Dealing with Despots

Each day, the Globe and Mail – one of Canada’s national newspapers – runs a reader poll on a “hot topic.”  Today, in light of current events in Libya and elsewhere, the poll, under the heading “Dealing with Despots,” asks readers, “What is the most important duty for a Canadian business operating in an authoritarian country?” and provides the following response options:

  • To keep corrupt elites from looting revenues owed to locals
  • To protest when human rights abuses are detected
  • To provide local development to workers and communities
  • To insist on democracy development
  •  

    The very structure of the response options reveals one of the most egregious and persistent misperceptions of corporate responsibility: that it’s fundamentally an “OR” decision, that we can either make money and protect our investment or we can fight corruption, protect human rights, promote democracy, and provide community benefits, implying that these actions do not contribute to return on investment.

    In fact, taking a proactive stance on issues of corruption, human rights, community development, and governance can help to establish a more stable government and regulatory regime, build social capital among affected stakeholders, and secure a licence to operate, all enhancing the likelihood of protecting the original corporate investment and achieving a positive ROI.

    The poll, as written, reflects thinking from an Age of Externalities, when the social and environmental implications of how we made a buck amounted to an SEP: Somebody Else’s Problem.  In this context, the first response option essentially represents a compliance strategy, by which a corporation might rationalize its business in an authoritarian country by demonstrating compliance with applicable laws and regulation in the host country, implying fulfilment of its corporate responsibility.  But this option is silent on the non-financial implications of a compliance strategy, and, moreover, completely disregards the opportunity foreclosed by such an approach.  Now, it is increasingly recognized that not only are the social and environmental costs of business arguably within the scope of a corporation’s responsibility to address, but, further, that a proactive stance on environmental, social, and governance issues can in fact present an opportunity to enhance ROI while also benefiting other stakeholders.  Thus, corporate responsibility is often an “AND” decision, as in, “the most important duty for a Canadian business operating in an authoritarian country is to fulfill its corporate responsibilities of making money in an ethical, legal, and fiscally, socially, and environmentally responsible way, and if it cannot do so, to explore alternative strategies, including, if necessary, the withdrawal of its business from that country.”  Where is that response option?!

    Unfortunately, the poll oversimplifies what is typically an extremely complex and difficult range of issues and strategic options faced by companies that operate internationally, and in doing so risks perpetuating some of the very myths that stand in the way of achieving a more responsible, integrated, and innovative approach to leveraging a robust business sector as an agent of positive change.

    Here’s a screen grab of the poll results, taken at about 2:00 pm MDT.

    Screen grab of Globe and Mail poll, Dealing with Despots, March 21, 2011

    Interestingly, the proportion of poll respondents selecting the first response option, “to make money and protect its investment,” has held steady at about 40% throughout the day so far. Thus, about 60% of respondents have selected one of the other four options, with about half of those (or 33% of the total number of respondents) voting that a company’s first duty is “to provide local development to workers and communities.”  It is tempting to interpret these results along partisan lines, or to assume that Canadians are polarized around the role of business.  But it’s just not possible to know how the respondents interpreted the scope of the response options, particularly the first one.  What the poll results do make clear, however, is that a significant number of people view corporate “duty” more broadly than in just financial terms. That result alone suggests businesses, particularly those operating in undemocratic regimes, should pay particularly close attention to the scope of their corporate responsibilities.

     

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