Friday, October 14, 2011

Why Occupy Wall Street should occupy corporate leaders' minds

This weekend, the Occupy Wall Street protest will go global. Protests, marches and occupations are planned across the world, with almost a thousand events across every continent scheduled to go ahead on October 15th. Here in Toronto, the financial district around Bay Street is preparing for an occupation that has so far garnered more than 9000 followers on Facebook. In London, social media sites have registered more than 15000 followers for the planned occupation of the London Stock Exchange. Similar smaller scale events are in the offing from everywhere from Alaska to Auckland. Whatever the success of these protests, it is remarkable the speed at which a local event in New York which was hardly reported on two weeks ago, has now been turned into a global movement.

Although the range of issues and demands of the Occupy Wall Street campaign and its various international incarnations are many and diverse, they share a strong single point of focus. The financial sector is very much the villain here. This is in some contrast to the movement that the current events most parallel, the anti-globalization protests that took to the streets in late 1990s and early 2000s, exemplified best by the Battle in Seattle in 1999. At that time, although many of the issues were the same as those receiving attention now, the main point of focus was international finance and trade organizations such as the WTO and the IMF, and meetings of political leaders such as the G8 were major targets. Now, by occupying the financial centers of major cities, the focus is much tighter. The financial sector is public enemy no.1.

In many respects, this is not too surprising. Economies across much of the developed world have been in a constant state of crisis for the past three years. Austerity measures are biting hard. Unemployment is up. And a significant proportion of society feels excluded, exploited, and ready for an alternative. The financial sector is an obvious target because it is here that the systemic risks have been created, and it is here that so much of taxpayers money has ended up, shoring up institutions that are too big to fail. When these same organizations continue to post substantial profits, pay out huge bonuses and generally carry on as before, it is fairly predictable that they will become the focus of so much public ire.

Much of the initial response to Occupy Wall Street has been dismissive. The financial sector, which must be getting quite used to being the bad guy these days, has hardly raised a murmur in response. As of yet, we haven't seen a single press release on the events from major financial services organizations such as Bank of America, Barclays, Citigroup, Goldman Sachs, HSBC, or anyone else. Don't business leaders have anything to say about what's going on?  Don't they want to be part of the conversation? Or are they just so concerned that anything they say will just be ridiculed by the protesters, or simply set them up as even more of a fall guy, that they are fearful of trying to put their position across in public?

But big business, and big finance in particular, needs to take this seriously. Here's why.

First, because governments are looking to be responsive and populist, especially with elections around the corner in the US. That could mean tighter controls, less freedom and more regulation. As even Dominic Barton of McKinsey made clear in the Harvard Business Review earlier this year, "Business leaders face a choice: They can reform the system, or watch as the government exerts control ... there is growing concern that if the fundamental issues revealed in the crisis remain unaddressed and the system fails again, the social contract between the capitalist system and the citizenry may truly rupture, with unpredictable but severely damaging results." Better regulation might fix some of these problems, but knee-jerk regulation, borne of anti-corporate prejudice is not going to be the best fix for the capitalist system, and not necessarily the one that we need.

Second, because the protests create a great opportunity for collective action on the part of business. Problems of financial risk, executive pay and corporate lobbying aren't going to be fixed by individual company initiatives, or even by national government regulation. If one firm or one country reduces its attractiveness by, for example, controlling pay, then talent will likely migrate to more rewarding shores. If one company puts a limit on government influence, then the attention of policy makers will simply be taken up by its competitors. That's the savage logic of the global marketplace. The best recipe for meaningful change is collective action across an entire industry. Like a financial sector executive pay protocol. Or a banking industry code of practice on political influence. But to be effective these would need to include government and civil society participation and include effective monitoring and sanctions across borders. No one is pretending this wouldn't require a huge effort. But crises of trust, like the current protests, could be the context that is needed for collective action such as this to arise and prosper.

Third, because these protests clearly signal that for some proportion of the population, all the money, time and effort expended on CSR simply isn't working. And spending more isn't going to make a difference. These people are looking for a change in the system, in the rules that govern business and it's relationship with government.They're looking for more accountability, less political influence, and if their demands are for better corporate citizenship, they mean the kind of citizenship where you pay your fair share of taxes and don't just simply offshore when it suits you. This requires a very different approach to CSR than the one now predominant in the corporate sector. It means fixing attention on how to devise better rules, not how to behave better within the existing rules.

The challenge here, clearly, is a big one. Perhaps then it is no surprise that corporate leaders have been content so far to just cover their ears and hope it all blows over. But there are fundamental issues that need addressing at the heart of our model of global capitalism. Occupying Wall Street, Bay Street, or the City of London may not be any kind of solution, but that does not mean it should just be dismissed either. Business leaders would be foolish not to see this as an opportunity to create an improved system of capitalism that serves us all better.

Photo by david_shankbone. Reproduced under Creative Commons licence 


  1. i agree with your points about why business should listen and pay attention to the protests instead of just blacking it out. I was just wondering when you made the remark that CSR isnt working, do you mean it in a sense that the idea of CSR isnt working? After reading your book for my university course in business ethics and the emphasis you place on CSR i think the question is more about how business implement their CSR not what the guidelines may be.

  2. Hi Anna, thanks for the question. The point is that the current version of CSR isn't working for a significant proportion of people. But if CSR became more about the how business contributes to setting the rules of engagement, the rules of capitalism if you like, then it might be more convincing. Otherwise companies face the prospect of fiddling while Rome burns (somewhat literally today apparently). If a bank like Dexia can be listed at no.17 in the 2011 Most Sustainable Corporations in the world and then fall apart due to the debt crisis a few months later, maybe we're not getting to the heart of things with how we often think about CSR.

  3. How about some of the financial terrorist going to jail for a starter?

    Angelo "Mascot of the Housing Panic" Mozilo
    James "Let Them Fail" Cayne
    John "Commode on Legs" Thain
    Martin "Just Put It on the Tab" Sullivan
    Alan "High Priest of the Fed Temple" Greenspan
    Phil "High Priest of Deregulation" Gramm
    Dick "There's a Reason I'm Not Called Richard" Fuld
    Hank "Crony Capitalism" Paulson

  4. Start with this one: SEC cover up

    For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed....

    Wall Street SECrets

  5. You say that "big business, and big finance in particular, needs to take this (occupation of the Wall Street) seriously" whereas Chris McDonald, who also posted about this issue stated that "the Occupy Wall Street movement has substantial symbolic significance, but we all know, I think, that nothing concrete is going to come of it".

    How would you evaluate this statement? If it is true, then the finance sector would not really have to care about it, right?

  6. Anonymous, yes, we have to look at the failures of the regulators too, and how truly independent they are.

    Hauke, good question! We don't see the Occupy protests as isolated from a broader concern about the need to reform capitalism, which even senior business leaders privately tend to agree with. The protests are just some of the more extreme variants of it. And a taste of what might happen if no one does anything about the more fundamental reforms that need undertaking. So even if the protests themselves don't lead to anything concrete (which will be hard to prove either way) that doesn't mean business should ignore them.

  7. If government's implement restrictions couldn't it lead to a "race to the bottom" scenario? But how would companies being able to set "rules of capitalism" on their own? Is it really possible in today's economy when hungry developing countries would take an opportunity to take advantage of ethical regulations in the industrial world. It already happens in several industries and not even the current international agreements of reducing the green house effects have been specially effective due to countries that wanna protect their industries and not risking give up space for competitors.

  8. I can understand that people are demonstrating for this but I dont think that it will make a difference anyway. If the corporations doesn't care now they probably wont even now that its gone global. They don't want to do anything that can harm them and the only way the demonstrations is affecting the issue at hand is by creating attention to it and as you say make the government involved more after the election. But what would actually happen if the government did? If we think about it from the corporations point of view?

  9. JD, All,

    In response to your "race to the bottom", for any system that one wishes to regulate (international banking sector), if one cannot sufficiently extend and establish sensors and controls to all areas of the system, then one must shrink the boundaries of the system until the area of interest matches the area capable of being regulated. In other words, we must isolate our national banking sector, over which we have control, from the external banking sector, over which we have not sufficient control. We can easily control the flow of finance into and out of our system as we aim to achieve an agreed upon equilibrium in our closed system. Cybernetics 101.

  10. The systemic entanglement that the world has unwittingly created cannot be ignored. Its influence on the lives of most people is undeniable. But I frankly have a difficult time wrapping my mind around how this mother-of-all-conundrums can be addressed, given the necessary changes in behavior that must embrace whatever those "new rules" might be, assuming that they can even be authored and agreed upon before a social upheaval ensues.


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