Goodwill

The standards of socially responsible behavior con-tinue to evolve with societal trends and expectations.

In order to maintain public goodwill, companies must conduct themselves in a responsible and ethi-cal manner while providing transparency in their business dealings, accountability to their stakehold-ers, and sustainability to society and the environ-ment. “Public relations bears directly upon the area of values associated with goodwill. Its task is not one of communications only, as some have sup-posed. Its roots reach to the very heart of corporate policy” (Hill, 1958, p. ix). These extensions of goodwill help demonstrate commitment toward a company's stakeholders.

The most formally understood practice of good-will is corporate social responsibility (CSR). This practice has commonly been perceived in the United States as a largely European phenomenon, since CSR is a high priority for European compa-nies. The European Commission, in establishing social goodwill as one of the pillars of its approach to business and economic competitiveness, has set in motion a Multi-Stakeholder Forum that recom-mends to the European Commission how social responsibilities should be reflected in government policy and business practices. In addition, European Union countries swiftly began adopting ambitious new requirements for corporate reporting, called “sustainability reporting,” that go beyond financial results to cover the triple bottom line—one that shows the economic, environmental, and social performance of an organization.

However, this responsibility has not been con-fined to Europe, because more U.S. companies are taking goodwill practices more seriously. The growth of technology has made all types of infor-mation more accessible, leading to greater scrutiny of corporate practices around the world. “In a nation such as the United States, where public opin-ion is both judge and jury, any segment of the public is free to question management's wisdom, integrity, and good human intent in handling responsibilities that amount to a public trust” (Hill, 1958, p. ix). Corporations are buffing up their social responsibilities and reputation since the Sarbanes-Oxley Act and the emphasis on corporate gover-nance that emerged in the wake of Enron, WorldCom, and other major corporate accounting problems. This transparency also goes beyond financials into more global operations, like labor practices. On a local level, more and more govern-ment agencies are expanding their standards for government contracts and requiring recipients to provide their employees with a predetermined living wage. Globally, NGOs, the media, and other groups are increasingly scrutinizing human rights and labor issues and demanding internal and external monitoring.

“The corporation exists to serve the common good and must constantly justify its performance on that basis before the bar of public opinion” (Hill, 1958, p. 146). Beyond the necessary reporting requests, companies are wisely working to have an influence in setting the standards by which they will be measured. According to Hill & Knowlton's 2002 Corporate Reputation Watch survey, two thirds of CEOs feel that corporate social responsibility initiatives contribute at least a moderate amount to their company's corporate reputation, including the way they are perceived by groups such as customers, shareholders, and the media. In fact, participating in goodwill practices, which boost a corporation's reputation, increases the length of time that a firm spends earning above-average financial returns and decreases the length of time that a firm spends earning below-average financial returns.

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