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Published: October 11, 2002

 
 

Globalism without Tears: A New Social Compact for CEOs

The world’s economies can grow more secure and more humane if chief executives and boards accept and execute a five-point corporate citizenship agenda.

Adapted from The Politics of Fortune: A New Agenda for Business Leaders, by Jeffrey E. Garten. Reprinted by permission of Harvard Business School Press. Copyright 2002 by Jeffrey E. Garten.

Illustration by Tavis Coburn
The golden age of capitalism that the United States had enjoyed since the 1980s came to a jarring end during the last 14 months. First, the terrorist attacks on the United States on September 11, 2001, exposed a national security problem that is spilling over into every aspect of our lives and will have a pervasive impact on the functioning of the economy as well. Two months later, the scandal involving the Enron Corporation and Arthur Andersen, and all the corporate transgressions that were exposed in its wake, severely undermined the integrity of American business.

To use a term popularized by Andrew Grove, the chairman of the Intel Corporation, the United States is at a “strategic inflection point” — a moment when the basis for strategy changes, requiring a fundamental course correction. The Great Depression, the Japanese bombing of Pearl Harbor, the first explosion of the atomic bomb, the opening of China, and the collapse of the Berlin Wall are earlier examples. September 11 and the Enron–Andersen fallout constitute powerful strategic inflection points. More than merely amounting to critical discontinuities in our lives, they could have a combined effect on the balance between government and business that constitutes an earthquake in American society.

Think of America at the beginning of 2000: Before the terrorist attacks and Enron’s collapse, markets — and not the government — were ascendant. The domestic and international economies were fast becoming “frictionless.” Businesses were honing their operations with ever-slimmer inventories, just-in-time deliveries, and global supply chains that exploited the most efficient manufacturers in every part of the world. At home, Americans were increasingly entrusting their fate to the stock market, and this so-called equity culture was spreading from Buenos Aires to Beijing. Jack Welch, then chairman and CEO of the General Electric Company, and John Chambers, CEO of Cisco Systems Inc., were heroes and icons, as were their corporate counterparts overseas. Enron was among the world’s most admired companies. Deregulation was a driving force in America and most other nations. The push to increase the connections between countries by lowering barriers to trade and investment — the push for more globalization — was at the center of American foreign policy and international politics. National borders were fading. Moreover, most top government officials and CEOs assumed that an era of peace and prosperity was at hand, and that American-style capitalism was the most acceptable model.

This snapshot of 2000 is enough to show how much has changed. Today, business is hunkering down, focusing less on dramatic innovation than on the accuracy of its financial statements. “Across the business landscape, the imperial chief executive, hailed not long ago as the savior of entire companies and the driving force behind the turnaround of the American economy, is suddenly under siege,” wrote David Leonhardt in the New York Times in the summer of 2002.

Americans need no less than a new paradigm for leadership in their society. The roles of business, government, and nongovernmental organizations (NGOs) must move in the direction of closer partnership. They must coalesce around a vision of a society in which many new security measures, carefully weighed against the freedoms that the United States defends, will be taken. Leaders across sectors must construe security in not just military terms but economic ones. They must understand that global problems are increasingly hard to separate from what happens at home. For business leaders in particular, the new paradigm of leadership must go beyond pleasing Wall Street and delivering ever-higher profits on a quarterly basis. Besides considering all the stakeholders of a company — employees, customers, suppliers, communities — business leaders must consider the concerns of society, such as a cleaner environment and a higher level of integrity in business dealings.

 
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Resources

  1. Jeffrey E. Garten, “From New Economy to Siege Economy: Globalization, Foreign Policy, and the CEO Agenda,” s+b, First Quarter 2002; Click here.
  2. Amy Cortese, “The New Accountability: Tracking the Social Costs,” New York Times, March 24, 2002; Click here.
  3. Geoff Dyer, “Biotech Sector Urged to Focus on Problems of Poor Countries,” Financial Times, June 12, 2002; Click here.
  4. Alison Maitland, “Human Rights and Accountability,” Financial Times, June 13, 2002; Click here.
  5. Roger L. Martin, “The Virtue Matrix: Calculating the Return on Corporate Responsibility,” Harvard Business Review, March 2002; Click here. 
  6. Business Partners for Development, Putting Partnering to Work, April 2002; Click here.
  7. Global Reporting Initiative, Sustainability Reporting Guidelines on Economic, Environmental, and Social Performance, June 2000; Click here.
  8. Manufacturers Alliance and National Association of Manufacturers, U.S. Manufacturing Industry’s Impact on Ethical, Labor, and Environmental Standards in Developing Countries: A Survey of Current Practices, April 2001; Click here.
 
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