Case study of General Electric Co

Case study of General Electric Co General Electric can trace its roots to the founding of the Edison Electric Light Company in 1878. By 1890, Edison had organized his various businesses into the Edison General Electric Company. The Thomson-Houston Company and the various companies that had merged to form it were led by Charles A. Coffin. In 1892, these two major companies combined to form the General Electric Company. GE is a global manufacturing, technology, and services conglomerate, formed in 1892. Today, GE is made up of six businesses, each of which includes a number of units: GE Commercial Finance provides loans, operating leases, financing programs, commercial insurance, and an array of other products and services aimed at enabling business worldwide to grow. GE Healthcare is a leader in the development of a new paradigm of patient care dedicated to detecting disease earlier and helping physicians tailor treatment for individual patients. GE Industrial provides a broad range of products and services throughout the world, including appliances and lighting; plastics and silicones products; and equipment services. GE Infrastructure is one of the worlds leading providers of fundamental technologies to developing countries, including aviation, energy, oil and gas, rail and water process technologies. GE Money, formerly known as GE Consumer Finance, is a leading provider of credit services to consumers, retailers and automotive dealers around the world. NBC Universal is one of the worlds leading media and entertainment companies in the development, production and marketing of entertainment, news and information to a global audience. As per their last annual report at the end of 2008,at the end of the year they employed in total globally 323000 employees. $797,769 millions in assets 182,515 millions in revenues. Stakeholder Relations GE is a public company listed on the New York Stock Exchange and incorporated in the State of New York. The company is managed by a 16 member Board of Directors, of which 13 of the directors are independent. Directors are chosen annually at the annual meeting of shareholders. Four committees assist the Board: the Audit Committee, Management Development and Compensation Committee, Nominating and Corporate Governance Committee, and the Public Responsibilities Committee. The Public Responsibilities Committee oversees the companys position on corporate social responsibility. GE also has a team of Corporate and Business Executives who lead GEs many corporate functions and businesses. GE has very strong equitable shareholder control. Each share of the common stock is entitled to one vote. Shareholders are able to nominate and elect candidates for the Board of Directors through a majority. Also, GEs code of conduct, The Spirit and The Letter enables shareholders to initiate a process of dis missal of Directors. Within Organisation External Employees Customers Senior Management Shareholders Board Of Directors Suppliers Shareholders Government Representatives Audit Committee Non-Governmental Organizations (NGOs), Management Development And Compensation Committee Industry And Financial Analysts Nominating And Corporate Governance Committee Environmental Advocacy Groups Public Responsibilities Committee Media Environmental, Health And Safety Committee Community Leaders Citizenship Executive Advisory (CEA) Council Ecomagination Advisory Council Investors Investors Table Key Stakeholders GEs Board of Directors and GEs Risk Committee play vital roles in the oversight and management of the Company. From this senior leadership they are held with great accountability. The primary role of GEs Board of Directors is to oversee how management serves the interests of shareowners and other stakeholders. To do this, GEs Directors have adopted corporate governance principles aimed at ensuring that the Board is independent and fully informed on the key risks and strategic issues facing GE. This is dictated by two-thirds of its Board be independent under a strict definition of independence. The GE Board held 13 meetings in 2007 and outside Board members visited at least two GE businesses each in 2007 without senior management present in order to develop their own view of the Company. The Board also meets periodically without management. The Board and its Committees focus on the areas that are important to shareowners strategy, risk management, and people and in 2007 received brief ings on a variety of issues, including: controllership and risk management, compliance and litigation trends, U.S. and global tax policy, environmental risk management, social cost trends, acquisitions and dispositions, intellectual property and copyright protection, global trends, the reshaping and broadening of GEs businesses, and productivity. At the end of the year, the Board and each of its committees conduct a thorough self-evaluation as part of their normal governance cycle. Table Power v Influence MatrixKeep Satisfied Employees CEA Environmental, Health and Safety Committee Public Responsibilities Committee Ecomagination Advisory Council Manage Closely Senior Management Board of Directors Management Development and Compensation Committee Audit Committee Monitor Media Government Representatives Non-Governmental Organizations Community Leaders Keep Informed Investors Shareholders Industry and Financial Analysts Environmental Advocacy Groups Suppliers Power Influence Low High High Low Senior GE officers, including the Citizenship Executive Advisory (CEA) council, are regularly involved in reviewing stakeholder feedback. This group meets at least quarterly and reviews summary stakeholder feedback and issues important to the Companys citizenship efforts to ensure that the appropriate actions and resources are in place. The CEA is comprised of five senior GE executives. GE makes a commitment to transparency in its citizenship reports where the Vice President of Corporate Citizenship and the General Counsel ensure transparency of non-financial information. GE provides training on transparency to all employees as part of induction training as well as e-learning training that deals with compliance to policies and integrity. The citizenship reports are widely disseminated and translated to further encourage participation of its stakeholders. GE makes commitments to engaging with external stakeholders in its citizenship reports, which outline the types of engagements the company undertakes. They started the reports in 2005 and are now into their fourth. GE is currently developing a company-wide approach to stakeholder engagement called, materiality. Stakeholder engagement depends on the functionality of a department, for example, with citizenship-related engagements (i.e. NGOs or public policy groups) the Vice President of Corporate Citizenship over sees external stakeholder engagement. GE provides training to managers and executives on how to interact with stakeholders as part of the business Management and leadership classes. They have formalised engagement where they have institutionalized external stakeholders involvement in corporate decision making on environmental and social issues. GE has an Ecomagination Advisory Council comprised of a Board of 6 to 8 industry thought leaders with expertise in energy and environment. The Council guides the company on technology research and investments, provides new ideas on its environment strategy, helps generate or review white papers, and participates in GE sponsored events. GEs Ecomagination business strategy guides the companys evaluation of its environmental impact. The strategy aims to achieve energy-efficient, less emissive products, and achieves this through the use of the Ecomagination Product Review score card. The score card quantifies a products environmental impact relative to other products. Ecomagination product revenues increased from $12 billion in 2006 to $14 billion in 2007, which as a percent of overall company-wide revenue is 23% in 2007. In the current discussion global climate change, the environment is a hot topic now and will for the forseeable future for stakeholders. The main stakeholders that can be linked with this are the ecoimagination, environmental organizations, EHS. They will increasingly expect policies and strategies with real results and commitment to reduce detrimental environment impacts. They will therefore have a great deal of influence currently and will do for some time. They can increasingly apply pressure on the company to materialize its efforts. No doubt he GE is already tackling these issues but with these external stakeholders great power will arise as they influence employees to take responsibility and increased products on the ecomagination scheme. GE already state they have increasing product line in the pipe line. This is also a media frenzy topic which is reported on daily, environmental issues can see a hole host on stakeholders mainly external influence the the senior management and BOD, these include the media, government representatives, which will influence the community and thus individual shareholders and investors. Not only will they influence the internal operations of the company but in tern the GE will guide its suppliers so no conflict of interest if they are not doing all they can to alleviate environmental issues and are seen to be responsible. GE also has the Environment, Health and Safety (EHS) Policy, which ensures consistent global standards for evaluation methods. GE provides training to operations leaders on the overview on EHS policy through Plant Manager Training. Of the Ecomagination and EHS policy are both widely circulated, but Only Ecomagination material is translated. However of the mechanisms to facilitate the sharing of lessons learnt from evaluations is not in place and thus contradicts the approach of external stakeholders to lead the environmental issues. GE has the Statement on Principles of Human Rights, which commits the company to monitoring its suppliers adherence to EHS standards in emerging markets, prohibitions against forced and child labor, local wage and hour laws; evaluating human rights issues; and assessing the impact of major infrastructure project financing on local communities. The Vice President of Corporate Citizenship oversees the reporting and evaluation of GEs social impact while different leaders have varying responsibilities depending on the issue. For example, the General Counsel has the responsibility for compliance, governance, and ombudsperson. GE does not provide training to staff on evaluation of social impacts of their activities. Companies like GE with global supply chains face significant challenges in order to ensure that their suppliers make safe and quality products, and that they are produced on time and at competitive prices. In addition, stakeholders increasingly expect companies and their busine ss partners to respect and implement national and international labour and environmental standards in their workplaces. This challenge becomes even greater when companies source suppliers from countries without adequate government enforcement. While the policing model of the past has made some positive improvements, it has been relatively unsuccessful at identifying the core issues. This has created a duplication of efforts, contributed to a proliferation of codes of conduct that create confusion, and has largely been an ineffective use of resources. Adding to the dilemmas are some unanswered questions, including: How will competing companies in the growing economies of Brazil, Russia, India, and China manage their supply chains in relation to international labour standards? Do consumers see the value of investing in supply chains and, if so, are they willing to potentially pay more? Todays leading companies and multi-stakeholder initiatives are changing tack and beginning to focus their efforts on five areas: Improving management systems Developing effective complaint mechanisms and workplace remediation platforms Evaluating internal purchasing to determine how their own actions may negatively impact the workplace Increase supply chain transparency Creating incentives for their buyers and suppliers based on social and environmental performance criteria This shift in approach requires collaboration from a broad set of stakeholders because no one sector can effectively achieve this alone. Companies should learn from the hard lessons of the past, avoid the pitfalls that others have experienced, and consider targeting resources on building internal capacity to work in partnership with NGOs, trade unions, multilaterals, peer companies, and industry and trade associations to tackle these complex issues together. Moreover, companies and their stakeholders should collectively engage governments and encourage them to enforce their laws in order to make decent work a reality and to create a level playing field for multinational companies and for those suppliers competing for their business. GE has the code of conduct called The Spirit and The Letter, which guides the handling of internal complaints. GE also has a Global Ombudsperson system where ombudspersons are placed in every business and country where GE operates to facilitate compliance and the complaints process. The Spirit and The Letter have the commitment to ensure mandatory discipline for anyone found to have retaliated against a whistleblower. The Corporate Ombudsperson has the overall responsibility to oversee compliance with the code. GE provides all ombudspersons with training on receiving concerns, initiating investigations, and monitoring case progress and closure. Employees receive compliance training through the intranet. This also encompasses complaint and response procedure for external complaints. GEs 2007 proxy statement highlights a mechanism that exists for external stakeholders to lodge complaints directly to the Board of Directors. The Corporate Ombudsman also oversees compliance with commitmen ts made in the proxy statement, and will pass any concerns to the Audit Committee of the Board of Directors. Ombudspersons are trained on receiving and handling concerns from external stakeholders. GEs code enables any stakeholder to report concerns of corporate policies and strategies directly to the Board of Directors. With the many commitments and programs and committees in place GE keep their stakeholders mainly employees informed with reports. They have proxy statements, citizen reports, annual reports which are widely disseminated and translated. They also have key policies that are made easier accessible such as human rights statements. Not all endeavours are translated and circulated but the majority are. Environmental and social aspects are reported on and also compensation of the senior management and executive directores, CEOs are all transparent. If this was not the case this could easily alienate lower level employees and other stakeholders. With the information available stakeholder board have also been issued the task of evaluating report writing on annual and citizenship reports. They concluded in the 2008 citezen report that GE utilized a Stakeholder Review Panel to assess and comment on report quality. Ongoing stakeholder engagements have enabled the Company to determine the impact and influence of its corporate citizenship efforts. The Panels commentary is intended to inform and guide report readers, as well as GE. Six people were invited by GE to join the Panel, identified in discussion with AccountAbility, the latter acting as the Panel Convener. Panel members were selected for their interests and concerns, their expertise and their knowledge of GE. Panel members were asked to participate as individuals, not as representatives of their organizations, Environment Social Development Department at the International Finance Corporation, HSBC Climate Change Centre of Excellence. The Panel provided feedback to GE based on a draft report, and the commentary based on its view of the final report. The Panel focused on the quality of the report, although members raised some performance issues in discussion with GE. The Panels commentary, presented here, is intended to inform and guide the report readers, as well as GE. Use was made of the AA1000 Assurance Standard, but the Panels work is not a formal assurance exercise. Background to the 2008 Convenings This year we sought to reflect on our progress concerning the implementation of our Statement of Principles on Human Rights as well as our broader ecomagination and development efforts, and further explore the links between GEs operations and the broader human rights agenda. In particular, we convened experts and stakeholders in three regions to discuss: à ´Ã¢â€š ¬Ã†â€™Ã… ¾ How can GE further advance the implementation of the Companys global Human Rights Policy, and in particular in relation to our role as a global Olympics sponsor at the 2008 Beijing Olympic Games; in other words, What does it mean to be a good global citizen? (Geneva) à ´Ã¢â€š ¬Ã†â€™Ã… ¾ How can GE further embed its environmental stewardship work within the core of its strategy and practice, expanding its efforts outside the United States and also connecting its efforts to the broader development agenda? (Washington, D.C.) à ´Ã¢â€š ¬Ã†â€™Ã… ¾ How can GE advance an effective approach to serving communities in the developing world in light of the Companys unique position in providing infrastructure solutions to the private and public sectors? (Delhi) To learn more about GE and stakeholder participants for these convenings, please visit www.ge.com/citizenship/processes. Insights from the 2008 convenings GE greatly appreciated the honest and open discussions at the three convenings. Valuing the counsel and advice we received, we would like to share a summary of the key opportunities and challenges the convenings helped us identify and explore. We discuss many of these opportunities and challenges within this years report and are looking forward to further engagement over the coming year to help us inform and guide our citizenship approach and efforts. To provide the reader with a flavor of the discussions at the convenings, this report also features a number of (unedited) expert perspectives authored by participants of the convenings. Insights include: Climate change public policy Clear and consistent communication, including recommendation and clarification of effective and credible global policy frameworks, engaging in national and local debates on trade policies, and customer engagement on clean technology (Washington, D.C.). Company-to-country investment Leveraging innovation and product adaptation driven by local culture and context (Delhi). Customer product-use issues Clarification of GEs approach to client responsibility of GE products, including increased engagement with society on key concerns such as dual-use technology and post-sale management (Geneva, Delhi, Washington, D.C.). Expanding boundaries Engaging experts as GE continues to operationalize its Statement of Principles on Human Rights and consider a life-cycle approach for GEs products as GE applies its efforts to help reduce CO2 emissions within its supply chain (Geneva, Washington, D.C.). Human rights Increased public positioning on business issues associated with the emerging and ongoing human rights discussions and proactive engagement as they arise, e.g., 2008 Beijing Olympic Games (Geneva). Localizing engagement Greater understanding of the implications arising from GEs unique position as a business-to-business company providing infrastructure solutions to countries (from technology development to local implementation) (Delhi, Washington, D.C.). Strategic collaborations and partnerships Leveraging of GEs core competencies and strengths (commitment to innovation and ability to scale projects and programs) in strategic collaborations and partnerships to ensure acceptance and sustainability (Delhi). The Panel encourages GE to continue innovating in its reporting, and we challenge it to strive for leadership in promoting meaningful transparency across the global business community. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Injecting sustainability into financial reporting: This years Citizenship Report has demonstrated the strategic relevance of GEs programs for its long-term business performance. These material aspects of sustainability management and innovation should be incorporated into regular investor disclosure, including quarterly and annual reports as well as in proxy statements. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Embedding citizenship within operations: We would welcome transparency on how sustainability performance is brought to life for individual GE employees through performance evaluation and compensation. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Matching global reporting with national level data: Utilize GEs Web site to provide country-level performance data and information for global stakeholders, including insights and outcomes from key stakeholder and business engagements, especially in high growth regions such as Asia. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Discussing public policy engagement: Further strengthening of disclosure on GEs public policy activity and lobbying on key citizenship issues at the global and national level, including membership organizations that represent GE. Consider making all submissions to governments available on the Web site. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Exploring human rights: Shine a brighter spotlight on GEs human rights approach and practice, and illustrate its thoughtfulness in approaching challenging dilemmas. As operationalizing GEs human rights policy around the globe is particularly complex, this area does not lend itself to quantitative goals, but to case studies and an active discussion of the dilemmas and nuances central to the human rights challenges the Company faces. For example, the illegal use of GEs ultrasound equipment for sex-selection by practitioners in India or application of GEs global labour rights standards within its supply chain in challenging environments like China. Further information on steps the Company has taken to align its performance with its human rights policies would enrich the Report. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ Progressing the Energy and Climate Change Agenda: Deepening of reporting on the Companys contribution to the U.S. Climate Action Partnerships commitment to 60-80% reduction in U.S. emissions by 2050 how, on a practical level, GE plans to help achieve these goals via technology adaptation or expansion of ecomagination. à ´Ã¢â€š ¬Ã†â€™Ã… ¾ User-focused reporting: Experiment and explore how best to reach and communicate with the companys diverse range of stakeholders, especially those with particular, set interests or those who may have limited access to the Web. ge Public responsibilities Companies confront many dilemmas when conducting business, in rich or poor countries alike, when defining their role in communities: understanding the proper role of governments and the right level and quality of influence from companies that are sometimes larger than governments themselves; the need to respect different cultures but still make sure that the same values are applied all around the world; the need to have an educated workforce that fits in the companys processes while trying not to change local cultures; expectations that companies will provide for all; and disappointment when companies need to close plants or leave communities. Much has been written and discussed about the impact of multinationals on communities. Stakeholders have many different views and perceptions, and there is little agreement about how to measure impacts, both positive and negative. I think, however, that there are two basic questions that companies need to answer: 1. Are we really listening to the stakeholders who are actually impacted at every step of the value chain of our business? 2. What are communities going to be like when our company leaves? Many stakeholder dialogues are going on around the world, and it is certainly a remarkable and great step to have companies like GE whose sheer size allows them to have significant positive impacts when defining their course of work listening to diverse views and exchanging ideas with non-business partners. They are, however, mostly focused on stakeholders who speak English or belong to organized groups with some international affiliation. Maybe it could be good to actually exchange ideas with the impacted communities themselves to form a more complete picture. Companies should come into communities planning for the time when they leave, be it two years or 70. Hopefully, that way one can avoid creating dependency and promote ownership from day one. It is probably more complex to start and carry business with this view, but it is surely better to prevent risks than to manage crises. Public Policy GE has increasingly focused on deepening and improving its ability to work effectively with governments throughout the world. We firmly believe that a better understanding of GEs vision and business activities and governments impact on those pursuits will serve both parties well. Moreover, we have made a concerted effort to enhance our working relationships with government officials. The rules governing governmental transactions and advocacy activities differ from country to country, and can be varied and complex. Our total commitment to integrity has led us to continuously educate GE leaders on changes in the rules and regulations governing interactions with government officials. The Public Responsibilities and Audit Committees of the Board are briefed regularly on our government relations and compliance activities. I spend much of my time travelling internationally and meeting people at every level within and outside GE. Our strong commitment to corporate citizenship makes GE a very attractive place for lawyers to work. My ability to attract the best lawyers and maintain the legal teams strong internal sense of community is greatly assisted by the fact that the Company is committed to promoting the Rule of Law and is actively working with governments and communities to promote ethical behaviour. GE lawyers are inspired and motivated knowing that such a strong commitment runs through the veins of the Company. Global Initiative to Combat Nuclear Terrorism In 2006, the U.S. and Russian governments launched the Global Initiative to Combat Nuclear Terrorism. As a global citizen, GE is deeply concerned that every safeguard be taken to ensure that legitimate commerce in nuclear materials is not exploited by terrorist organizations. As a global producer of nuclear power plants, nuclear fuels, radioactive isotopes for healthcare applications, and radiation detection equipment, GE has the experience and expertise to make a substantial contribution to this goal. In 2007, GE worked with the U.S. Department of State to express support for the Global Initiative, and in 2008, we will participate actively in several projects, including the development of a model national nuclear detection architecture document; international cooperation in developing technical approaches to remotely detect radiological materials; and minimizing the use of highly enriched uranium in the production of medical radioisotopes. Countries of concern GE devotes significant resources to ensuring that business activities are in compliance with all applicable laws, that they are conducted with integrity and achieve value for our shareholders worldwide. While our policy has always required that our businesses follow U.S. sanctions and other applicable laws, in 2008 we adopted a policy that goes beyond what current laws require. In light of reputational and business risks associated with doing business with countries designated as State Sponsors of Terrorism by the U.S. Department of State (Cuba, Iran, North Korea, Sudan, and Syria), the Company will not accept business in these countries except activity that is authorized by the U.S. Government for humanitarian or public policy purposes. This approach augments a policy adopted in 2005, when GE and its board decided it would no longer do business in Iran because of developing conditions in that country. The exceptions were to run down existing commitments and humanitarian activity authorized by U.S. Government licenses. Since then, GE has done everything it said it would do in 2005. As of the end of June 2008, the preexisting commitments with Iran have been completed. At all times GEs policy was fully compliant with U.S. and all applicable laws. In fact, GEs policies have been more restrictive than U.S. law. Recent sales to Syria have been very small, involving healthcare products as well as non-U.S. origin power, oil and gas, and lighting. In recent years, GE has had very little activity in the Sudan, almost all involving the sale of healthcare products. GE has not had any sales to North Korea in the past three years. Since 1996, GE has not accepted business in Myanmar (Burma). Recommendations GE is