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 

Lessons in politics from Starbucks: sign of the times or storm in a coffee cup?

Drip, latte, cappuccino, espresso, frappuccino; short, tall, grande, venti, trenta. Starbucks, the international coffee chain is great at giving choice in getting our daily dose of java. But what about campaign contributions or no contributions? Doesn't exactly roll off the tongue in the same way, but that is the stark choice that Starbucks CEO Howard Schultz is now offering US politicians in the face of the country's ongoing debt crisis. For the past few weeks Schultz has been seeking to build a coalition of US business leaders ready to join him in withholding campaign contributions from Washington until the main political parties start working together and agree a debt deal to turn around the beleaguered economy.

In the last few days Schultz has stepped up the campaign with full-page ads in the US press, including the New York Times, taking the form of an open letter on Starbucks headed paper to his "fellow citizens" to join him in "restoring hope in the American Dream" by sending "the message to today's elected officials in a civil, respectful voice they hear and understand, that the time to put citizenship ahead of partisanship is now".

It's quite a remarkable campaign. Schultz has the support of more than a hundred business leaders joining his pledge. Among those listed as "key supporters" on the campaign website are the CEOs of AOL, BBDO, NYSE, NASDAQ, Wholefoods Market and Zipcar. It is not such a significant coalition yet to cause the main political parties any real loss of sleep - compared with major contributors, most of these individuals and companies are not heavily involved in funding political parties. But for a business leader like Schultz to come out and so explicitly take a stand that effectively seeks to hold his domestic politicians to ransom until they do his bidding represents a fairly unique twist on the growing involvement of business in politics and the claim by corporations to be "good citizens".

In one sense, Schultz should be applauded for seeking to use his own and his company's economic muscle to try and achieve what he sees as a greater public good. Management guru, Rosabeth Moss Kanter, for instance has come out in favor of his "courage and leadership" in attempting to restore confidence. Even the more cynical corporate critics will find it difficult to see a clear-cut corporate self-interest at stake here. Sure it could help reinforce the famous Starbucks brand but at the same time its also going to annoy a lot of people too, especially those in Washington who are being labelled by Schultz and his CEO friends as having a "pervasive failure of leadership".

On the other hand, though, we might also question what's really going on here when we have a company CEO leveraging his company brand in such a way to make a political rather than an economic point, and at the same time claiming to be a "fellow citizen" with the rest of us (who can hardly afford to take out full page ads in the New York Times to present our own views on the current political logjam). This is not just Schultz the individual citizen speaking here but Schultz the corporate CEO and representative of Starbucks. But then, if (and it is a big "if") we accept corporations as political actors, then at least this example represents a fairly good case of building coalitions, providing an arena for free and fair deliberation, and moving beyond mere corporate self-interest.

To our mind the whole situation presents a really interesting insight into the emerging political role of the corporation and the difficult decisions that have to be made when business leaders start increasing their involvement in public debates. According to a McKinsey survey, "almost half of US executives believe they and their peers should play a leadership role in publicly shaping debate and in efforts to address sociopolitical issues such as education, health care, and foreign policy ... yet only one-seventh of survey respondents consider themselves to be playing that role now". Schultz's efforts to restore economic confidence by taking a step into politics gives us a taste of what might happen when these executives really start doing so. We still have a choice about whether and how those steps should be taken.

Photo by Nick Humphries. Reproduced under Creative Commons Licence.

Google vs China: upping the ante on industrial espionage

One of the big business ethics stories of the last month has been Google's announcement in mid January of a 'new approach to China' following reported attacks on the company's IT infrastructure from inside the country. Google's announcement spoke of targeted attacks on the email accounts of known human rights activists, both within and outside China, as well as other security breaches of Google and 'at least 20 other large companies'. Whilst the announcement of this degree of hacking would have been cause for concern, the explicit link to the surveillance of advocates of human rights in China was positively incendiary. Google was not just talking about regular industrial espionage here but about state-sponsored spying for political purposes. So suddenly the company had launched itself into a diplomatic row - albeit one between a company and a government - rather than its usual commercial scrapes.

The announcement didn't just make the headlines because of Google's allegations though. The company dropped another huge bomb by declaring that it would no longer continue to operate a censored version of its search engine in China - despite being required to by the Chinese authorities. 'Over the next few weeks' the company announced, 'we will be discussing with the Chinese government the basis on which we could operate an unfiltered search engine within the law, if at all. We recognize that this may well mean having to shut down Google.cn, and potentially our offices in China.'

Since the furor over Google's announcement blew up a couple of weeks ago, numerous commentators have offered their view on what's going on. Many have focused on Google's ongoing troubles in securing in market leadership in China, (suggesting that the human rights concerns have been used as a smokescreen behind which to withdraw gracefully from a commercial failure), while some have presented it as a belated switch to principled behavior. Some have even reckoned that Google is using the publicity around the announcement to build awareness and brand loyalty in China. Working out the motivations of the company in picking such a huge fight in one of the world's most important markets is never going to be easy.

Three things that have particularly stood out for us though in all this are these, and we think they offer some salutary lessons for the brave new world of business ethics that is starting to emerge.

1. Google the 'political corporation'. Google clearly feels big enough and powerful enough to pick a fight with one of the most powerful governments in the world.... over human rights. On the one hand, this is great in that it means that we don't have to just rely on the government to protect our human rights. Some big companies (whatever their motivations may be) may also be willing to do some of the heavy lifting from time to time (at least when when it suits them). In some of our writings, we've refereed to this as the corporate administration of citizenship rights (yes, not the catchiest phrase we'll admit, but it does the job). On the other hand, isn't this an issue that national governments - especially the US Government - should be leading on, rather than, as Hilary Clinton did, simply backing-up Google once it has broken cover. Still, whatever one thinks about this Google is clearly feeling big and important ... and perhaps also starting to feel the heat that comes with such size. It could just be getting in quick before the ethical backlash over its mammoth reach begins in earnest. With its fingers in all kinds of free speech, privacy and intellectual property issues, Google is fast becoming the essential political corporation of the 21st century.

2. One step forward, two steps back for the Global Network Initiative. The global what??! If you've not heard of it, well you're not alone. In the latest bout of Google vs China, the initiative hardly even scored a mention in the media storm. However, the GNI was launched back in 2008 to much fanfare, and was promoted as the new approach that internet companies were going to deal with censorship issues after getting their knuckles rapped by the US government for bowing to the Chinese government's demands. Well, the 'new approach' before the latest new approach of course. As a partnership between Google, Microsoft, Yahoo and a score of NGOs and academic institutions, the GNI held out considerable promise for delivering a more responsible approach to a tricky ethics problem that frankly, was not going to go away fast. Fast forward to January 2010 and GNI advocates could well point to Google's announcement as proof that the initiative is starting to have a significant effect. After all, one if its members is making a major song-and-dance about its commitments to internet freedoms. The trouble is though, no one at Google thought to mention the GNI, or suggested that it played a role in its decision. More worryingly, one of Google's main partners in the initiative, Microsoft, publicly criticized the company for it stand in China. Oops, hardly a hallmark of a strong partnership.

3. Industrial espionage goes up a level. First, spies worked for governments, just like in the old movies. Then they worked for companies ... in fact just like in the (new) movies, such as the 2009 Julia Roberts' release Duplicity. But some of the big news stories now in industrial espionage involve both companies and governments. It's a kind of semi-industrial espionage. The Google story was just the latest and best known incident of this government-business espionage, but clearly its becoming an increasingly prominent feature of the contemporary business landscape. Just this last weekend, the Sunday Times in the UK reported on a leaked British security service document accusing China of bugging, bribing, and blackmailing UK business executives in an attempt to secure commercial secrets. Notably though, here the warning came not from a multinational corporation, but from the national security service (the irony of MI5 warning against spying was not lost on many of the newspapers' readers who commented on the story). Either way though, as these incidents suggest, the stakes being played in industrial espionage have been significantly raised. The question, of course, is how best to respond ... and whether governments or companies should be leading the line.


Photo by Mykl Roventine. Reproduced under Creative Commons Licence

‘Are we all France now?’

That’s what Jon Stewart asked his guest Bill Clinton on the Daily Show a minute ago. They were discussing the proposed 700 billion (!) bailout for the financial industry proposed by the Bush administration today.

This is inspiring stuff. Who would have thought that the government most committed to reinstall freedom of markets, low taxes and ‘small government’ is now intervening directly in the economy in an unprecedented way. We blogged about similar cases in the UK and France recently – but what the US government intends to do here eclipses all the others.

We find it interesting from two perspectives. First, it is one of the classic examples of an ethical problem. On the upshot, yes, the financial industry is in trouble and the effects of further bank collapses would be massive - for the economy in general, but more concretely for jobs, home owners and ‘hard working’ Americans (and beyond). But on the other hand, why bail out an industry which has enjoyed fairytale profits in recent years, not to talk about bonuses and executive salaries far beyond imagination?

From a ultilitarian perspective (see Chapter 3 of Crane & Matten) maybe everybody would be better off by the bailout. But what about fairness and justice - providing healthcare for children has been anathema for the US government so far, yet would have cost much less. Or from another perspective, what about the consent of taxpayers to spend what amounts to $5,000 each in tax dollars for this massive bailout package?

The second aspect hints at the political role of private corporations. To have enough to live of in old age (i.e. pensions) and having a roof above your head (i.e. homes/mortgages) are obvious issues: access to these for a long time was considered a basic civic entitlements of citizens. That’s why welfare states in Europe still provide (or tightly regulate) access to these commodities. The US though has been at the forefront of creating markets for these things. As we see, the corporations in charge have failed at administering them – maybe because they shouldn’t have been in charge of these issues in the first place. And that’s why the government now feels it has to step in. The bailout now is an attempt to help out as a one-off. But it raises the general question we have discussed at length in our just published recent book: if corporations are now responsible for administering basic entitlements of citizens would it not be just fair to apply the same rules of transparency, accountability and democratic control as we do to governments? It is fascinating to see this debate and we guess it is far from over.

Business ethics at the Toronto International Film Festival

At the moment, here in Toronto, we are in the midst of the 2008 Toronto International Film Festival (TIFF), which is one of the world's premiere festivals , up there with Cannes, Venice and others. The city is alive with movie folk, big name actors and directors, and excited film fanatics. It's a fun place to be.

Regular readers of the blog and some of our other work will know that we are enthusiastic advocates of the role of movies in enlightening us about various aspects of business ethics. And TIFF 08 is no exception, with a bunch of exciting new films that get to grips with some of the social, ethical and environmental challenges facing contemporary business across the globe. We'll talk about some of these movies in a moment.

But it's not just the movies that are putting corporate responsibility in the limelight at TIFF this year. With increasing commercialisation and corporate sponsorship of the festival, some critics are complaining that the one time "people's festival" has been taken over by big business interests. With priority entry at some venues for sponsors, just flashing your Visa card (Visa is one of the main sponsors) can get you early seating and a place in the special lounge with drinks and refreshments while everyone else has to queue outside. Understandably, not everyone is over-enamoured with the implications of these acts of "good citizenship" by corporations - or at least not when there are such strings attached.

But it's tough balancing act for arts organizations when governments such as the incumbent Canadian Conservative Government, make cuts to arts funding leaving the private sector as the next obvious port of call. If arts organizations go in this direction, the challenge is obviously to work out a relationship that creates meaningful value for both partners - and takes account of the various stakeholders of each institution. It's a difficult proposition, but an important one to get right if these partnerships are to be sustainable. TIFF has clearly had the first warning shot fired across its bows and festivals around the world would do well to make sure they systematically incorporate these concerns into their subsequent planning.

But onto the films...

This year's line up has a few hot new documentaries that look worth checking out, including these (for more details check out the full program at http://www.tiff08.ca/:

Food, Inc. directed by Robert Kenner explores how modern developments in food production pose risks to our health and the environment. According the TIFF 08 programme:

Food, Inc. carefully dissects the cozy relationships between business and government in both political parties. In opposition to these powerful interests, we meet people from all walks of life, from a Republican mother who lost her two-year-old son to E. coli poisoning to the founder of Stonyfield Farm Organic Yogurt, who flouts conventional left-wing dogma by seeing a positive side to Wal-Mart.

Upstream Battle, directed by Ben Kempas, about Pacific salman, Native Americans, hydro-electric dams, and water rights in Northern California and Oregon (see the trailer here):

"Upstream Battle is wonderfully nuanced, acknowledging the complexity of the situation. The other stakeholders in this ecosystem include farmers who rely on the water for irrigation; the neighbouring tribes of Yurok, Karuk and Klamath; and commercial fishermen who catch the salmon at sea. The film manages to humanize those on all sides, including the corporate employees whose own livelihoods are in flux over changing owners."

And for a dose of individual resistance to organizational corruption, Yes Madam, Sir, directed by Megan Doneman tells the story of Kiran Bedi, the first woman to join the Indian Police Service, former head of Tihar Jail, Asia's largest, and notoriously corrupt and overcrowded prison, and latterly resident at the UN in New York.

"Kiran Bedi is arguably India's most controversial daughter, both revered by her supporters and reviled as a self-centred publicity seeker by her critics. In this captivating examination of her life, Australian documentarian Megan Doneman shows that whatever people may think of Bedi personally, there is no disputing her professional achievements. "

We'll try and catch one or two during the festival, but anyone that has seen these or who has more details, do drop us a comment. And if you're not in Toronto, keep an eye open for local release announcements ... and fof course or other new films that might be of interest. We're always keen to hear about new movies to feature. But let us know who you're being sponsored by first!!

A view from Africa on corporate citizenship

We are writing this blog entry on the long trip back from a fascinating trip to South Africa. We were there mainly to participate in a big international conference organized by the International Society of Business, Economics and Ethics (ISBEE) – a global network of organizations and scholarly societies dedicated to business ethics. The conference only happens every four years, and brings together people from every continent (it’s not for nothing that it’s called the Olympics of Business Ethics!), and it’s an exciting place to be to talk and learn about what’s happening across the globe.

We were there to launch 2 of our new books, to run some professional development workshops, but most of all, to talk about our work on corporations and citizenship. And the conference, and South Africa in particular, turned out to be a great location to do this. Questions and debates about the social and political roles and responsibilities of corporations are fundamental to countries like South Africa, where it is companies that are charged with the responsibility for implementing black economic empowerment legislation through their human resource programs. Companies are also a key player in the provision of various public goods, such as water, health, and education. For instance, on one of our trips outside Cape Town we passed a special needs skills school sponsored by the local Coca-cola bottler (see photo) that demonstrates just a little of how deeply embedded corporations are in traditionally ‘non-business’ activities.

Such issues also swirled in and out of the several of the keynote speeches at the conference. We heard an executive from the mining company Anglo American discuss at length their responsibility to ‘be a healthcare provider’ and ‘guarantee the human rights’ of South Africans through their impressive HIV/AIDS program. We heard the manager of the charitable foundation of the pharmaceutical company Abbott Laboratories argue that the legitimacy of their African health initiatives would be threatened by incorporating business goals into their social programmes. And Henk van Luijk, one of the original European pioneers in the business ethics field, and a founder of ISBEE, explicitly identified the political role of the corporation as one of the key challenges facing business ethics and CSR in the future.

So when we came to present on the final morning of the conference, rather than the usual smattering of diehard conference junkies that make it to the last paper sessions of such a long conference, we were greeted with a large, eager crowd that was fully primed for a serious discussion about corporations, politics, and citizenship. Now we’ve been presenting our ideas on all this for a good few years, refining and sharpening as we’ve gone along, but this was definitely one of our favorite, and most productive, conference presentations for a long time.

In what was an unusual occurrence for us, most of the packed room was in agreement that we had to develop better conceptual and practical tools to address the political dimensions of business. In other occasions though, people’s discomfort with the whole idea of business playing a role in politics has meant that they have done their best to shoot the messengers. In one of our recent papers, we discussed this fear in terms of ‘monster theory’ which we had a little fun with.

But this time, corporations and politics were clearly on the agenda amongst our audience. However, not so many of them were convinced that ideas like citizenship, and corporate citizenship specifically, were the best way forward. They could have a point, but at the moment, it is certainly emerging as one important piece of the puzzle. And what we need is more people engaging in the debate about corporations and politics, and eventually devising serious alternatives, rather than just wishing it would all just disappear. In our conference presentation we worked with our audience to think through some potential routes forward for doing this. And in our many conversations both inside and outside the conference itself, we learned a lot about some of the challenges that we face. So whichever way you look at it, spending time in South Africa definitely got us thinking… (oh, and having a little fun too, as you can see in the picture above).

Business and politics: Berlusconi and BAE back in the news

This week sees Crane and Matten travelling to Europe. At the moment we are in Milan in Italy, being hosted by the CSR Unit at Bocconi University. Later in the week, we will be off to the UK for meetings, research interviews, and a general catch up in London and Nottingham.

It's an interesting time to be here in Italy, with the Alitalia sale in the news every day, and the national election having taken place over the weekend. As expected, Silvio Berlusconi has come out on top, and is now set to lead the country for an incredible third time. As a renowned media tycoon, it just goes to show how ingrained business is with politics here, a point that we have been discussing a lot in our work on the political roles of corporations over the last few years. In fact, when we gave a seminar on Corporations and Citizenship at Bocconi yesterday, it struck us just how comfortable our Italian colleagues were with the idea that corporations have political roles and identities - an issue that often arouses controversy elsewhere, where the idea that corporations have solely economic roles in society often prevails. It made a change to get such a warm reception.

Of course, the intersections of business and politics will also be on the agenda when we touch down in the UK later in the week. One of the most popular cases in our Business Ethics book deals with the BAE corruption scandal, and it seems that this whole issue is very much back on the agenda again in the UK. Last week saw the high court in London rule that the Blair government's decision to quash the inquiry into the alleged corruption on the grounds of national security was unlawful, yet the new PM, Gordon Brown looks set to continue on the path of his predecessor in attempting to block any further investigation - despite what appears to be considerable international pressure from the OECD, the US and elsewhere to do otherwise.

The upshot of all this is that it is clear that the untangling of business and politics is getting increasingly difficult, whether here in Italy, the UK, or pretty much anywhere else. The cosy world of distinct sectors with clear responsibilities looks to be increasingly a feature of the past (if it ever was much more than a myth). The resulting challenge of working out what roles and responsibilities this poses for corporations will test the imagination of all of us. We have a new book, Corporations and Citizenship, coming out later in the year with Cambridge University Press, which attempts to make a start on this question. But even we have to admit that we end up asking more questions than we answer. But, hey, you've got to start somewhere.

Corporations and political responsibilities

Just today the latest issue of Business Ethics Quarterly has dropped into the mailbox, featuring our latest article on corporate citizenship - well, actually an invited response to someone else's article about whether the label of 'citizens' fitted corporations or not. Oh, the joys of becoming "those two corporate citizenship guys" - available 24/7 to answer all your CC questions ... and more often that not to be roundly disagreed with by just about everyone.

Unusually for us, this time around we actually agreed with most of what our colleagues had written. Anyway, one thing that we particularly liked in this paper, and which we have been talking about in our work for some time, is the idea that once you start to acknowledge some role for corporations in the realm of citizenship, then you are effectively moving towards the idea that corporations have a political role in society.

Now, for various reasons, this whole idea that corporations might have political roles and responsibilities is for many people a fairly controversial one. Obviously none of us are very comfortable with the whole blurring of boundaries between business and government, between the economic and the political. But this is the situation that we find ourselves in at the moment. And, as people interested in nature of business ethics and responsibility, it represents one of the more fascinating, yet challenging aspects of the whole debate.

On the one hand, we applaud corporations that step in where governments have failed, such as in the provision of decent roads, schools, and hospitals, or where they move to protect their workers from HIV/AIDS infection. This is just good citizenship, right? On the other hand, we have many legitimate doubts about the presence of multinationals in delivering the basic entitlements of citizens, or when corporations get involved in lobbying governments to prevent legislation that might curb some of their worse excesses. Bad citizenship, huh?

So the area is something of a minefield, albeit quite a fun one to hop around in ... until you put a foot in the wrong place of course. But over the next few months we'll be commenting quite a bit on some of these political issues as they relate to corporations. There could be a few explosions along the way, but we're ready for it, helmets on, and ... well ... you can finish off the metaphor for yourselves...