Corporations often rant about too much government in business. Here is a piece of legislation that could give a corporation a significant boost in both customer and investor satisfaction.
Whether you are motivated by a carrot or a stick, the SEC rule on conflict minerals (CM) has something to offer your company. These minerals are defined as columbite-tantalite (coltan), cassiterite, gold, wolframite, their derivatives (such as tantalum, tin, and tungsten), and any other materials the US secretary of state identifies as financing conflict in the Democratic Republic of the Congo or an adjoining country.
Since this rule applies only to SEC-listed companies, I thought I would add up the number of firms that would be required to report annually on CM use. As it turns out, there are 8,971 public companies on the accountability roster. I continued my research and discovered there are 309,264 private companies that would not have to report CMs. The ratio of companies that have to report to those that don't is about 1:30.
How big a difference would that make in the overall scheme of things? One would think that the public companies could claim Congress is picked on them unfairly. But here is where our stick turns into a carrot.
What do public companies care about most? Their employees? No. Their products? To some extent, as far as earning potential is impacted. But the biggest concern for a publicly held company is for the shareholder and investor.
Here is a direct quote from a statement from a consortium of investors declaring their shared convictions about the regulation. The investment groups issuing this statement have more $450 billion of assets under management.
We are expressing our disagreement to the lawsuit filed against the Securities and Exchange Commission (SEC) by the U.S. Chamber of Commerce, the National Association of Manufacturers, and the Business Roundtable. We believe the SEC's final rule of Section 1502 protects investors and has an effect on a significant public interest. Given that the long-standing conflict in the Democratic Republic of Congo (DRC) has claimed more than five million lives and contributed to egregious human rights abuses such as rape, child soldiers, and slave labor, we believe companies must disclose their use of conflict minerals. As investors and fiduciaries with a long-term view of capital appreciation that must meet the interests of multiple generations of beneficiaries, we believe it is important to protect investors through improved disclosure and reporting on social risk factors such as labor practices and human rights. Requiring disclosure within a company's supply chain allows investors to evaluate supply chain policies and practices, to make company-to-company comparisons, to calculate the level of risk associated with conflict mineral sourcing, and to provide assurance that companies are not engaging in destabilizing activities.
In short, the carrot takes on a very green color. The psychological and emotional impact on the public of a company refusing to support responsible CM management would akin to the effect of someone blowing cigarette smoke in your face.
The public mantra of “corporations don't care” is so established that corporations are fighting an uphill battle to garner public trust. Jumping in with both feet to support the CM rule would generate positive feedback for any company.
Turning lemons into lemonade is an old school practice. Any corporation that really wanted to make friends with its customers and investors would capitalize on this opportunity to show that a leopard can change its spots.