The McGraw-Hill Companies: A Corporate Social Audit
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The McGraw-Hill Companies: A Corporate Social Audit

A corporate social audit conducted on the popular big business McGraw-Hill.

Overview

The McGraw-Hill Companies are driving the financial services, education and business information markets through leading brands such as Standard & Poor's, BusinessWeek, McGraw-Hill Education, Platts, McGraw-Hill Construction, McGraw-Hill Broadcasting, Aviation Week, and J.D. Powers and Associates. According to the McGraw-Hill Companies, they have been a “leader in providing trusted information and analysis for well over a century”. From the Industrial Revolution to the Internet Revolution, they have filled a critical need for information and insight by helping individuals and businesses in a broad range of markets. McGraw-Hill supports three long-term global needs: the need for capital, the need for knowledge and the need for transparency. These are the foundations necessary to advance economic growth, in their eyes, and to allow individuals, markets and societies to reach their full potential.

McGraw-Hill owns many companies, therefore finding unethical behavior on their behalf was close to impossible. They own BusinessWeek, Standard & Poor and even have affiliations with Lexis Nexis. Most of what is published about the business world and even the usage of natural gas is controlled by McGraw-Hill. With their close ties to George W. Bush, and the monopoly of natural gases and high prices that are going on, it leaves one to wonder just how involved with it all the company is. One thing that one can be sure of is the fact that one of their subsidiaries, Platts, has been subpoenaed on more than one occasion by federal courts to release information reported to them by energy sources in scandals resulting in falsified information to increase gas and energy prices (Foster Electric Report, 2005).

On one occasion 27 companies and 21 individuals were charged with making false reports about natural gas trades to Platts in an effort to manipulate prices. $298 million in civil penalties are part of the settlements with these individuals and companies, one of them being Enron. McGraw-Hill had refused to comply with this court order and was fighting it. There was also a similar case involving 23 companies that had been lingering for two years as a result of McGraw-Hill failing to provide the courts with the requested information (Foster Electric Report, 2005). McGraw-Hill claimed that this was a violation of the First Amendment and as a result the federal judge decided to close this criminal trial to the public and press, thus keeping the information provided by McGraw-Hill private (Gerstein, 2005).

Mission Statement

“Our mission is to provide essential information and insight that help individuals, markets and societies perform to their potential. At The McGraw-Hill Companies, our mission is to serve our customers’ enduring global needs for knowledge, capital and transparency. We provide the essential information and insight that help individuals, markets and societies to perform to their potential. To do so effectively, we need to see the bigger picture. By embracing, cultivating and retaining a diverse talent base that is distinguished by both performance and thought leadership, we aspire to accurately reflect the broad markets we serve each and every day” (McGraw-Hill, 2007). The company achieves growth through five key elements. These are purpose, strategic intent, a balanced portfolio, financial performance and shareholder returns.

The purpose of the McGraw-Hill Companies is to remain an essential key to all markets. In doing this they, influence, expand on and transform the current markets. Their strategic intent is to focus on services and content, thus becoming a solutions provider. They maintain a balanced portfolio to provide leadership in the diverse markets they serve, and are consistently generating revenue and profit growth giving them extraordinary financial performance. The final element, shareholder return, is focused on providing a superior return to their shareholders in the form of increasing dividends and share appreciation (McGraw-Hill, 2007).

Environment

It is no wonder McGraw-Hill places such a high priority on promoting their ethical behavior as they are involved in two industries that environmentalists have been vigorously pointing their fingers at as prime culprit in the demise of our environment today. These industries are paper and natural gas. McGraw-Hill is one of the leading publishers of textbooks internationally. McGraw-Hill also owns the company Platts, which is in charge of publishing and keeping a record of the oil and natural energy resources being used today, and has been labeled the bible of gas trade by the Dow Jones Index (Thompson, 2007). As expected, McGraw-Hill has an environmental paper procurement policy that sounds nice and eco-friendly, but the harsh reality behind the paper and publishing industries is quite another story.

The production of carbon dioxide (greenhouse gases) is largely contributed by the paper industry. The paper industry is the fourth largest producer of these gases, and its negative affects towards global warming are only increased by the added harm of depleting the trees that we need to create more clean air. Book publishers use an extraordinary amount of paper each year and contribute to some of the most wasteful practices of paper nationwide (Hudson, 2007). While McGraw-Hill claims to only purchase paper that follows the “current environmental laws and regulations applicable in their countries” (The McGraw-Hill Companies, 2007), the amount of paper wasted by the average publishing company each year is nearly 40-60% for books that have actually been published. This doesn’t even cover the amount of paper that is thrown away as a result of misprints, irregular copies and scraps (Outskirts Press, 2007).

With this irresponsible treatment of unused books, it is clear that McGraw-Hill may, in fact, place monetary value over the protection of the environment. It is common knowledge that new editions of textbooks are released yearly simply to make more money for the publishers, even though previously published editions are nearly identical. It is also known that publishing companies will throw away these unsold copies if they are not sold once they are marked down to 75% off (Outskirts Press, 2007). McGraw-Hill has even sued a wholesaler for selling used textbooks which resulted in conserving paper for the betterment of the environment, but less money in their pockets (New York Times, 1995). While this was 12 years ago, the trend has not changed as McGraw-Hill recently joined with four other publishing companies in suing Google over creating a digital library that would allow digital access of nearly all books in five major research libraries (Wyatt, 2005). The facts speak for themselves. If McGraw-Hill were more concerned about the environment than money in their pockets, would they ever feel that they needed to sue Google?

Even with all of the facts of the harmful paper practices of publishing companies, McGraw-Hill has been a pro at deterring the negative attention from their image. One proactive step they have taken was a commitment to refrain from purchasing paper products made from the wood of ancient growth forests, thus preserving and protecting the world’s oldest trees. Several companies have signed onto this plan in joint commitment to save our forests and combat global warming (globalethics.org, 1998). There is still much more that needs to be done if there is going to be a truly effective change. Today it requires 5% of a tree just to produce a 500-700 page hardcover book. When you think of all the books that are produced and wasted that really adds up, and it doesn’t matter where the paper is coming from if there is still so much of it being wasted (Outskirts Press, 2007). One of the biggest proactive solutions to this issue is being conducted by smaller publishing companies. This solution is the development of print-on-demand publishing. McGraw-Hill has yet to take the large leap into this industry and would be wise to do so (Hudson, 2007).

Even the largest book publishing company, Random House, is making proactive strides in favor of the environment. They have announced that they will be increasing their “use of recycled paper ten-fold over the next four years, accounting for 30 percent of all its paper by 2010.” (Hudson, 2007) McGraw-Hill states in their paper policy that where possible they use paper products with recycled fiber content and communicate with their suppliers an interest in further development of such practices (McGraw-Hill Companies, 2007). They fail, however, to make promises as to percentages and to give a true insight as to the amount of recycled paper they are actually using. This statement leaves much room for speculation as to whether or not they are even using recycled paper at all. Random House has been said to set the bar for all other publishing companies. This leads one to believe that McGraw-Hill is not using recycled paper 30% of the time. Even this simple change would make an extreme impact on the environment. Random House alone will be saving 550,000 trees and 88 million pounds of carbon dioxide with this commitment (Hudson, 2007).

It would be beneficial if McGraw-Hill decided to hop onto these environmentally healthy practices soon. One may argue that the cost is higher when using recycled paper, but a survey conducted by Tyson Miller showed that 80% of readers stated they would be willing to pay more for books printed on recycled paper (Hudson, 2007). One cannot say that the paper policy of McGraw-Hill is all negative. They do have a commitment to use paper that is not bleached with chlorine which is a step in the right direction. They also require environmental policy papers of all their suppliers along with statements included in all written agreements (McGraw-Hill Companies, Environment, 2007). This goes to show that McGraw-Hill is not involved in anything illegal concerning paper and the environment, but they have failed to show how they are going above and beyond their legal duties in this environmentally ethical issue.

If every publishing company worldwide were to unite and take a stand in using only recycled paper, it would conserve 60% of the energy they use today, reduce water pollution by 35% and reduce air pollution by 74%. Then, if they were to go even a step further by keeping their paper products out of landfills it would reduce all municipal solid wastes by 40% (Hudson, 2007). When the impact of using recycled paper is laid out this plainly it is easy to see how McGraw-Hill, one of the leading book publishers, is greatly contributing to the pollution of the environment.

Perhaps McGraw-Hill is aware of their negative impact on the environment. This may be why they have taken a stand in other, more small-scale, arenas towards environmental preservation. They have made very public their contributions towards green buildings and projects that are now the new wave in construction. A subsidiary McGraw-Hill company, McGraw-Hill Construction, has jumped on the bandwagon of this fast-growing trend. They have launched a new magazine entitled GreenSource. This magazine features sustainable designs and guidance on the latest environmentally responsible buildings. McGraw-Hill has conducted much research on this topic and has found that it is a new trend resulting in much financial gain. It is no wonder they were so quick to become involved. This magazine is not even printed on recycled paper (McGraw-Hill Companies, 2007).

McGraw-Hill is very public about their environmental policies and standards by publishing their efforts and indexing companies that meet the criteria of environmental and social governance and promoting these companies to investors. Looking at the state of emergency the world is in, considering global warming, one view is that the governmental standards for environmental practices just is not enough. This is a debatable topic as many George W. Bush supporting scientists are denying the pure existence of global warming. The McGraw-Hill Companies are large contributors to the Republican Party (Dumas, 2006). Democrats are currently trying to pass limits on greenhouse gasses through Congress and George W. Bush is not helping or supporting this proactive step (Hebert, 2007).

Community

As far as being committed to the community, the list of principles says that McGraw-Hill Companies will encourage employee involvement in community programs and socially responsible activities (McGraw-Hill, 2007). Looking at the community involvement webpage of the McGraw-Hill website, there were some conflicting statements. McGraw-Hill says that they do not support “political activities or organizations established to influence legislation; sectarian or religious organizations; member-based organizations, i.e., fraternities, labor, veterans, athletic, social clubs” (McGraw-Hill, 2007). However, at the top of that same page there are political payment policies stating that any contributions made to political campaigns will be lawful ones and all policies and legalities will be observed (McGraw-Hill, 2007). So which one is it? Do they contribute to political activities and/or political personalities that influence legislation or not? Their statements are complicated, full of a technical jargon, and it feels as if its main purpose is to confuse the general public.

The Arkansas Times published some shocking information concerning George W. Bush and McGraw-Hill. Apparently, many schools are not happy with Bush’s No Child Left Behind Act. An audit of this reading program showed that the administration was pressuring schools nationwide to use a program developed by a company that had close political and financial ties to the president. The states and local schools, however, say that the program was “terribly flawed” and they wanted to use other programs they viewed as better. A report by the inspector general revealed that the department’s leaders stacked review panels, ignored federal laws and even manipulated selection procedures to guide $4.8 billion in grants to companies that were supportive of Bush, mostly McGraw-Hill. It also states that the CEO of McGraw-Hill is a close friend and direct contributor to Bush and the Republican Party (Dumas, 2006).

With all of this extra money coming in it is amazing as to why McGraw-Hill isn’t putting the extra money toward using recycled paper. They are, however, giving some grant money back to the community. The corporate community mission statement states that they are there “to help people around the world learn, grow, acquire new skills, better their lives and better their communities.” McGraw-Hill supports many schools and offers grants and scholarships along with mentoring programs. They have published their efforts in helping the community through school involvement. Much of this is more than likely their involvement with No Child Left Behind which in turn generated billions of dollars in revenue for them. They do boast that in 2005 they contributed close to $39 million dollars through giving (McGraw-Hill Companies, Community, 2007). Compared to what was uncovered about their gain through their partnership with Bush, this contribution is pocket change.

Employees

Diversity is a core value of the McGraw-Hill Companies, and the company’s commitment to a diverse work environment spans generations. Today, the company’s reputation for integrity, quality and innovation depends on its ability to transform the diverse experiences, perspectives and ideas of their employees into outstanding information services and analysis that meet the financial, education and business needs of their customers worldwide. As Harold McGraw III, the chairman, president and CEO of the company said, “I believe that we are at our best when the men and women of the McGraw Hill Companies work and thrive in a dynamic environment, where inclusion is encouraged, differences are respected and diversity is of paramount importance” (McGraw-Hill Employees, 2007).

Domestically, and around the globe, the McGraw Hill Companies are committed to providing a talented and diverse workforce with the resources they need to feel fully engaged. The company has implemented different programs, groups and events for the employees that serve as connections between their diversity vision and how they implement that vision in the real world. One of these programs is a CEO Employee Forum in which the CEO, Mr. McGraw, demonstrates his commitment to diversity by hosting a regular Employee Forum with groups of employees from similar backgrounds, experiences and cultures. Past Forums have included groups such as employees with flexible work arrangements, Hispanic employees, part-time employees, working parents, INROADS interns, etc. These forums are invaluable to the organization, and one of the many reasons why McGraw Hill is considered an employer of choice in the markets they serve. Through the Diversity Council, the company celebrates its’ cultural differences and understanding of how these differences impact the ability to exceed its customers’ needs (McGraw-Hill, 2007).

As long as McGraw-Hill follows through with their programs, and it is not just stated information of their programs, they are diversely employed. Another program which helps McGraw-Hill’s case of being a diverse company is the Employee Resource Group. This has been vital in fostering a mentoring culture throughout The McGraw-Hill Companies. Mentoring is one component of The McGraw-Hill Companies’ employee development strategy. It is an opportunity to strengthen organizational relationships, align people and processes, develop people to achieve their full potential and build leaders (McGraw-Hill, 2007).

In addition to offering employee centered programs, the McGraw-Hill Companies are family friendly, believing that flexibility helps their employees who have children. They can choose from shortened weeks with a compressed schedule, part time work, job sharing and more. Telecommuting is an area in which this company stands out with more than 60% of their employees working from home at least part of the year last year. The McGraw-Hill Companies also sponsored 2,519 backup–care centers that took in over 200 children last year. Currently, as an added employee benefit, new moms receive four weeks of fully paid leave and six weeks of partially paid leave. Even adoptive parents receive one paid week off to welcome their new arrival. Additionally, the company holds bimonthly forums allowing employees to talk about concerns they have in the areas of work/life balance and more (McGraw-Hill, 207).

It is interesting that the most ethical and positively rated category in which McGraw-Hill performs is the part that benefits them the most directly. The programs that McGraw-Hill has instated directly benefit the outcome from the employees. The employee turnover rate is very low, which decreases the hiring and training costs the company incurs (McGraw-Hill, 2007).

Contrary to the stated corporate values, McGraw-Hill Broadcasting faced and lost a lawsuit filed by a former employee. The employee stated that, because of his age, his contract with a Denver television station was not renewed. McGraw-Hill tried to defend their decision saying the employee, David Minshall, was terminated because of poor performance. The testimonies given against the television producer doomed the company (Society for Human Resource Management, 2003). The producer constantly wanted the anchors to go for “a younger look” and made other inappropriate comments about employee’s ages. This does not fit with the corporate model of being fair and respectful towards all individuals that work for the company.

Investors

The McGraw-Hill Company puts its commitment to their investors on the same level as their mission statement. There is a growth statement underneath the mission statement that states that McGraw-Hill can only achieve growth by five means; one of those means is the shareholder return. McGraw-Hill is committed to “providing a superior return to [their] shareholders in the form of increasing dividends and share appreciation” (McGraw-Hill, , 2007). It is true that all companies have the same goal in mind, but only a few really strive to accomplish this goal. McGraw-Hill has not done anything outstanding in this aspect to show that they truly are committed to this repeatedly stated goal.

McGraw-Hill is the parent company of the S&P 500, and this may make for some conflict in interest. It is widely known that there are strict rules that apply to financial companies. The Security and Exchange Commission (SEC) creates, closely maintains and strictly enforces all rules. There is little chance that the financial rules can be broken. Even with the close knit rules companies can, and do, get away with financial crimes.

A case, from 2004, reported that a former S&P Analyst was charged with insider trading. It was said that the insurance analyst, Rick Marano, his brother and another man used inside information about two mergers to pocket hundreds of thousands of dollars by trading call options (FinancialWire, 1, 2007). The outcome of this case is unattainable information. The fact that the information is unattainable to the public creates some suspicion about McGraw-Hill. There was a similar case of insider trading with the McGraw-Hill Companies back in 1985, but the details were also unattainable.

The McGraw-Hill Company is the parent company of many other companies. They keep their business ventures diversified enough so that if one area of the market is struggling, the rest of the branched companies in the conglomerate can make up the difference. The investors will typically always have a good return due to the un-likelihood that all of the companies under the McGraw-Hill Companies name are to do poorly at the same time.

Stakeholder Commitment

The McGraw-Hill Company seems to be committed to their stakeholders. There is an extensive list of stakeholders of the McGraw-Hill Companies. Some of the stakeholders include the employees of the company, the communities in which the McGraw-Hill Companies are located, the shareholders of the company, the companies that supply McGraw-Hill Companies products, and the customers who purchase McGraw-Hill Companies products. According to the principles of the McGraw-Hill Companies, they are committed to fostering teamwork and to providing an environment that values, empowers, and respects individuals (McGraw-Hill, People).

This is proven with the McGraw-Hill Companies being placed on the Working Mother Magazine’s list of the top companies to work for. “As far as being committed to the community, the list of principles says that McGraw-Hill will encourage employee involvement in community programs and socially responsible activities” (McGraw-Hill, Community, 2007). McGraw-Hill offers a variety of different work options for working moms, as previously stated, and it is no wonder why they are so highly esteemed in this area (Working Mother Magazine, 2006). However, when we look at the discrepancies between what is stated about their commitment to the environment and communities compared with their actions, it is hard to say if they truly are committed, or if they simply have a good PR representative.

Suppliers

The McGraw-Hill Companies have a Supplier Diversity Program that expresses their commitment to working well and maintaining good relationships with their suppliers, as well as supporting and encouraging the aspirations of diverse groups of suppliers (McGraw-Hill, 2007). McGraw-Hill also states that they give preference to suppliers who have clear policies in place regarding illegal logging and forest habitat of special concern (McGraw-Hill, 2007). There are no directors or controllers of this policy. The policy, if maintained and overseen, would be extremely socially responsible and environmentally positive; however this policy is not visibly being enforced. McGraw-Hill could be saying one thing, not following through on it, and no one would know. The policy of using suppliers that are also socially responsible and environmentally friendly is great, but it is needed to be proven that they are following it in order for it to be fully accurate. The policy also states that they give preference to suppliers that are socially responsible. That is just preference, it does not say that they do not deal with the suppliers that do not follow such policies, they simply ‘prefer’ socially responsible ones.

The Supplier Diversity Program of the McGraw-Hill Companies ensures the diversity of the company. The company states that they are “committed to dealing with all suppliers with integrity and in an ethical manner…” (McGraw-Hill, 2007) The program aims to increase the number of firms in which they supply to and companies that supply to them. They “seek to expand the number of firms, including but not limited to minority – woman-owned businesses.” (McGraw-Hill, 2007) According to the Federal Government, a minority supplier is a business enterprise that is 51% or more owned and controlled by minority group members including but not limited to African-Americans, Asian-Pacific Americans, Hispanic Americans and Native Americans. This means that McGraw-Hill Companies indirectly go out of their way to find minority suppliers. This is a very socially responsibly act, however, to their shareholders it would be more beneficial to find the best supplier as opposed to going out of their way to find a minority supplier.

Consumers

All of the companies under the parent name McGraw-Hill Companies take care of their top stakeholders first - their consumers. Consumers are the sole reason why the McGraw-Hill Companies are in business. Without customers, they would not have any reason to provide the products they do. This is why McGraw-Hill makes it a point to treat their customers well. The consumers are going to run the company; they are the highest stakeholders, the highest shareholders and the most important investors in the company. It shows through the huge financial success the company has had, that the McGraw-Hill Companies are successful in financially treating their consumers well. The company as a whole states that it goes out of its way to fulfill the needs and wants of the consumers. The entire intent of being socially responsible is to impress the consumers, and create a positive opinion of the company. The company has much control over consumers and can change their behavior, or the perception of their behavior, to mirror the expectations of the consumers (McGraw-Hill, 2007).

Conclusion

In conclusion, since so much of the survival of the McGraw-Hill Companies rests in the hands of consumers, it would be wise to implement a more socially responsible mindset into their practices. With so much of the business world turning to green methods, McGraw-Hill would be wise to step up their efforts a notch and truly go above and beyond their current efforts in creating and developing sustainable products and practices. If the McGraw-Hill Companies wish to survive long-term, they truly need to look further into the future and start making investments that may not necessarily give them immediate profit returns. When the big picture of their policies versus their practices is laid out and their involvement with George W. Bush is made known, it is easy to believe that their sole interest is in immediate profits without much thought about the future. Taking a look at the big, long-term future and setting their priorities straight may be the next step the McGraw-Hill companies is required to take to ensure that their success will proceed into the next few decades.

Works Cited

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Former S&P Analyst Charged With Insider Trading.(2004). FinancialWire,1. Retrieved February 13, 2007, from ABI/INFORM Global database.

Gerstein, J. (2005, October, 5). Latest First Amendment Contest Erupts Between Judge, McGraw-Hill. The

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Hebert, J. (2007, March, 12). Emission Caps Unlikely Without Bush Help. .Foxnews.com.,Retrieved

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McGraw-Hill Cos.: Judge Orders Surrender of Data to U.S. in Energy Pricing Probe. (2005, October, 5). Wall Street Journal, p. A12.

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