Foundation’s 20th Anniversary Consultation
for the future - the need for a new dynamic
‘that which is worthy of esteem for its own sake’.
As I lay half-waking half-sleeping in my bed this morning there came to me a vision of the decline and impending fall of the Roman Empire. There were the gilded palaces - the imperial corporate headquarters - remote in style and immune in culture from the real world outside. There were the cries of peacocks, the ripple of water from the marble fountains, the rustle of silk from the slave girls clearing the remnants of the previous night’s debauch, whose lingering odours were disguised by the scent of roses. And there was the Emperor himself - the Empire’s CEO - rich beyond the dreams of avarice, indifferent to the picture he presented to the world or to the fact that his disproportionate rewards brought the imperial game into disrepute.
And yet there were some stirrings of disquiet in his mind, closed though in many ways it was. His financial gains, he felt he had to say in justification, were no greater than those of the chief gladiator who, while he survived, was richly rewarded by the symbols - or logos, as they were then called in the Greek language - of the wealthy wine shops and the brothel-keepers, but whose retirement, the Emperor failed to observe, was in no way cushioned and could in any case be short-lived.
His disquiet should have been heightened by the news that the barbarians were at the gates. But he was happy to dismiss the implications of their presence. These terrorists, as he characterised them, using the Latin word rather than the Greek ‘barbarian’ - these terrorists, he said, spring like Athena fully armed from the head of Zeus (he was not an uneducated man), and we will simply destroy them. And to soothe the mob we will in the meantime have more bread and circuses and call them Imperial Social Responsibility - or ISR for short. So pull up the ladder, Caligula. We’re all right.
But then the mood seemed to darken as I looked beyond the limen, the threshold of Rome, to the limes, the shadowy possessions beyond, which were intended to be the Empire’s outer protection. It was thence that the barbarians came, their origins rooted in the inequity, injustice and oppression from which their world suffered. And their operations, however dastardly they might seem to the Romans, derived succour from the conditions of that world. But none of this was understood in Rome itself. Decline, it seemed to me in my dreaming state, would inevitably become fall, since symptoms, rather than causes, clouded the judgement of men and monopolised their attention. Rome would not survive unless it changed.
And then the vision faded and I awoke to the harsh reality of having to follow the superb professionalism and visual pyrotechnics of Bob Worcester and Angela Wilkinson.
At theis consultation meeting today, Bob and Angela have dealt with what has happened and what could happen. These are descriptions of a real past and of a logically possible future. They were brilliantly professional expositions. If I describe them as passive, this is in no way pejorative - simply that of themselves they do not make for action. I have to attempt a change of gear and deal with what should happen.
Pierre Wack, the progenitor of Shell scenario planning, used to quote: ‘The best way to predict the future is to make it happen’. And that is what we should be about today.
But first let me step back. Why should we concentrate on values and the corporate sector? Because in the post-Cold War world the corporate sector has become the dominant influence in a ‘globalised’ world. It exercises that influence both through its own operations and through the leverage it can bring to bear on the institutions, both national and international, that shape the world. Moreover transnational corporations are the only truly effective mechanism today, spanning continents and leaping boundaries. Without their co-operation we will not achieve our goals for a better society. At the moment they are as much part of the problem as part of the solution. But business has the capability - within its legitimate role - of being part of the solution.
It is important to observe the nature and manner of change in corporate behaviour up to now. We have seen challenge to established practice from without, resistance, further pressure, reluctant acceptance, and then, if change is to be cemented, legislation. This is not a desirable scenario, nor an attractive recipe for future success.
But we have seen it repeated over the years. The abolition of the slave trade in the early 19th century faced business arguments against reform similar in principle to those we hear today. A pamphleteer of 1789 wrote: ‘How far the revenue of this country may be effected by carrying into effect the crude and visionary projects of these men [the slave trade abolitionists]…..is an experiment which it is hardly supposed will be made by the Minister who so ably presides over the finances of this kingdom’.
There was prolonged resistance to publishing of accounts. I cannot resist a quote from P & O Directors mid-19th century:
‘On more occasions than one, the question has been mooted at the general meetings as to the publication of the accounts of the company, and the opinion has been expressed by the Board that the period had not arrived when it would be expedient to do so, and at the same time the proprietors have been informed that it was not considered for their interest that such a course should be pursued….
Proprietors at a distance forming their opinion of the future position of the company from published accounts of past transactions could scarcely avoid arriving at erroneous conclusions……but the directors entertain the hope that the proprietors will rest content with the assurance that the establishment is carried on with every regard to economy consistent with efficiency……’.
This does not need much alteration to see it echoed in corporate attitudes to protection of the environment in the 1970s and to the defence of human rights in the early 1990s. Or indeed today in resistance to a mandatory definition of materiality in the forthcoming reform of UK company law.
All these issues concern what we would now call values. The abolition of the slave trade and ultimately slavery was about the equality of human beings and human dignity. Open accounting is about probity and integrity; defence of the environment about concern for a finite planet. Defence of human rights is again about respect for the individual.
These different values have emerged over time. They have become accepted as legitimate corporate responsibilities, in word if not in deed, through long and often painful processes. Trade unions struggled to achieve workers’ rights. The Limits to Growth (Club of Rome, 1972) could have had a seminal impact, for all its intellectual flaws. But it took successive disasters to bring home companies’ responsibility for their environmental impact. The experience of Shell and BP over human rights exemplifies what seemed to have become a truism that disaster was needed as the catalyst to precipitate change.
This has left us today with a corporate world which is not trusted, which is believed to put profit before principle, whose operations are rightly perceived to cause significant collateral damage to people and to the physical and social environment. The good that companies do is outweighed in people’s minds by the harm they cause. This does not provide the foundations for success.
But there is a difference today on which we can build. For the first time in history the whole spectrum of values is on the table. Perhaps the word ‘sustainability’ conveys that spectrum, though it is still inadequately defined and too often concentrates solely on the physical environment. It may be that the words ‘human rights’, which are more precisely defined, subsume sustainability. What we have is an internationally accepted framework of values: the UN Universal Declaration of Human Rights, the Convention on the Rights of the Child and the core International Labour Organisation conventions. All the elements are in the field. We don’t have to invent values from scratch. And let us be abundantly clear that they are applicable to companies as well as to governments and individuals.
The challenge, and I believe the destination for our route map, is to see company operations, wherever they take place, reflect these values. That should be where we want to get to.
Much has already been gained in principle, if not in practice. Health and safety of employees and concern for environmental impact are seen as the responsibility of any reputable company. Responsibility for the impact on human rights, both direct and indirect, is gaining ground. What have been seen as ‘externalities’ to company business are increasingly seen to need to be ‘internalised’, if companies are to succeed and survive in a more critical world.
But we are far from reaching our destination - which must be the acceptance by companies of responsibility for the total impact of their operations. Only a tiny minority of companies meets all its responsibilities. The old process of resistance, pressure, and reluctant acceptance still persists.
How do we stand this on its head and encourage companies to be the initiators?
How can we reshape the world and its institutions in such a way that market forces lead companies automatically to maximise their contribution to the alleviation of poverty and protection of human rights within their legitimate sphere? The emphasis here is on the words ‘automatically’ and ‘maximise’. In other words, how do we build into the market and corporate systems incentives or compulsions to internalise responsibilities in line with contemporary values which have previously been ignored or externalised? We have to answer this in a manner which accords with the legitimate role of companies. Companies must not usurp the role of government. We have to answer it in a manner which preserves the beneficial aspects of the market economy (its competitiveness and dynamism), but which makes that market economy a force for a fairer world as well as a financially richer one. The market is not ‘free’; indeed it will only survive if its freedom is curtailed within moral parameters.
There are many - too many - initiatives in the field today providing codes or guidelines for company conduct. The distinguished Catalan jurist, Dr Ramon Mullerat, last week at a Wilton Park conference, listed eight which are world wide in their intended impact and many more which are more narrowly focused. The major ones will be familiar - the UN Global Compact, the OECD Guidelines, the Global Sullivan Principles, the ICC Guidebook. All are voluntary; most fail to cover the totality of a company’s responsibilities. And while they have helped to create awareness of the issues, they have not changed the world. A small minority only adheres to the Global Compact. We need to seek more effective drivers for change.
Now the UN Sub-Commission on Human Rights has produced Norms on the Responsibilities of Transnational Corporations and Other Business Enterprises with Regard to Human Rights. It’s an awkward title, but it distils, in a single comprehensive and authoritative document, the international human rights principles applicable to the whole range of business responsibilities. The Norms are not legally binding, except where they cover issues already covered by law. But representing as they do the behaviour expected of companies by the international community, based on internationally accepted standards, they are more than voluntary.
Their value is that they provide in a summary and applicable form the principles of the UDHR and other conventions. They provide a template against which companies can measure their own codes or statements of principle and against which company performance can be judged. And they can ultimately provide the basis for a regulatory framework which, given the inadequacy of voluntary response by the corporate world, must be an essential element of the way forward. Indeed, the top man of Shell, Phil Watts, calls for a ‘regulatory framework’ in a book published by the World Business Council for Sustainable Development, of which he is co-author. But paradoxically his company, a world leader, which already reflects the whole spectrum of responsibility in its operating guidelines, is no different from lesser companies in having a knee-jerk hostility to anything that savours of legislation, forgetting perhaps that it was not forethought that brought it back to its position of leadership today, but disaster.
History abundantly demonstrates that voluntarism doesn’t work and it is sad that we cannot look to corporate leadership to effect the necessary change. A fundamental barrier to such leadership and to much that needs to be done lies in the vitiating fallacy that the purpose of a company is value (meaning money) to shareholders. This has led to money being the only measure of performance. It has led to the concept of ‘corporate social responsibility’ as a voluntary add-on and of ‘giving something back’ to the community, with the implication that the core activity of a company is parasitic on society. It has led to the need for the interests of every stakeholder other than the shareholder having to be fought for by elements outside the company.
To any good manager this is a nonsense in practice and principle, but it distorts the whole. Limited liability was not a privilege accorded for the sake of making money for shareholders. The purpose of a company is to provide goods or services profitably and responsibly. Money to shareholders is a condition, not a purpose. Nor is it a value. We need to seek other drivers for change. We need a dynamic which springs from a concept of business as a service to society, not just a financial source for shareholders.
So what is the destination for our route map? I believe it lies in the values recognised and set out today by the international community.
How do we get there? Not through voluntary measures, which again I would say history demonstrates have never worked; not through waiting for disaster to stimulate change; but through a mixture of incentives and restraints in which the law will have a part to play. An international regulatory framework will require international treaties and will therefore be years, if not decades away, but is worth aiming for and needs to lie at the end of our march. In the meantime we have to start at national level with governments giving encouragement to good practice, implementing such practice in their own transactions, developing sensitive legislation and seeking greater equity for the poorer parts of the world through the WTO and similar institutions.
We must not be seduced by the evasion of politicians that ‘you cannot legislate for morality’. Of course you cannot; but you can legislate for behaviour. We need to start with compulsory full disclosure by companies of what they do and disclosure by the banks and other financial institutions of the direction of their money flows. Exposure to the public gaze can be a significant driver of change. Companies can work with government towards these ends; or they can work against government action and therefore against the tide of public opinion which will then deservedly engulf them.
The need is urgent. I do not believe that we have the 20 years or more which it has taken us to get where we are. Terrorism could well represent the warning tremors that presage an eruption. It must be a real question whether companies can change fast enough to forestall the explosion of the anger of the dispossessed of the world. Let us try to help them to do so.
is the invariable ally of tyranny’ (Michael Ignatieff).