Credo

What Is a Credo?

Credo is a Latin word, which the Oxford English Dictionary defines as "a statement of the beliefs or aims which guide someone's actions." In the corporate world, a credo is similar to a company's mission statement, its beliefs, principles, or purpose. A company's website likely will contain a prominently displayed mission statement, along with the firm's goals and objectives. In the best possible world, a company would use its credo to guide its actions.

It may be easier for privately held companies to demonstrate their credos through action because public companies have fiduciary duties to their shareholders that could constrain a corporation's activities.

Corporate Credos in Action

Johnson & Johnson (NYSE: JNJ)

Consumer-goods and pharmaceutical giant, Johnson & Johnson boasts a storied credo developed by its founder, former chair Robert Wood Johnson, in 1943. Known as "Our Credo" it begins as follows:

We believe our first responsibility is to the patients, doctors, and nurses, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality.

Johnson & Johnson's credo upholds values of fair pricing, reasonable wages, and strives to instill an atmosphere of innovation by listening to workers' ideas. Moreover, Johnson & Johnson believes that a company's management should comprise ethical and responsible citizens.

The company established its credo long before environmental, social, and governance issues became the critical factors that they are today in how the world perceives a corporation. Johnson & Johnson has always viewed its credo as more than a moral compass, as evinced by the company's recalling all of its Tylenol products in 1982 when seven people in the Chicago area died after taking Extra-Strength Tylenol capsules. This renowned example of corporate ethics in action cost Johnson & Johnson more than $100 million.

Patagonia (Private)

The privately held clothing retailer Patagonia has been at the cutting edge of social responsibility, environmental activism, and advocacy for public lands and the outdoors for the past 45 years. For most of this time, its mission has been to “Build the best product, cause no unnecessary harm, use business to inspire and implement solutions to the environmental crisis.”

In 2018, however, in view of the global climate change initiative, the founder and chief executive officer of Patagonia changed its credo to something more direct, urgent, and crystal clear: "Patagonia is in business to save our home planet."

If anyone doubted Patagonia's commitment to walking the walk, the company's directive to its human-resources department six months later was, "Whenever we have a job opening, all things being equal, hire the person who’s committed to saving the planet no matter what the job is."

JetBlue (NASDAQ: JBLU)

JetBlue began operations in 2000 when the airline industry already had a number of low-cost carriers, so the company needed to differentiate itself from the competition immediately. Right from the start, JetBlue manifested its credo of "Bringing humanity back to the airline industry" through its customer-friendly attitudes and actions. Putting its credo into practice sooner rather than later also helped the new airline evolve its branding strategy. JetBlue's newest credo, "We're always up for good," is part of its larger JetBlue values theme.

The Walt Disney Company (NYSE: DIS)

Some companies have long credos similar to Johnson & Johnson's two pages of text. Other firms opt for shorter, easy-to-remember credos that sometimes act as logos or tag lines. Large companies that are umbrellas to numerous subsidiaries or trademarks may create credos for their most popular brands — Walt Disney's Disneyland, for example. It took the company a long time and a lot of financing, but Disneyland was finally able to make good on its credo of being "The happiest place on earth."

Why Credos Matter

Using a credo as guidance is important to businesses for many reasons — from helping them define their corporate culture and articulating their values, to clarifying their reason for being. When creating a credo, many corporations focus on putting their customers first, which lets consumers know that they are important to the company ahead of revenue and profits; especially in the hospitality and restaurant industries, for which customer service is critical.

Moreover, a credo is the indispensable groundwork for any marketing campaign. Having a credo also can guide employee behavior and influence collective actions across the firm by sending workers a concrete statement of the company's values — leading them to ask, "What would management want us to do in this situation?" or "Would our actions reflect the company's image properly?" Without a defined purpose, corporations can falter, lose direction, or languish during long unproductive periods.

Credos of Public vs. Private Companies

In general, it is easier for privately held companies than public companies to uphold their credos via their actions. One reason for this could be that public companies are constrained by their fiduciary duty to shareholders to maximize profits. Public companies with customer-facing brands, however, are an exception. They can often act on their credos with less conflict, as their market incentives generally align with their corporate values.

A 2018 research study from the University of Michigan, Ross School of Business discusses whether corporate social responsibility really does benefit society. The study agreed that private companies more than public companies likely would follow through on corporate social-responsibility declarations. "If the CEO of Patagonia wants to buy organic cotton, he can make it happen even if it means lower [profit] margins," quoted Patagonia's founder in this study. "A public company has to justify that [purchase] to shareholders."