Friday, October 31, 2008

Digital Social Responsibility Panel at Japan Society

It has been an eventful week. On Wednesday, I participated in the Japan Society's panel on Digital Social Responsibility: Search for a Sound, Responsible Information Society with Charla Griffy-Brown of Pepperdine, Jun Kurihara of Harvard, and Harriet Pearson of IBM. This conference could not have been better timed: It took place hours after Google, Yahoo, and Microsoft agreed to new guidelines that would aim to protect human rights, privacy, and free expression. From the Scientific American:

The three software giants today (Oct. 29) announced creation of the Global Network Initiative designed to persuade oppressive governments to allow their citizens to freely express opinions, via the Web in particular, without fear of

Participating companies must agree to "respect and protect the freedom of expression rights of their users when confronted with government demands, laws and regulations to suppress freedom of expression, remove content or otherwise limit access to information and ideas in a manner inconsistent with internationally recognized laws and standards," says the new group's guidelines.
The guidelines were a response to criticism from NGOs about Internet companies cooperating with the Chinese Government. From InformationWeek:

Yahoo helped launch the initiative after becoming one of several technology companies criticized for how they deal with restrictions on speech in foreign countries. Yahoo was accused of giving the Chinese government information about users that led to the jailing of dissidents. Google has been criticized for filtering search results to comply with demands from the Chinese government. MSN and Yahoo also filter search results to comply with Chinese government

GNI members said they commit to protect freedom of expression and privacy, partner with others for collective governance and accountability, and spread their objectives around the globe. They agreed to require governments to put information requests in writing and to interpret those requests as narrowly as possible.
As expected, there is already some skepticism about the initiative. From SA again:

Don't expect any radical chances results any time soon: companies joining the
initiative (at a cost of $100,000) have two years from the time they sign on to prove they're following the guidelines. It is unclear, however, the consequences a company faces if they join the initiative but fail to meet these guidelines.
Several themes emerged from the Japan Society panel. The overall theme is that companies and Internet users must build a foundation of trust in order to fully exploit the benefits of Web 2.0. That means stewardship of the Internet and of information will become a big focus--information stewardship happens to be something that IBM has been thinking about since the late 1960s. Some other big themes from the panel:

1. A "ubiquitous network society" or "collective intelligence" is emerging from the Internet and Web 2.0, allowing for better and quicker response to crises and problems. The use of crowd sourcing is one such example. With so much information out there, will the global economy begin to put a higher premium on other skills, such as empathy? (BusinessWeek has made this argument, too.)

2. The Web is allowing companies and operations to move from an international model to a multinational model to a truly global model in which data are processed in multiple places, through cloud computing, for example. As John Ruggie mentioned at the Carnegie Council this week, the speed and scope of business has surpassed traditional governing organizations like states. How do we keep up

3. Web 2.0 can help mitigate risk (as well as create new risks) in many areas, including supply chain, brand, and public relations. Lines between competition and cooperation are blurred as are those between friends and enemies. How do we better facilitate these interactions, for example to boost the "integrity of the crowds," as I would put it. This point was brought up by Andrew Zolli at our Web 2.0 panel at the Carnegie Council.

4. Finally, ethical leadership or "courageous leadership," as Kurihara put it, will be needed to resolve the paradoxes and ethical dilemmas posed by Web 2.0. Zolli made a similar point at our panel by saying that ethical leadership is the fastest mover affecting brand value. The others are about stewardship--social and environmental.

(Photo collage from Japan Society of Kurihara, Griffy-Brown, Pearson, and me.)

Thursday, October 30, 2008

John Ruggie Sees Big Shift in Public Attitude Toward Govt

Harvard Professor John Ruggie spoke at the Carnegie Council this week on the future of his project on business and human rights. Below is a short summary Carnegie Council intern Sheila Oviedo helped me put together. The big points are that Ruggie sees a dramatic shift in public attitudes in favor of government regulation, as a result of the financial crisis. Government is no longer just "the problem," in the public mind.

Also, Ruggie could see a more ethical capitalism emerging not by instilling ethics in people per se but by creating incentives based on an ethical framework. The temptation to be corrupt is too big, for example, and therefore people need the incentives to be good.

(You can listen to the audio of his talk here.)

Business and Human Rights
(Summary of the Ruggie presentation)

This week, John Ruggie, the Special Representative of the Secretary-General on Human Rights and Transnational Corporations and Other Business Enterprises, visited the Carnegie Council and shared insights not only on his mandate, but also on the way forward for business and human rights as well as ethics and capitalism in the post-crisis global economy.

The Framework for Business and Human Rights

Released in April 2008 and unanimously accepted by the Human Rights Council in June, the Ruggie report, "Protect, Respect and Remedy: A Framework for Business and Human Rights" rests on three core principles: the state duty to protect against human rights abuses by third parties, including business; the corporate responsibility to respect human rights; and greater access by victims to effective remedies. In less than a year after its release, the framework rapidly gained traction among business and human rights groups, corporations, and even governments. The Human Rights Council agreed to renew Ruggie's mandate for another three years, which allows him to move forward with operationalizing the framework.

The formulation of the Framework was, according to Ruggie, informed by three broad approaches. First was the pyramid of correlative duties adapted from the work of John Knox. The pyramid suggests that the current international human rights regime is still largely state-centered, but with no specific requirements for state compliance with human rights laws or strict enforcement mechanisms. "Where most cases (of human rights abuses) are, enforcement is weakest," Ruggie noted. The alternative is to "flesh things out at the bottom" by providing states with tools to uphold and enforce human rights law.

The second area that informed the Framework is the "collision of norms" in the international system. The system consists of clusters of laws, codes, and norms that often clash because there is no hierarchy. Human rights law, Ruggie said, does not generally trump other laws. The Framework therefore makes policy arguments rather than legal arguments to integrate human rights into business.

The third area that informed the Framework is what Ruggie calls the "political economy of human rights." There is a "vast misalignment" of corporate activities and government capabilities, which results in governance gaps. "Human rights violations are a result of these governance gaps," Ruggie noted. The Framework prescribes pragmatic measures that can be done to bridge these gaps.

In general, the Framework follows what Ruggie calls an approach of "principled pragmatism." It is guided by the principle to strengthen the current human rights regime and is pragmatic on how to get there, he explained.

The New Mandate

Ruggie's extended mandate from 2008 to 2011, presents an opportunity to operationalize the Framework at both the state and corporate levels. At the state level, he aims to offer governments useful tools to be able to monitor and enforce human rights law through a range of mechanisms such as a country's investment policies and corporate laws.

At the corporate level, Ruggie aims to push companies to carry out their commitment to human rights. Companies say they respect human rights, he said, "but most of them don't have (systems) in place to prove they are respecting human rights." In the next three years, Ruggie's challenge is to inspire companies to operationalize the corporate responsibility to protect human rights to mitigate further rights abuses.

Another key challenge is to improve public access to remedial measures. "The need for judicial remedy is the most problematic," Ruggie acknowledged. Hence, the Framework prescribes alternative non-judicial remedial mechanisms in areas where judicial mechanisms are weak or in cases where companies can deal with complaints in an objective manner.

The Future of Business and Ethics

Ruggie sees the current global financial crisis as a catalyst for a shift in attitudes toward globalization and regulation. He expects increased government regulation in the post-crisis future, and perhaps more acceptance of the significant role of government and the state in the economy.

The post-crisis era has room for ethical financial capitalism, but only if ethics is used as a basis for developing new incentives. Ethics can't be relied upon to balance an incentive structure that encourages excess and irresponsible risk-taking.

Tuesday, October 14, 2008

Nye's Soft Power Skills for Leaders

Joseph Nye recently came to the Carnegie Council's Public Affairs Program and took his idea of soft power and applied it to leadership.

The Power of Social Entrepreneurs

The Washington Post ran a story on the growth of social entrepreneurship today. Here is an interesting excerpt with stats:

A survey last year by the financial firm Deloitte & Touche found that two-thirds of those ages 18 to 26 prefer jobs that permit them to contribute to a nonprofit group.

In recent years, more than 30 business schools, including those at Georgetown and Harvard universities, have launched social entrepreneurship programs. The number of law schools that support pro bono programs or require students to work in them rose to 145 this year, from 100 in 2001, according to an American Bar Association survey.

Pamela Hartigan, co-author of the new book "The Power of Unreasonable People: How Social Entrepreneurs Create Markets That Change the World," said today's young idealists differ from their predecessors.

"In the 1960s and 1970s, politics was the way we thought of changing the world. But young people today. . . believe that change is going to be brought about by business and market discipline," Hartigan said. "And so they seek to set up enterprises, not to pad their pockets, but to transform what is broken in our societies in a long-lasting way." She added that some get restless: "They are very impatient about not having a job that's meaningless."

Ashoka, an Arlington County-based organization that funds social start-ups, created a program in the mid-1990s for would-be entrepreneurs ages 12 to 20. Ashoka's Youth Venture has launched more than 2,000 projects worldwide, at least half of which are still active, including a new team of Bethesda-Chevy Chase High School students who plan to install energy-saving light bulbs in poor neighborhoods, funding the project with babysitting and tutoring money.

Monday, October 13, 2008

The Earth Is a No Gloating Zone

A few weeks ago, I was listening to the BBC and heard some British commentators speak about how deliciously ironic it was that the United States, an evangelist of free market principles, is now verging on socializing its financial system. The tone of the comments was smug and gleeful. It was gloating; it was what the Germans call schadenfreude or taking pleasure in the suffering of others. Of course, a few weeks later, many Europeans realized they were in the same boat.

I didn't get this desire to take pleasure in the suffering of others. Also, don't Europeans, who often claim to be immersed in history, realize the historical context? Don't they recall the New Deal, not to mention the Marshall Plan? In a paper I have been working on recently, I tried to express my feeling:

The global nature of the world’s problems makes it increasingly obvious that the human family is in the same boat. Despite the initial glee some commentators took in the recent misfortunes of the U.S. financial sector, the false dream of "decoupling," and the reasonable desire for punitive measures against the "party" on Wall Street, it became clear that international cooperation was the only path toward weathering the "perfect economic storm."

Thomas Friedman recently noted that Iceland’s plea to Russia to help it avoid "national bankruptcy" shows that financial globalization has gone faster than regulatory institutions could govern it. Globalization of the world’s problems has also gone faster than the common understanding of "national interest."

In a time when everything has gone global—from epidemics to pollution to communications—nationalistic political slogans like John McCain’s "country first," like the 1867 "Canada First," seem anachronistic. Of course, we expect our politicians to fight for a country’s national interest, but the nature of each country’s interest is increasingly global. How can a more enlightened sense of national interest take root?

Today, Slate has an article on the same topic. It starts like this:

Until last week, Europe had witnessed the type of anti-American gloating usually seen only during the soccer World Cup, the quadrennial event in which the American team is routed in the early rounds. The spectacle of highly paid American bankers falling on their faces inspired smug lectures from afar about the reckless pursuit of profits, disdain for regulation, and manic risk-taking that characterize U.S.-style capitalism.

The tsk-tsk-ing reached a new level with a cover story in the German newsweekly Der Spiegel, "The End of Arrogance": "The banking crisis is upending American dominance of the financial markets and world politics." The piece notes the delicious irony of the United States having to nationalize parts of its financial system. "The Americans are now paying the price for their pride," it notes. "Gone are the days when the U.S. could go into debt with abandon." Gone, too, are the days of "turbo-capitalism" imposing its mores of "avarice and greed" on the global economy. No wonder schadenfreude—that lovely word meaning joy at other people's suffering—was coined in German.

But now the clog is on the other foot. Germany has been forced to bail out the nation's second-largest property lender. Iceland, whose financial system now swims with the fishes, has seized several banks. Britain unveiled an expensive plan to inject up to $88 billion of capital into proud financial institutions such as Barclays. Several European countries have hastened to boost deposit insurance.

(Photo by BinaryApe.)

Wednesday, October 8, 2008

Financial Crisis: Typology of Issues

Stephen Jordan of the U.S. Chamber of Commerce's Business Civic Leadership Center sent out a helpful email to friends and colleagues today. He wrote that groups have shown a lot of determination not to cave into the distress of the current financial crisis. Instead, many in the corporate citizenship community are trying to accelerate recovery, minimize damage, and be constructive.

Stephen offered a typology of the issues that the CSR community might address in the coming weeks in response to the financial crisis:

I. How to Build Trust (Ethics)

o How to increase confidence in “Wall Street” (financial capital)?

o How to increase confidence in senior business management?

o How to address social concerns about business in a recession or times of hardship?

o How to sort through the responsibilities of various stakeholders to the system?

II. How to Minimize Harm (Public Policy)

o How to mitigate the impact of the crisis on the poor (or on social services)?

o How to avoid class warfare on the one hand and systemic, entrenched inequality on the other, and other “us versus them” effects

o How to avoid damaging “Main Street” (small and medium-sized businesses, local communities, etc.)

III. How to Accelerate the Future (Operations)

o How to promote enlightened capitalism (i.e. maximize benefits over a 20 year period, as opposed to next quarter)

o How to expand the benefits of capitalism for the bottom of the pyramid

o How to develop non-traditional “blended value” social and economic institutions and public-private partnerships to address social goals and reduce poverty

IV. How to Proceed (Goal identification and Strategy)

o How to make business part of the solution

o How to distinguish between normative (morally good to do), operational, and legal imperatives and obligations for investors, boards, senior managers, regulators, customers, and other interested parties

o How to distinguish between “good” and “bad” capitalism

o How to define the roles and responsibilities of the public and private sectors better in order to maximize public welfare

o Who should do what?

Wednesday, October 1, 2008

Moral Common Ground in China

This summer, China hosted the 2008 Olympics without a major incident, but barely a month after the Olympic curtains fell, Beijing was scrambling to contain one of the worst cases of milk contamination in recent history. These two events mirror the gap between two images of China. On one side is China as a confident power, rapidly opening not just to foreign trade and investment, but also to ideas, values, and norms from the outside world. On the other side is the developing, more uncertain China, driven by a growing capitalist culture that is filling a moral vacuum created by the Cultural Revolution.

A recent Carnegie Council delegation to Beijing days after the Olympics found that the Chinese want to bridge this gap, and ethics is high on the agenda.

The delegation traveled to Beijing from Sept. 21 to 26, 2008, to lay the groundwork for China-Japan-U.S. dialogues on ethics, energy, climate change, and faculty development. The group included Joshua Eisenman, Asia Studies Fellow at the American Foreign Policy Council and Ph.D. candidate at UCLA; Jonathan Gage, a Carnegie Council Trustee and Principal of Booz & Company, where he also publishes its magazine strategy+business; Harry Harding, University Professor of International Affairs at the George Washington University; Devin Stewart, Director, Global Policy Innovations, Carnegie Council; and Alex Westlake, Managing Director of ClearWorld Energy in Beijing.

Meetings with senior academics, businesspeople, and think tank and government officials revealed that Chinese interest in ethics in international affairs is more cosmopolitan than many may assume. In particular, there is genuine interest in ethical business, in ethics relating to climate change and energy security, and in reconciling Western discourse with China’s traditions. Intellectuals believe that indeed, the tainted milk scandal, which hit a pitch while the delegation was in Beijing, has helped to increase the urgency for an ethical dialogue not only within the country but also between China and other countries, such as the United States. As one of the world’s most important political and economic players, many Chinese feel a growing sense of responsibility and are increasingly willing to talk with other global partners to carry out their global obligations.

As Harry Harding put it, China and the United States both justify their policies on moral grounds; they are ethical powers. China has a long ethical tradition, although the sense that China’s transition from a closed to an open economy and the quest for profits has led to “moral degradation” is widespread. Frustration is growing over the erosion of traditional values, and discussions in Beijing indicate a desire to use these values to create a new culture that can adopt from the outside and adapt to the globalized era, as Alex Westlake put it.

Yet there is also hesitation over what some see as a double standard and the West’s apparent lack of willingness to take into the account the point of view of developing nations. China and the United States, for example, share many values, although they place emphasis on different priorities, as Harding said. China’s involvement in Africa, a topic that Josh Eisenman is investigating, is a case in point. China’s association with the government of Sudan has made it the target of international criticism. Yet some have expressed doubt about American ethical commitments, such as those on climate change.

Many of the themes heard in Beijing indicate increased international engagement for China and increased world involvement in paving China’s next road to reform and a pluralist approach to ethics, based on consensus and compromise. The China Reform Forum is hosting a symposium on the next step to China’s reform next month. The topics include options for general reform as well as reforms in its market-oriented economy, society and government. All topics present opportunities to promote ethics in Chinese reforms.

Our discussions in Beijing illustrate two overarching ethical principles: the Golden Rule and the Golden Mean. Several sources, for example, suggested that China find the best elements from its historical traditions, from the outside world, and from socialist thought, implying a pluralistic mean between the three. The Golden Mean, a theme found both in the Confucian tradition as well as in Indian, Greek, and other philosophies, also could lay the foundation for equity or fairness in negotiations, ranging from trade to climate change. Moreover, a fairer negotiation process is likelier to bring about lasting solutions.

Finally, theses solutions should be based on reciprocity, respect, rights, and responsibility—captured nicely in the nearly universal concept of the Golden Rule. The Carnegie Council looks forward to helping further this dialogue.

(Photos: Carnegie Council delegates meet officials at the Chinese Academy of Social Sciences, top, at Renmin University School of International Studies, and at the Central Committee of the Communist Party of China)

This summary was prepared by Sheila Oviedo and Devin Stewart.