Back in 1991, when AES first issued shares to the public, the company also made public its unique business philosophy. The Securities and Exchange Commission was curious about that philosophy – and a little skeptical. It required AES to list its values as a “risk factor” in the IPO prospectus: “If the Company perceives a conflict between [its] values and profits, the Company will try to adhere to its values – even though doing so might result in diminished profits or foregone opportunities.”
Strong words – which AES’s cofounders have worked to translate into action on three different levels. One level involves corporate social responsibility – best represented by AES’s environmental projects and its range of initiatives in the developing world. But there’s another level at which Sant and Bakke have worked to translate values into action – that of the company itself.
Every year, AES conducts an employee survey to gauge how well the company has adhered to its stated values. The survey is both exhaustive (it generated 7,500 individual comments in 1996) and down-to-earth. Employees are asked how well various descriptors – “friendly,” “arrogant,” “is growing too fast,” “is taking on too much risk” – capture the realities of life at AES. The survey also asks employees how much they agree or disagree with certain provocative statements: “We work because the work is fun, fulfilling, and exciting and when it stops being that way we will change what or how we do things.” Or: “We do not try to get the most out of a deal at the cost of being unfair to a customer, supplier, or related party.”
AES uses this data as a management tool. The values survey determines a portion of the salary increase and bonuses for top executives. The plant-by-plant results are considered a leading indicator of performance.
Bakke and Sant haven’t been reluctant to take their lumps when things go wrong. In 1992, workers at the company’s Shady Point, Oklahoma plant falsified emissions reports. (They said they feared for their jobs if they failed to meet pollution-reduction goals.) AES managers uncovered the wrongdoing and reported it to the government, which administered a $125,000 fine. Still, Sant and Bakke took personal responsibility for the values breakdown. They reduced their annual bonuses by 65% and 85%, respectively, and issued an angst-filled public apology.
In 1996, after accidents at plants in Pakistan, Kazakhstan, Hungary, and England – which killed three independent contractors and injured two AES people – company leaders took another monetary hit. AES announced it would reduce its annual corporate bonus pool by nearly 10%.
Dennis Bakke’s position is clear: Soft values are hard work. “Mistakes are inevitable,” he argues. “But that doesn’t mean we abandon our values. We’re going to continue to strive to live by them, even though we’re going to fail sometimes.”