it of DuPont. 


15

About the AuthoRS 

developing ethical leadership 

R. EDWARD FREEMAN is the 

Academic Director of the Business 

Roundtable Institute for Corporate 

Ethics. He is the Elis and Signe Olsson 

Professor of Business Administration 

at The University of Virginia Darden 

Graduate School of Business 

Administration and co-Chair of 

Darden’s Olsson Center for Applied 

Ethics, one of the world’s leading 

academic centers for the study of ethics. 

S. RAMAKRISHNA VELAMURI 

is an Assistant Professor of 

Entrepreneurship at the IESE 

Business School. He has a PhD in 

Entrepreneurship, Business Ethics, 

and Strategy from the Darden School 

of Business and an MBA from IESE 

Business School, Spain. Professor 

Velamuri is also a visiting professor at 

the University of Saarland in Germany, 

Nile University in Egypt, and the 

University of Piura in Peru. He has 

previously taught at the University of 

Virginia, Boston University and the 

Ecole Nationale des Ponts et Chaussees. 

BRIAN MORIARTY is Associate 

Director for Communications at the 

Business Roundtable Institute for 

Corporate Ethics. 

thought leadership Commentary 

CHARLES O. HOLLIDAY, JR. is 

the chairman of the board and chief 

executive officer of DuPont. Holliday is 

the 18th executive to lead the company 

in more than 200 years of DuPont 

history. He became CEO on February 1, 

1998 and Chairman on January 1, 1999. 

Holliday has been with DuPont 

for more than 30 years. He started 

at DuPont in the summer of 1970 

at DuPont’s Old Hickory site 

after receiving a B.S. in Industrial 

Engineering from the University of 

Tennessee. He is a licensed Professional 

Engineer. 

In 2004, he was elected a 

member of the National Academy of 

Engineering. He became chairman 

of Business Roundtable’s Task Force 

for Environment, Technology and 

Economy the same year. Holliday 

is also past chairman of the World 

Business Council for Sustainable 

Development (WBCSD), The Business 

Council and the Society of Chemical 

Industry – American Section. While 

chairman of the WBCSD, he coauthored 

a book Walking the Talk 

which details the business case for 

sustainable development and corporate 

responsibility. 

Holliday also serves on the board 

of directors of HCA and is Chair of 

the Board of Directors of Catalyst. In 

addition, he is chairman of the U.S. 

Council on Competitiveness and is a 

founding member of the International 

Business Council. 

Under Holliday’s direction, DuPont 

established the mission to achieve 

sustainable growth – increasing 

shareholder and societal value while 

decreasing the company’s environmental 

footprint. 


NoteS 

1 Milton Friedman, “The Social Responsibility of Business is to Increase its Profits,” 

The New York Times Magazine, September 13, 1970. 

2 US Census Bureau, County Business Patterns 2003, (Washington: DC, 2005), p.3. 

3 The ideas in this paper have been developed with a number of co-authors over the 

years in several places. In particular see Wicks, Freeman and Parmar (2005); Freeman 

and McVea (2001); Freeman et al (2004); and Freeman et al (2005). We are grateful 

to a number of people for helpful conversations, in particular Professors Gianfranco 

Rusconi, Dr. Lorenzo Saccone, Dr. Valeria Fazio, Dr. Mette Morsing, doctoral students 

at the Copenhagen Business School doctoral consortium on Corporate Responsibility, 

numerous participants in the EABIS conference in Gent, Professors Jeff Harrison, 

Robert Phillips, and Andrew Wicks. 

4 Here “ethics” is used its broadest sense to encompass obligations to employees, and 

other stakeholders. This is sometimes referred to as an “American” usage, whereby the 

“European” usage is much narrower. 

5 The first three levels of commitment are explored in greater detail in Wicks, Freeman, 

and Parmar (2005). The origins of these ideas can be found in part in Freeman (1984) in 

the idea of “enterprise strategy.” 

6 Haaland-Matlary, J. 2005. Kjernekar: Ethical Integrity in a Chaotic World. IESE 

Business School Alumni Magazine, 96( Jan-March): 12-15. 

7 Damon, W. 2002. The Moral Advantage. Optimize. Available on the Internet at: http:// 

www.optimizemag.com/issue/003/ethics.htm. 

8 From the Merck Web site: http://www.merck.com/about/mission.html. 

9 Michael Waldholz, “Merck, in Unusual Gesture, Will Donate Drug to Fight Leading 

Cause of Blindness,” Wall Street Journal, Oct 22, 1987, pg. 1 

10 “Sun Microsystems Sustainable Growth Initiative” in S.E.E. Change: Examples of 

How Business Roundtable Companies Are Embracing Strategies That Promote Social 

Responsibility, Improve the Environment and Grow the Economy, Business Roundtable, 

2005. This document is available on Business Roundtables Web site at: http://www. 

businessroundtable.org/pdf/SEEChange/SEEChangeCompanyPrograms.pdf 

11 “Nike Issues FY04 Corporate Responsibility Report Highlighting Multi-Stakeholder 

Engagement and New Levels of Transparency, April 13, 2005. This news release is 

available from Nike’s Web site at: http://www.nike.com/nikebiz/nikebiz.jhtml?page=29 

12 “US SEC’s Cox details executive pay disclosure plan,” Reuters, Jan 10, 2006. “Pros: Coke 

and Others Step Up to the Challenge,” American Management Association, http:// 

amanet.org//editorial/coca_cola_pros.htm. 

13 Ronald J. Alsop, The 18 Immutable Laws of Corporate Reputation: Creating, Protecting and 

Repairing Your Most Valuable Asset, Wall Street Journal Books, 2004, pp. 28-29; 52-58. 

14 Penni Crabtree, “Court Orders Often Keep Companies’ Darkest Secrets Hidden,” The 

San Diego Union-Tribune, September 8, 2002. 

15 Pete Engardio, “Penske’s Offshore Partner in India: The Truck-Leasing Outfit Works 

with Genpact in India and Mexico to Improve Efficiency and Customer Service,” 

BusinessWeek Special Report: Outsourcing/Online Extra, January 30, 2006. 


17

For more information on the Business Roundtable 

Institute for Corporate Ethics please visit or call 

Business Roundtable Institute for Corporate Ethics 

100 Darden Boulevard 

Charlottesville, Virginia 22903 

(434) 982.2323 

info@corporate-ethics.org 

www.corporate-ethics.org

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