Speaker Name: David L. Burner
Speaker Title: Chairman and CEO
Speaker Company: Goodrich Corporation
Chancellor Borkowski, Dean Peacock, Senator Broyhill, Mrs. Boyles and family, members of the Walker College Business Advisory Council, faculty, students and friends of Appalachian State University. It is an honor and a pleasure to participate in the Harlan Boyles Distinguished CEO Lecture Series and to join with the impressive speakers who have preceded me.
Even though we are only a few miles away, I envy all of you who reside in the Boone area, either as students or full-time residents. I have had the opportunity to wet a line in the Watauga River over the past several years since we moved to Charlotte, and you benefit from one of the most beautiful areas in our country, with some great trout waters, and an impressive university. You see, I’m convinced that there are two kinds of people–fishermen and non-fishermen–and you can’t make one out of the other. My wife suggests that you can give your husband a fish and feed him for a day. But send him off fishing and you can get rid of him for an entire weekend. And, of course, there is the refrain from the current popular country music “fishing song” that goes: “My wife said that if I go fishing ONE MORE TIME, she’s going to leave me,” to which the fisherman sitting on the river shore laments, “I’m gonna miss her–lookie there, another bite!”
Thank you to my good friend Bill Holland for the gracious introduction. Unfortunately, in our current environment, I must sometimes explain my resume. You see–included in over 40 years of business experience was my first job at Arthur Andersen & Co. They were, in 1962, one of the premier public accounting firms in the world, and I was pleased and proud to be a part of such a prestigious firm.
I was subsequently the chief financial officer of two public companies–before I moved on to The BFGoodrich Company over 20 years ago. And while at Goodrich, I had the good fortune to transition into business operations before finding myself in the position of CEO. I must tell you that my career was not the result of a carefully executed personal plan, but it was certainly a dream come true in a land of opportunity.
“We, in America, are blessed with freedom and liberty that is often taken for granted. We have a system of free enterprise and a capital system that has withstood a multitude of challenges over many years.”
Little did I imagine that as a new century began, these once noble professions–accountants, financial officers and CEOs–would be regarded by many with mistrust and even disdain. These are noble and honorable professions and it is important that we do what is necessary to restore the appropriate confidence and regard to these essential responsibilities. We, in America, are blessed with freedom and liberty that is often taken for granted. We have a system of free enterprise and a capital system that has withstood a multitude of challenges over many years. And even though it is sometimes abused, it is a system that recovers and sustains.
A number of months ago, when I was honored with the invitation to join with you today, Dean Peacock asked if I had in mind a topic for my remarks. I quickly responded that I did–my favorite topic–the transformation of Goodrich into the leading aerospace systems company that it is today.
At that time the domestic economy was showing signs of slowing, corporate scandals kept emerging and we were a nation still attempting to recover, almost a year later, from the atrocity of September 11. The business world, including the aviation industry, was struggling as we worked toward the expectation of better times ahead. In many instances, drastic action to control business costs resulted in job reductions and restructurings. It did not seem that things could get much worse. But political and economic issues collided with the public’s uncertainties and a lack of confidence in our business institutions that included all of its constituents–from bankers–to brokers–to accountants and lawyers–to CEOs–all the way to the boardroom–to further depress the equity markets and consumer confidence. And now–WAR!
I haven’t changed my mind about my chosen topic. I still want to tell you about the transformation of a 133- year-old company into a successful enterprise that is positioned for continuing success. But I also want to talk with you about another related topic that I believe is an essential reality–and that is Corporate Sustainability.
I’ll start with good old Benjamin Franklin–Goodrich that is! How many people own BFGoodrich tires? Well good–the French will love you–because Michelin has owned and made BFGoodrich tires since we sold them the business, and the trade name, in 1987! Did you know that BFGoodrich invented polyvinyl chloride (that ubiquitous product better known as PVC)? How about rubber bands? Synthetic rubber? Tubeless tires? And good old PF Flyer tennis shoes, for those who can remember back that far? How many have seen the Goodrich blimp? You’re right–no blimp and no tires–only one of the broadest based aerospace systems companies in the world.
What happened to this company that was created in 1870 when Dr. Benjamin Franklin Goodrich left his home in the East because he could not sustain a successful medical practice, to go to Akron, Ohio? Making fire hose and bicycle tires was an unusual beginning for a doctor turned industrialist. But timing is everything and the automobile needed inflatable tires while the industrial might of America continued to strengthen.
The company prospered with the First World War, barely survived the depression, but again benefited from the wartime investments of the Second World War. During this period, Akron, Ohio, became the rubber capital of the world–spawning such companies as Goodyear and Firestone. Meanwhile, BFGoodrich struggled with their efforts to diversify into other industrial products and to maintain a leading market position in the highly competitive tire industry. Our strength was technology, our challenge was marketing and our problem was high cost production. The often told description of the Akron-based tire triad was that Goodrich would invent it, Firestone would make it and Goodyear would sell it. Sadly, Firestone is today owned by Bridgestone of Japan, BFGoodrich by Michelin and Goodyear is struggling for survival. No production tires have been made in Akron for many years.
Embedded in the diverse mixture of industrial products that were created by the old BFGoodrich Company was a small base of aviation products that was created with industrial rubber product technology–things like inflatable evacuation slides, deicing systems and aircraft braking devices. These products and a continuing devotion to innovation that was inherited from the legacy of the company became the cornerstone for the transformation of the enterprise.
From this emerged a new company dedicated to a still-young industry–aviation and aerospace products. But, understand, we had an advantage. The foundation for this success had been with us from the very beginning. Embedded in the heritage of this company was an essential and all-important element of sustainability–a culture of integrity, honesty and dedication to ethics that had been carefully preserved by the organization since its inception. Despite the changes in business organization, products, markets and venue, a dedication to the highest standards of civility and respect for others persevered.
“We are now in process of learning our lessons from the excesses and irresponsible behavior of many over the past several years.”
This is the foundation on which success was built and will be sustained. The other business elements of human capital, physical resources and economic strength must rely on that foundation of dedication to the highest standards of behavior by all in the enterprise to assure its sustainability. We have witnessed the damage and indeed the demise of those who were afflicted by greed and dishonesty in the business world. Their weakness was the lack of a foundation of honesty and integrity on which to create an enterprise to best serve all of its constituents–its stakeholders. They did not have embedded in their culture the essential elements of Corporate Sustainability.
Last year, a high-flying, large stock multiple American corporation entered a competitive boat race. Their boat was magnificent, expensive and aptly named the “Aggressor.” They practiced diligently under the direction of their CEO, who was determined to win at any cost. On the big race day, they finished dead last. Furious, the CEO created a task force to study the problem and hired a consulting firm to advise them on how to win. The consulting firm and the task force came back with their findings: the other teams had eight men rowing and one person steering, while the Corporate team had one person rowing and eight people steering. The Corporate team had to reorganize! They prepared for the next race with their new structure: four steering managers, two segment steering managers, two district steering directors and a new performance review system to provide work incentive for the person rowing the boat. Their margin of loss in this race was even greater than before. They held a meeting to determine the solution. The answer? They laid off the rower for poor performance and gave the managers a bonus for discovering the problem.
We are now in process of learning our lessons from the excesses and irresponsible behavior of many over the past several years. The evidence is in our damaged economy, depressed markets, devastated retirement plans and deficit-ridden state budgets. But the causes were deceit, a disregard for civility, and a lack of respect for others that was fed by greed and self-interest.
Regardless of your job or responsibility, all of us were participants in one way or another. “Corporate Sustainability extends the focus and the responsibilities of corporate governance–beyond the narrow confines of quarterly stock prices and analysts’ estimates–to encompass a longer term and a broader group of constituents or stakeholders.”
Those companies and people that abused our trust were missing the vital elements that are embedded in the concept of Corporate Sustainability. It is our responsibility to encourage and fortify those values that appropriately sustain our global well-being.
The concept of Corporate Sustainability has been receiving increasing attention in the past several years. Sustainability has the fundamental objective of identifying and managing the matters that affect corporate business returns over the long term and reporting these issues to its business stakeholders. That means that Corporate Sustainability extends the focus and the responsibilities of corporate governance–beyond the narrow confines of quarterly stock prices and analysts’ estimates–to encompass a longer term and a broader group of constituents or stakeholders. It considers what the business takes from the environment and from society and what it returns.
The idea of measuring corporate performance in a much broader sense has gained more prominence in Europe than elsewhere, but American companies are beginning to realize that focusing only on the “bottom line” results in an incomplete and potentially deceptive picture of the businesses’ status and viability. “The Global Reporting Initiative was created in 1997 to provide a multi-stakeholder process and independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines.”
In fact, the first international standard designed to ensure the credibility of social and environmental reporting by business was launched last month in England. The launch of the new standards, which guide companies in non-financial reporting, comes against the deep distrust of business in the wake of the corporate scandals from Enron to Tyco. In addition, the Global Reporting Initiative, commonly referred to as GRI, was created in 1997 to provide a multi-stateholder process and independent institution whose mission is to develop and disseminate globally applicable Sustainability Reporting Guidelines. The GRI, although independent, is an official collaborating centre of the United Nations Environmental Programme. The guidelines are for voluntary use by organizations for reporting on the economic, environmental and social dimensions of their activities, products and services.
So, how realistic is it to believe that businesses will be responsible to a broader and higher standard of behavior and reporting? Can you believe that the shareholders of public companies will promote, or even allow, investment in activities that may not have an immediate impact on the bottom line? And why would a business embrace the concept of sustainability?
There are three commonly defined elements of Corporate Sustainability:
Economic Performance (the most common measurement). The financial reporting measures and ratios traditionally used to evaluate business performance.
Social Performance. The involvement and commitment of a business to its community in both its broadest and its narrowest senses.
Environmental Performance. The activities and dedication of a business to influence and improve the environment.
The activities and measurement of Corporate Sustainability are encompassed in those three elements– commonly referred to as the triple bottom line. And, the conviction is the old adage that if it can be measured, it can be accomplished and it can be improved. The economic standard is the easiest to define, but as we have witnessed, it is not necessarily the easiest to accurately measure. Certainly not if the reporting is not appropriate or is intentionally misrepresented. We do have mechanisms, organizations and regulations to provide specific guidelines for the reporting process. But even with the new, intense oversight it is clear that there are not rules for every situation or transaction. Transparency is the new doctrine and, as my father taught me, common sense should always prevail.
Warren Buffet recently joined a large group of us to spend a weekend dedicated to the process of Corporate Sustainability. His litmus test question: “Is your action something that you want to see printed in the newspaper?” If not, reconsider; it is probably the wrong thing to do. Full and complete disclosure is, and always has been, the best standard for this measurement.
Social performance encompasses the involvement and impact of all aspects of a business on the community as a whole. Maybe the great philosopher Confucius can help us with the definition: “To put the world in right order, we must first put the nation in order; to put the nation in order, we must first put the family in order; to put the family in order, we must first cultivate our personal life; we must set our hearts right.” Sustainability suggests that it is an obligation of business to invest its resources and influence through its human and physical capabilities for the social improvement of the community as a whole. Business is challenged to truly make a difference.
Environmental performance goes beyond the responsibility of the business to obey environmental laws and regulations. It is the commitment to again make a difference. It is an obligation to influence the environment such that there will be a net improvement because of business involvement.
The elements of the “Triple Bottom Line” are appropriately broad and comprehensive. Last month about 150 CEOs, NGOs and invited guests and speakers gathered for a weekend in The Forum for Corporate Conscience to discuss and debate the concept of Corporate Sustainability. The gathering process encouraged open and honest discussion of thoughts and opinions. The result was the adoption by the delegates to the forum of a group of Collective Intentions that sets forth the aspirations for the sustainability, responsibility and values of our corporations and our world. The delegates agreed that this is only a beginning, with much more to do–but we can make a difference, if we care.
“If this rapidly shrinking world is going to continue to sustain our future generations, we have a responsibility to make a commitment for improvement for our global society, our environment and our economic capability.”
These are daunting challenges to our global businesses, particularly during troubled economic times. Can we really do this, or is it some “do-gooder’s” dream? Many of us are convinced that we have no choice. If this rapidly shrinking world is going to continue to sustain our future generations we have a responsibility to make a commitment for improvement for our global society, our environment and our economic capability. Great work is being done today by many of our corporations and businesses. Unfortunately, few receive recognition and the general public seems to see and hear only the bad news.
We at Goodrich have continued the legacy of our predecessors with a commitment to our stakeholders– our communities, our families and our environment. We give with our monetary resources and with our human resources, but there is much more to do. We can’t fulfill all of the concepts of the triple bottom line of Corporate Sustainability, but we can make a difference; and we can and will focus our capabilities where we can help this to be a better world for us and generations to come. You can help. As you complete your education, regardless of your role in life, you can have an influence on all of the elements of Sustainability. It is not only good business; it is the right thing to do.
One of Benjamin Franklin’s contemporaries, George Washington, said: “I hope I shall always possess firmness and virtue enough to maintain what I consider the most enviable of all titles, the character of an honest man.” Thank you for sharing your time with me. Please pray for peace.