Już 62 438 użytkowników uczy się języków obcych z Edustation.
Możesz zarejestrować się już dziś i odebrać bonus w postaci 10 monet.
Jeżeli chcesz się dowiedzieć więcej o naszym portalu - kliknij tutaj
Jeszcze nie teraz ZAREJESTRUJ SIĘlub
Zaloguj »
ZAREJESTRUJ SIĘ
Nie masz konta?
Davos Annual Meeting 2010 - Rebuilding Trust in Business Leadership
Poziom:
Temat: Biznes
Richard W. Edelman, President and Chief
Executive Officer, Edelman, USA; Global Agenda
Council on Marketing & Branding:
Good morning, ladies and gentlemen. I'm Richard
Edelman; I'd like to introduce my co-panellists
at this morning's discussion on rebuilding
trust in business leaders. So first to my
left is Eckhard Cordes who's Chairman of the
Management Board and CEO of METRO Group in
Germany; Tim Flynn who is Chairman of KPMG;
John Monks who is General Secretary of the
European Trade Union Confederation based in
Brussels; Ferit Sahenk who is Chairman of
the Dogus Group in Turkey; and Ruben Vardanian
who is Chairman and CEO of the Troika Dialog
Group.
I'm going to try and frame this discussion
for a few minutes. Trust in business was very
badly affected by the events of 18 months
ago. In fact trust and confidence in business
really plunged particularly in United States,
which has always been the bellwether for capitalism.
It did not suffer so much, by the way, in
the BRIC nations. The trust in government
interestingly went down as well so it's important
to remember that trust in business is higher
than trust in government in all but three
markets of the 22 that we surveyed. Now let's
go to some specifics about the nature of trust
in industries. The most trusted sector is
technology; 80 plus percent across the world.
The least trusted now is banks; they've gone
from the third most to the least, from 68%
in the US in 2008 to 28% in 2010. That's a
pretty dramatic fall from grace. It's also
important to look at the fragility of trust
in business; while it's stabilized, it's very
fragile. 75% say they expect business to go
back to 'business as usual' as soon as the
recession is over. 75% also say they expect
that government will be very involved in the
financial sector on a go-forward basis. These
are not exactly signs of great confidence
in business's ability to manage itself. The
aspect of CEO trust, it improved slightly
this year but when you think that in Western
Europe and in the United States CEOs are the
least credible spokesperson about a company.
It's a fairly shocking development; half as
much as an academic, half as much as a financial
analyst, half as much as an NGO representative,
down there with an average employee, not a
great endorsement. The values that build corporate
reputation have changed fundamentally in the
past four years. What we see today is that
people want a company they can trust and a
transparent operation in addition to high-quality
products and services. At the very bottom
of the list are excellent numbers and a strong
leader. So the values imply a change in what
companies aim for. So today what we hope to
discuss is are we moving to a stakeholder
society away from a shareholder society? What
is the proper role for the chief executive?
To what extent ought one to partner with NGOs?
So let's just turn first to Mr Cordes; let's
go through in your mind how you see the role
of the CEO. Are you a statesman, are you a
strategist, are you more or less visible?
Eckhard Cordes, Chairman of the Management
Board and Chief Executive Officer, METRO,
Germany:
Richard, thank you. I mean, first of all let
me point out that in my view without trust
or without a sufficient degree of trust a
market economy cannot work, cannot function.
Trust in an economy and in a company and in
an enterprise, trust reduces or a sufficient
level of trust reduces the level of complexity
we have to deal with. So creating or having
a sufficient level of trust in my view is
of paramount importance for an efficient market
economy and for an efficient enterprise, number
one. Number two – coming back directly
to your question, Richard – well, you
said statesman; I think a CEO should not be
a statesman. A statesman should be a statesman
and a CEO should be a CEO. What do I mean
by this? One of the questions I think we've
got to understand is why has come trust down
so much? You mentioned CEO is a group now
basically at the bottom of trust level. In
my view one of the reasons is that what has
happened in 2008 and say first half of 09
is something that people just don't understand.
If I may call it, excuse me, the man in the
street reading newspapers and magazines, reading
articles sort of finger pointing at CEOs or
politicians or bankers, the normal man in
the street does not understand the degree
of complexity what's going on here. Or in
other words there is a lack of transparency;
people just don't know what it is.
If that was so, and I think it is so, and
now turning to the role of the CEO, I think
what we've got to do is this, we've got to
explain to our fellows in our companies, what
are our targets? What is our strategy? What
are we going to do? What do we want to achieve?
So be as explicit in that regard as you can
be, be as transparent as you can be, or in
other words what I want my employees to see
and to feel if A happens they should know,
if A happens Eckhard is going to do A, if
B happens Eckhard is going to do B and C and
C. So what I said, let me repeat: create transparency
in the company, do exactly, let people know
what we want to achieve, and then I mean you
know it's a good English expression, you've
got to walk the talk. You've got to be consistent,
you know, no zigzag; no zigzag course, and
I mean if you stick to those rules in my view
then I think trust levels will come up again.
And a final short remark, and I know we are
going to deal with it later on, you know the
CEO in conjunction with its Chairman should
make sure, excuse me, as I said we come back
to that, we should help create compensation
systems that are perceived by employees as
okay or in other words if profits go up you
get more money, if there is no profit you
get no money.
Edelman: It's a perfect segue to John Monks
on the compensation issue. Yesterday President
Sarkozy called for a moral capitalism which
as an American I couldn't quite understand
but it was interesting. But, John, how do
you find the issue of compensation? You represent
unions across the continent.
John Monks, General Secretary, European Trade
Union Confederation (ETUC), Brussels:
Yes, I just wish we did as well for the ordinary
workers as unions as CEOs have done for themselves
over the last 30 years because the share of
wages and salaries in GDP in most countries
is going down and the share of profits is
going up. CEO and senior-executive pay is
linked very much to the movements in profits,
and I think it was for 30 years the average
American worker didn't get a real pay increase
at all. The prosperity came through the ability
to borrow, with all the problems we've seen
in the housing market in the United States
over the last few years. So I mean I think
this is, I'm not going to use too many emotional
words but the gap between rich and poor, the
top of the company and the bottom of the company,
the shop floor and the boardroom has been
widening and at an accelerating rate, and
by the way that can happen whether or not
profits are going up. It can happen because
you need, you're not doing very well and you're
looking round for some star to come in and
transform the business and so on, so you pay
way over the odds for somebody to come in.
And I know enough about companies to know
just how much time many of the Boards of Directors
are spending talking about their own remuneration
and the remuneration of the senior grades,
and very little time in some cases about what's
happening elsewhere in the business. Now there
are exceptions; I'm not taking a brush and
painting everybody black but the sense that
the system has been rigged, it's been captured
by the financial services world, transmitted
into values in the real economy, as I call
it, and we've got a system that seems to me
to be where the rest of the economy serves
the financial services world rather than the
banks and the others serve the real economy,
and the pay system seems to me to be at the
heart of that. And one thing I did like about
President Sarkozy a few months ago, he didn't
know what to do about bank regulation necessarily
but he did say to the French bankers, 'No
bonuses that are excessive this time.' And
that's the message that others are now giving
and it's long overdue.
Edelman: So, Tim Flynn, we're in a time when
there's a question about how to change corporate
values, stakeholder, shareholder model, short-term
performance versus long-term performance.
How do you get sufficient levels of transparency
into the business as well?
Timothy P. Flynn, Chairman, KPMG International,
USA:
Richard, thank you and I'm sure we'll have
a chance to come back and have a dialogue
of all these questions and some interaction
as we go along. Look, people are angry and
it's understandable that people are angry
with what's happened; the system has let a
lot of people down over the last 18 months.
If you look at, there's 34 million more people
unemployed since 2007; 34 million people around
the world have lost their jobs coming out
of this crisis. Unemployment of the youth;
15 to 20 year olds is over 20% in most developed
countries. Deficits are looming and increasing
dramatically and so there's no question in
my mind that there has been a lack of confidence
and trust in the system and it's at the very
heart of the matter if we're going to have
a sustainable long-term recovery and address
some of the issues that John talked about
in what's the right balance as you look across
the entire system? And I think that from my
perspective I have a hard time separating
the real economy from the banking world. I
mean, we don't have a real economy if we don't
have financial operating markets that operate
properly and function properly. So it's hard
to say we have a real economy over here and
this other economy over here. They are very,
very strongly connected, and it's critical
for long-term sustainable growth we have a
properly functioning long-term stable financial
system.
So let me move to a second about values and
what's happening around the world. As I talk
to our people and think about, you know, what
really happened? How did we get it so wrong
in many cases across the entire system? How
did some, what seemed like really good people
get so far across the line in the decision-making
that they made? And I think it starts with
all of us to make sure that as leaders of
organizations that our decisions are grounded
on the right values and the right principles,
that we create cultures in our organizations
that understand what we stand for, that you
go beyond just the letter of the law and you
have a set of principles which you measure
your actions against, and what you want to
stand for. That you have the right incentives
in place to drive the right behaviours in
your organization.
And just one final point: as I talk about
people and talk about when you're faced with
a really tough decision, how do you go through
that process? How do you make sure you're
making the right decision? And actually there's
three things you have to really watch out
for, and I think these three things happened
when the system crossed over the last number
of years. Number one, don't rationalize your
decision. You know, 'I'm going to do this
just once for the benefit of the employees.
I'm going to make this decision just one time
to get by this quarter and I'll never do it
again. It's not for my bonus; it's to save
jobs'. So you rationalize your process, or
implied permission: 'Other people know we're
doing this, my boss knows I'm doing this,
my boss knows me, knows my family and if it
wasn't right he or she would tell me'. And
what you do there is you take your value system
and supplant it with somebody else's value
system. And thirdly fear: 'It's not my job
to raise my hand. The culture won't support
me if I raise my hand'. And I think if we
create organizations where tough decisions
are not rationalized, that they're not looking
for implied permission for some other to make
a decision and they're not guided by fear,
we'll make a lot better decisions. And we
will have to realize in organizations it's
not just about shareholder return anymore;
that's not the focus, it's stakeholder return.
We have to look across the entire system and
not just focus on short-term profits but long-term
stakeholder value, and that's critically important
and that is part of restoring trust and confidence
as we go forward.
Edelman: Ferit, you're involved in the banking
sector. This is the sector that's been most
adversely affected by the events of the last
two years in terms of trust. Compensation
perhaps is at the core of this; how are you
addressing it in your institution and what
are your views about banker pay in general?
Ferit F. Sahenk, Chairman, Dogus Group, Turkey;
Young Global Leader:
Well, first of all, as a banker I'm very proud
to be here. The last two years we are getting
a lot of bashing but let me tell you there
are bankers who have been doing banking in
the world that are commercial bankers who
are trying to be investment bankers, so we
have to separate bankers who do products,
leveraged products, and people like us who
do real banking. There are differences. For
example 2001 in Turkey we had a very deep
crisis; similar things happened in our country,
the regulation took place, the regulatory
bodies did disciplinary action. Very simply
we compensate our people from core earnings,
not from treasury products, not from what
I call unsustainable earnings, the real hardcore
banking earnings. I think this is very important.
So as the Chairman of the bank, my CEO and
the people underneath him know that with the
right ethical transparent sustainable banking
that they do they get a compensation, so they
don't have to go crazy leveraging the balance
sheets, creating leveraged entities outside
balance sheets. This is I think very important,
and on our board everybody knows banking,
so before there were all these compensations
we have to say that Chairman and CEO, if it's
the same I think there is a problem. In our
institution Chairman is separate, CEO is separate,
so there is a governing eye beyond anything
and the boards do this.
Now there is a financial crisis, automatically
the eye is on the bankers. Yes, the bankers
have done a lot of mistakes. I think we have
to say there was a lot of mistakes done but
I think it's time to stop the shame and the
blame. There are a lot of people unemployed
in the world and we should start getting with
it. Market economy has only, can be attained
or continued by confidence and I think in
this media has a lot to do as well. I think
it's about time that we should take the focus
out of the bankers as well because we need
bankers and we need the customers as well.
In our company I always say this, 'Listen
we are going to go through this crisis with
our customers, we are going to help them as
well. And we are going to go through this
crisis with our people working in our company.'
Now beyond compensation let's concentrate
on the real economy, what's happening in the
world. I think if you look at this as well
we will get to the right point and we will
able to rethink, rebuild and redesign the
world in front of us. We should stop blaming.
Edelman: Mr Vardanian, can we go through your
view of the role of corporate governance in
these issues? You're a Chairman; you have
a Chief Executive and tell us also from your
academic point of view how you see the way
forward.
Ruben K. Vardanian, Chairman of the Board
and Chief Executive Officer, Troika Dialog
Group, Russian Federation; Young Global Leader;
Global Agenda Council on the Future of Russia:
Thank you, Richard. Yes, I am the Chairman
and CEO simultaneously and it's exactly the
wrong model that was described and by the
head of the Corporate Governance Committee
in the Russian Union. But I want to describe
a little bit about my company because I think
it's very important to understand what's going
on worldwide is much more complicated, it's
not like black and white. We have a partnership
with 150 partners. The company was established
20 years ago with $35,000 and four people;
now we have around a $1 billion capital and
we have a partner, Standard Bank, who own
35% and others belong to the partners, and
I am the CEO and Chairman. The last three
years I was not paid any bonuses because my
evaluation was done by my colleagues and the
process was established many, many years ago.
The top people was not paid and we pay bonuses
by the losses to the employees and we're not
deferred and we pay people big numbers. The
reason why I bring this example I just want
to say it's, we're trying to simplify everything
putting it in the boxes saying, 'This is right.
This is wrong'. I think a lot of things depend
on the culture, values and system and I agree
we should be very clear, what is the goal?
What is the system of the compensation motivation?
What is the model of the communication? What
is the type of thing you want to build in
your own company?
For example in our company we measure the
trust every year in our review about saying,
do you trust the top managers or not? In online,
employees asking, answering this question,
and we have suffered decline last two years
they don't trust the top managers and not
because they did something wrong but because
the other point I want to bring now to our
discussion is about the competence. I think
the crisis, this is showing us, I think it's
created a big issue about not only what trust
is emotional, do they like this person or
don't like? But is the person competent to
manage the company, competent to manage their
country, competent to manage their equity
under control?
And I'm the president of a business school
which was established four years ago with
18 founding members, Russians and non-Russians.
We put $500 million; it's a big ambition project
we tried to build in Moscow, top international
business school. And during these four years
I visit around 45 business schools worldwide,
I was visiting basically all the schools.
And I remember my surprise when I went to
one of the emerging market countries and I
was at top two schools which was very well
recognized and I asked the same question to
deans of the school saying, 'Are you discussing
with your students about corruption in your
country?' He said, 'No it's illegal.' 'I understand
it's illegal but you have in your country,
the student as soon as you get MBA will go
in the reality and face the corruption.' He
said, 'No we cannot discuss this point.' Okay,
I say, 'Do you touch anything about black
economy or government involvement in economy?'
He said, 'No, no, no, no again it's very delicate
issues.' I went to the American business school,
I said, 'Okay you're teaching about business
in China, are you teaching about how the Communist
Party in China are making decisions and influencing
the decision-making process in China?' He
said, 'No, no, no, it's ideological.' I think
we are facing the issue about the educational
crisis, and the crisis of the reality in the
world has become very complex, very different
and people and the system have not adjusted
yet to this reality. And I think it's a serious
crisis much deeper and much serious because
it's an issue about how we will handle the
situation, whereas in Russia we don't have
big banks, we have small banks, not enough
capitalized. Okay, our problem is different
compared to yours and you cannot say, 'Oh
let's cut the big banks to small banks' because
we have 1,200 banks it's not enough capital
for $250 billion, and the banking system doesn't
work in Russia. On the other hand the regulations
for example, in Russia the government own
80% of the economy or control economy or influence
the economy in some way; it's a question of
can government really competitive manage the
assets and not a question about regulations.
As I was saying the world tried to discuss
some of the issues which is very important,
very serious including trust, trying to simplify
some elements and trying to put in the boxes
black and white. And I believe in the end
I think it will all go into personal values
and personal issues which is people need to
ask themselves, 'What I am doing? Why I am
doing? What are my main drivers?' And I'm
very proud again that I have a partnership
with my people that I work for 20 years and
I believe it's a very good model for my company,
maybe it will not work for other companies.
Edelman: So let me ask a question of the group,
anyone can grab it. So the sort of social
contract between business and government changed
pretty profoundly in September 08. You know,
business had been separate, government had
been the referee. All of a sudden business
had to turn to government as the investor
of the last resort and so I wonder, one, whether
and how business can get government extricated.
Two, are there justifiable demands that government
is placing on business now because it is an
investor come referee, come regulator, come
partner, keep going? So any of you.
Cordes: May I volunteer to start? You know
this is a German perspective and the German
perspective might differ from other countries.
I mean, my view and our view, there was obviously
no doubt that towards the end of 2008 it was
a necessity, a must that government interfered.
I mean all of us now without government interference,
the banking system would have collapsed. Okay,
ticked off, done. The risk I see now is looking
back 2009 what has happened that, and this
is again, German perspective maybe some of
you are familiar with the German motors, German
case called Opel, you know that a company
that was literally bankrupt, Opel –
the German arm or the European arm of General
Motors. It was bankrupt, let's put it that
way, and rather than letting it go belly up
and have a sort of a renewal in the German/European
automotive industry the government tried to
interfere and the German government tried
to interfere. And as we all know at the very
end of the day you know they failed with their
interference because there was a private solution.
At the end of the day, GM stepped in again.
Why am I mentioning this? Because you know
the risk again from a German perspective I
see is that after the successful intervention
in 2008 there was a tendency that German politicians
seemed to believe that they could sort of
outsmart business leaders in terms of, 'We
know how it works.' And in that respect they
forgot that they at least, and I'm not complaining,
indirectly, at least indirectly involved also
in the failure of some German banks in 2008.
We have a very special system of some banks
in Germany which you don't have in other countries.
So my message is what we need to do now is
this, first of all, yes, it's appreciated
that government step in when, you know, the
house is burning, end of 2008 in the wake
of Lehman. Number two, governments must understand
that they are not smarter businessmen than
businessmen. So number three, and this is
the conclusion, my view is that sort of government,
what you just said, Richard, they should sort
of set the rules and they should make, or
must make sure that, you know, we as business
leaders stick to these rules. That's their
role; they set the rules, we play. In my view
everything else ultimately will fail.
Edelman: So but how we do the divorce proceedings?
In other words, there's a pretty activist
state hand in France and the United States
now in the car business. How are the assets
going to be distributed, John and then Tim?
Monks: You won't do the divorce and at least
in the foreseeable future. Let's be clear:
the phase we're in now, in a sense we've rescued
the banks but the cry is, 'What about us?'
from car workers. I mean, one of my colleagues
can't come here today because of Opel closing
the plant in Antwerp. So people are now looking
round saying, 'Well you did it for AIG and
you did it for all the others, what about
us? We're voters, there's more of us than
there are of those. And why just them? Why
does the welfare state and socialism just
work for them and not work for us?' And that's
the demands that governments are going to
be under at the same time as they're under
huge pressure to start paying off the debt,
which the rescue of the financial services
sector has entailed. And this next year is
going to be miserable in many, many countries
as governments have to either raise taxes,
cut public spending or probably both, and
who pays will be the political debate in the
next phase. And I do think that to think that
somehow we can get government off our back
in those circumstances when this particular
recession has been caused, I think President
Lula said, 'by the guys with blue eyes' –
Wall Street, London, Zurich and a few other
places – it seems to me that the governments
are stuck. They may not want to be there;
their ideology after all was to stand back,
let business friendly policies, let the markets
rip, privatize, deregulate, all those things,
whether they were centre-left governments
or they were centre-right governments. But
that ideology is now being pressed by the
reality of the politics in the street and
with unemployment 10% average in the EU area
in, the United States and so on the pressures
are going to be there. So if you think, anybody
in the audience thinks that there's some right,
okay we're, there's some green shoots of recovery
around, we'll get them out and we can get
on with it, and we know better than they do
having perpetrated an almost perfect storm
which has, I think, damaged the credibility
of the system, and the discussion needs to
be in business circles about the system. I
wish it was true that we're on a multi-stakeholder
course of company responsibilities. You try
telling that to the hedge funds or some investor
I met in London about three weeks ago, he
said, 'Yes, I've got long-term investments'
he said, 'They're short-term investments that
went wrong and I can't get rid of them.' But
I don't believe that there's some change in
the way, there are exceptions, but in the
way the short-term perspectives that have
been dominant for the last 30 years or so
and remain dominant and led us to a large
extent into the current mess.
Flynn: Well, maybe I'll have a slight rebuttal
to that. I respect your point of view, John,
but I think you know we can't paint the entire
system and everybody in the system by examples
of a hedge fund, long-term short-term. Every
business person I talk to today understands
the severity of what's happened, and it's
helping to shape the debate to find solutions
so we can make sure this system comes out
stronger and what happened never happens again.
You can't have 34 million people lose their
jobs, and all things that have taken place
round the world and not have people understand
that every player in this system, every player
in this system, I don't think you take any
exception, had some role in what's taking
place, and has a responsibility to participate
in a straightforward honest debate of how
do we move forward and make sure we put the
safeguards in place. The capital market system,
there was this illusion that it would self-regulate
itself and it would never get to the tipping
point; it would self-correct before it got
too far. It's pretty clear that didn't, that
was not the case when the liquidity crisis
hit in the fall of 2008; everything froze
up and the system couldn't function, and had
government not stepped in we would have had
the collapse of the system. I agree with you
there's a very difficult issue, we save the
banks and what about all the other companies,
and that's a very difficult issue to work
through. And I think it goes to the heart
of one of the critical issues we have to face;
it's how do we make sure a systemic risk that
no institution is too big to fail? And how
do we put the best minds together to figure
out how to create a capital markets system
where no institution is too big to fail? And
there's a process and a system to unwind those
because failures have to happen or you get
the issue you talked about now, just who is
in line as you line up and line up? So I do
think business gets it, I do think government
has a critical role to play, I think everybody,
and I do believe that businesses are looking
beyond the short term, beyond a quick return
on profits to long-term sustainability and
are opening up the debate with all the stakeholders.
And I am confident the companies that I see
in the organizations that are out there, that
is everybody's goal to try and make that happen.
Will we be perfect about it? No. Are there
going to be exceptions? Absolutely, but the
vast majority of people I deal with are on
that path and I think it's a great path for
us to be on as a country and as a global interconnected
economic environment.
Edelman: So Ruben, you're in a very interesting
country on this business/government issue.
The government in Russia has been you know
very activist, let's put it this way. How
do you manage your relations with government
and if the government says, 'Well this is
the policy' how much pushback can you do actually?
Vardanian: I think first of all we need to
realize it's not the government; it's like
individuals in the different ministries and
the central bank fight against each other
and getting over the problem is not only with
the government, it's like one person making
decision. At least you can find an agreement
and they can understand the rules of the game,
whereas the government has a different agenda
in different ministries and getting absolutely
different, much more complex picture. In Russia
we went from the full control Soviet Union
system to no-control 90s where the government
basically has no power and everybody was doing
whatever they wanted, dependent of the greed
or a level of risk taking or some other limitation
they put themselves to the system now going
back with the government definitely becoming
the bigger player, investors, regulator, infrastructure
owner. And I think the main point is again
about, what is the people's agenda in mind
when we're doing any decisions and how they
see this all. I want to go back about the
government/business relations to your point
about America because I think it's a better
example for all of us, because in Russia it's
a government inefficient but the business
also inefficient in the new stage of development.
You were saying that before the crisis business
was doing whatever we wanted and government
was not. I disagree with you; I will say if
you look before the crisis what Donaldson
tried to do in the Securities Commission in
America, you can see that he tried to touch
some of the weak points. He got big resistance,
he got immediately a reaction from the Wall
Street saying, 'No, no, no, don't touch it,
everything is working, don't touch it.'
And I will say some way indirectly government
created this crisis also because they saw
some of the problems, they saw they had a
chance to influence these problems and they
didn't make it because again of the lobbying,
issues because they don't want to try the
system. But again GM problems, most prominent
in 20 years; okay, GM is not the problem of
this crisis, the crisis at GM going on the
last 30 years what happened in the automotive
industry and government involvement was always
very heavy. I will say when we discuss about
this whole liquidity crisis I think this comes
before what kind of relation business and
government in general have, what kind of transparency
and how the government can influence or not
on some decision which is made in the business
side. So the best example US is not working
efficiently anyway. This is why government
roles is not only be safe haven and save the
last moment, but also the question what kind
of the system of the regulations and what
kind of transparency can we really build?
And how the Securities Commission for example
and the central bank conflict finally can
be solved, because we all know about this
conflict. In Russia, in the US it was clear,
where they're saying, 'Everybody become commercial
bank because it's a commercial bank and it's
providing liquidity. If you're not a commercial
bank you can get into liquidity.' Okay, it
was clear conflict with the different government
but in Russia for example it is clear: if
you're not a bank you don't survive. I will
say it's a very important discussion about
the organization also government involving
the business, and what kind of the mechanist
needs to be done which is not easy question.
Edelman: So let me change the subject slightly.
Civil society, NGOs: 75% of those we surveyed
said they would trust business more if it
partnered with NGOs on matters of health or
other global human rights, etc. So how does
business successfully partner with NGOs to
build trust back in the private sector? Eckhard,
do you want to start with that?
Cordes: Yes, I'm more than happy to do that.
I mean one word was missing so far unless
I haven't paid attention this morning, this
is ethical behaviour. I mean, just give me
just one minute talking about our company.
What we just recently did in basically six/eight
weeks ago, we embarked on a partnership, even
signed a contract with UNIDO; UNIDO is a United
Nations organization dealing with development
companies trying to sort of educate farmers
to do better business and stuff like that.
I mean our company, what we typically do with
what we call the cash and carry arm, this
is basically 50% of our company, we penetrate
emerging and developing markets at a very
early stage. So most recent example last year
we opened the first store in Kazakhstan or
we are in Pakistan and things like that, obviously
also in mature markets. But I mean starting
a business, a retailing business/wholesaling
business in these countries very much puts
us in a position that we need to sort of train
our suppliers because they are not familiar
with sort of establishing a supply chain,
a cool chain which makes sure that, you know,
their products get to our shelves with a high
degree of quality. A couple of years ago,
some years ago in India 40% of products coming
from a farm into our shelves, you know, could
not be used anymore because quality had dropped;
40, four zero, a huge inefficiency. So what
we decided to do is okay we said, 'Okay, in
order to improve our business' we said, 'Okay,
we're going to train these guys which helps
them and which helps us.' And that's you know
in my view ethical behaviour. Sustainable
behaviour does not mean it's good for society
and it's not good for the enterprise. The
ideal, in my view, ideal ethical behaviour
is, sustainable behaviour is that both profit.
In that case I'm just talking about the suppliers
and the company. And what you said, Richard,
in my view is also clear; I mean that is something
which deserves to be talked about and it might
also help, might, to re-establish trust. But
to avoid any misunderstanding we have not
created or embarked on those steps just because
of the crisis. It's part of our business and
as it is part of our business we are at the
same time sort of helping develop those emerging
economies.
Edelman: So I'm going to ask one more question
of the panel and then I'm going to turn it
over to the audience. So Ferit, the media.
The media has been pretty tough on business
for the last 18/24 months. There are some
in the business media who even criticize themselves
for saying, 'You know we should have seen
this coming. We should have been tougher on
business.' How do you interact with reporters?
How much do you rely on them to tell your
story?
Sahenk: Well, if you are sure about your story
you have to be direct and to the point. I
think a partial reason for this crisis is
that we hid a lot of information from one
another within the stakeholder society. And
that's why as every day went by the last two
years there was something new happening in
the world, first in the companies then the
countries. People started getting scared of
one another, very simply. So the trust and
confidence in the society and also between
the countries started diminishing. People
started getting afraid. So you have to be
very open with your story, direct about your
story. We are talking about transparency;
you have to be transparent to the reporters,
to the society, to your own people. I mean
forget the newspapers and televisions and
the people watching them; you have to be open
to your people working with you. This is very
important. I think we talked about market
discipline versus government discipline. Most
of us would like to have the market discipline
but I think rather than the regulatory bodies
putting the restrictions or disciplines on
us I think we have to start utilizing the
values that we have forgotten to utilize in
our daily life. We are all human beings, we
all have values. I always say about regulatory
bodies putting the discipline on us, why not
putting the discipline on ourselves? I think
the leaders of today should be role models.
They should set the expectations because the
new generation, the second, the third tier
managers that are coming up in our companies,
they are always looking up to leaders and
they are becoming the Xerox copy of what they
see in their companies.
So I think, for example I work with 35,000
people and trust of the people are very important,
and media is part of this so that's why you
have to be very correct and open and at the
end of the day when you go to bed, put your
head on the pillow, you have to sleep comfortably.
In order to do that you have to be first transparent
to yourself and to public. Rather than blaming
the media, you should also say – I
want to say this very clearly – media
is a great vehicle right now for even technical
business like banking. Many of the people
on the street don't understand banking and
the blame is on bankers now, so I think the
bankers should use media to get to the street,
to talk to the street, because this Wall Street
versus the Main Street comparison I think
is giving us more difficult times further
ahead.
Edelman: So, John, you want to have a rebuttal.
Monks: Well, only just to say I mean I don't
think anybody in the world of business should
look for as the media as some kind of culprit
to blame. I mean I thought in the early stages
of this, in fact the banks got quite an easy
ride, and I noticed that change when Mr Blankfein
of Goldman Sachs not so long ago made a misfiring
joke when he was talking about the bonus pool
about Goldman Sachs doing God's work. Now
that lit the paper of a major explosion and
I've noticed the papers now after the banks
in a very, very big way. And you can't complain
about that when that kind of remark, daft
remark I'm sure and he was trying to be funny,
but nonetheless nobody thought that was funny,
none of these 34 million that have been mentioned
being unemployed think it's funny and newspapers
have got a job to do: sell their papers, and
television companies and so on. I'd say I'm
rather impressed by the financial press; the
Financial Times are doing a lot round Davos
at the moment but I've found that the series
of articles in that from all kinds of different
points of view as a model of thoughtfulness
about what's going on in the system and trying
to get people into this kind of mindset that
Tim thinks they're already going towards,
I wish I could be so confident that they are
thinking thoughtfully about the future and
how they avoid this kind of situation again.
Edelman: So we have about 15 minutes left
in the session; let's go to the floor for
questions.
Efrat Peled, Chairman, Arison Investment,
Israel:
Hello, my name is Efrat Peled. I am the chairman
of Arison Investment, one of the largest investment
companies in Israel. I am also taking part
in the Young Global Leader and the Young Global
Leader discuss a lot in the last two years
this issue of building the trust again and
we distinguish dramatically between the regulation
side and the part of the building the trust
which is more of the emotional, personal emotional
part of every person by itself. And as much
as we all can say, sit here and say that for
20 years we needed to strengthen the regulation
all over the world, we define the personal
responsibility as the leading point, I think,
in this crisis because as Flynn mentioned
earlier there's no certain person or leader
that can take the responsibility. It's all
of us who were part of this for the last 20
or 30 years and we all need to fix it all
together. And the YGL came with an idea that
we've been working for two years that is called
the Global Business Oath and we have two YGLs
here that are familiar in the panel with that.
And the Global Business Oath is a personal
oath that we encourage each and every one
of you to take upon itself, if you are a CEO
or any other position, because we believe
that with eight points that you can commit
basically on a personal level, not at the
corporate level, but each and every one of
us, and if we as CEOs and leaders will give
people the opportunity to pledge to better
businesses and doing businesses combined with
value this is where the change is going to
come from.
Edelman: Okay, so what's the question?
Peled: No, I just wanted to…
Edelman: It's a statement. Okay, so do you
have a question?
Peled: No.
Edelman: Okay, is there a question from the
audience? Any questions from the audience?
Yes.
John Neill, Group Chief Executive, Unipart
Group, United Kingdom:
My name is John Neill from Unipart Group.
John Monks observed that the head of Goldman
Sachs in all seriousness told The Sunday Times
that he was doing God's work. Now when I was
a small child I understood that when God was
very angry with mankind he sent fire and brimstone,
so now I understand he sends us investment
bankers to punish us. So my question is this,
do you think that God is satisfied that investment
bankers have done enough to punish us or do
you think more needs to be done?
Edelman: That may go down as the funniest
question of the panel. Certainly up there.
Well, Ferit, as you're the banker you have
to cope.
Sahenk: Pass.
Monks: Just to say I remember, John, last
year when the crisis was raging at its peak
at Davos and I think after he gave a speech
about what he thought of investment bankers
you could have put a guillotine outside this
conference and we'd have all sat there knitting
as the heads fell off, as the heads were rolling.
But I remember that was a powerful moment
in the Davos last year.
Edelman: Ferit, you've had time to stall.
Sahenk: On a serious note, and I take the
tone of the question but I think I want us
to go back to the point, we're all in this
together. It's not us against the bankers
or us against the politicians; it's everybody
in the entire system, and there's a lot of
emotion, we've talked about it, and there's
a lot of pain has gone through and no one
I think can in any way minimize that nor would
I in any shape or form. But I also think that
we have to understand the bankers are transforming
their business: they are increasing their
capital requirements, they're changing their
liquidity models, they're changing their compensation
structures, they're reassessing their underwriting
standards, they're looking at how they go
through and assess risks across our organization.
And so I think that for us to have confidence
going forward it's not done yet, it's not
over, and every part of this system needs
to continue to work on that but we are making
progress and I think if you're looking back
where we are today from a year ago, I think
we've made progress is my point, John.
Monks: But what about the bonuses that are
being paid by the investment banks this year?
Straight just after massive investments from
the taxpayer and there's this largesse being
dolloped out in vast amounts and it's caused
the Obama reaction in the way that we saw
last week.
Sahenk: My point on this, John – go
ahead then I'll finish.
Vardanian: Sorry, but I mean I paid bonus
this year. I want to confirm again, I pay
the bonus being a non-public company being
the major owner of the company because I believe
my employees did a good job to save the many
companies but they did it without creating
any revenue. They did a lot of restructuring
of the international companies in big troubles
because the stupid CFO raised a lot of money
without looking what they can really raise
again in this short liquidity and they bought
assets in other countries without looking
how they can cover the debt. And someone needs
to cooperate with them so they not go bankrupt.
And a compensation model which includes a
small salary and premium for the end of the
year work. Unfortunately this system that
exists and I will pay people who did a good
job despite that the company makes losses,
and this is not a public company and I believe
I did the right thing for the company and
the industry.
Monks: Did you have public money?
Vardanian: No, no, again it's a private company.
It's a private company but again I think the
issue we try and forget investment bankers
is the intermediary between the industrials
who want to go become bigger, who want to
raise more money, who want to buy more companies,
and even saying cut the banker industry smaller
needs to understand the deals of the American
acquisition going billions of dollars cannot
happen anymore. Okay, it's going stop the
entire industries' development and saying,
'Okay, the intermediaries needs to become
smaller' but they can become smaller only
if the industry will come smaller also.
Edelman: So, Ruben, let's get some other questions.
Participant: Very, very quickly, yes values
but surely we have to tell the world that
business creates jobs and remind them of that
and then the reason people are cross is because
the banks have gone under but the shareholders
haven't suffered, the bond holders haven't
suffered. Surely if we're going to have to
rescue banks, which I suspect we will always
have to do because we're so interconnected,
we need to make it clear who is going to pay,
what's going to happen to the CEO, what's
going to happen to the non-executive directors,
what's going to happen to the shareholders.
Because nobody understands out there in the
real world I think why the bailouts happened
and everybody else seemed to get away with
it and just the taxpayer paid.
Edelman: Okay, sir.
Participant: My name is Henk Rodenhaus[?]
from the Netherlands. A question for Mr Flynn.
The discussion is narrowing a bit on technicalities
like compensation or banking regulations,
but do you really believe that especially
on the Anglo-Saxon side the business understands
that you need a social licence to operate
and if we don't have that we can't make money?
We need the infrastructure, we need the rules
and regulations the society creates and it
gives us also the responsibility and accountability
towards that society. That's the message of
Mr Sarkozy, not just interesting, Mr Edelman,
but the essence.
Flynn: Look, I can't speak for the entire
business world; I can tell you the people
I come across with, the dialogue that has
been taking place today and I think one of
the biggest issues we had was a very short-term
reward system, incentives inside organizations,
incentives outside as shareholders, very short-term
focused, very focused on shareholder return,
drove some of the excess that John talked
about. And there's no question that the system
coming out of this has to have a longer-term
point of view, has to look over long-term
sustainable rewards, has to look just beyond
the shareholders to the broader stakeholders,
the communities which we live and we operate,
the employees that have their trust and retirements
built into this system. And I am hopeful and
optimistic that coming out of this crisis
a lot of people have learnt that. 34 million
people lost their jobs, every one of us in
this room probably knows somebody either family
or close friend who's lost their job, who's
lost their house, had some big impact on their
retirement plans, all those things coming
out of what happened. And I truly believe
that those lessons that we've learnt will
be transformational as we come out of this,
and I'm hopeful of that. I see it in organizations
that we're involved with, I see it in business
leaders that I dialogue with and I'm confident
that that's going to happen. How long will
that last? Will it be the rest of my lifetime?
When will that cycle come back? You know we
have good news as we have short memories,
also good news, also bad news, right, as we
kind of work through that system. But you
know that's just one man's point of view and
I respect everybody else's point in the room.
Participant: I'm a social entrepreneur and
as a social entrepreneur you are, how to say,
a practitioner, and I would like to ask you
can you give me one clear concrete example
how you amongst your stakeholders, amongst
your team regain trust? One concrete, let's
say, leadership programme you did or one concrete
campaign you did to regain trust? Just one
example made clear.
Cordes: Well, I have to come back to what
I said earlier. I mean, not all of us have
lost trust in the same way, I will put it
in that way, and the only thing you can do,
I hear what you're saying, a concrete example.
In our case there is, you can, let me put
it that way, either no concrete example or
a lot of concrete examples because what we
try to do is, what we try to do is to clearly,
very clearly communicate to people what our
targets, what our strategy is, what do we
want to achieve. And make sure at the same
time that we stick to ethical behaviour. We
have an example, again I apologize the German
perspective, we have an instrument if you
will in Germany in order to reduce or to mitigate
unemployment, a special system called short-term
work. So the state comes in, pays subsidies
to some extent to the companies still suffering
and we clearly said, 'Okay, as long as we
can do that we do not fire people, we pay
something and we get a little bit of subsidy
from the state.' That's what we did and that's
what we communicate. Yes, you might say, 'Well
Cordes, look, you get money from the state'.
That is true, but for us it would have been
cheaper, it would have been cheaper to dismiss
people, to fire people; we didn't do that.
One example, one example, but I do believe
and continue to believe at the end of the
day what I said: have transparent clear communication
and stick to your words, walk to the talk,
and this is then your general behaviour.
Edelman: We'll try and fit in one more question.
Alison Smale, Executive Editor, International
Herald Tribune, USA:
Alison Smale, I'm the Executive Editor of
the International Herald Tribune. I find it
remarkable that none of you have mentioned
diversity or changing people as a potential
way to regain trust. I hate to make a very
obvious point but there are no women on the
podium. I'm not as facile as thinking Lehman
Brothers would never have happened if it was
Lehman Sisters but what have you done to diversify
your personnel? Which I do think also goes
some way towards addressing the sting of social
anger that has built up over the treatment
of bankers and the perceived treatment of
the 34 million unemployed. Thank you.
Flynn: Well, I'm happy to start with that
question. I think diversity is a really critical
topic. I think it's in many ways, it's gender
diversity, but it's also diversity of experiences
and thoughts and so when you look at diversity
across our organization we very much champion
it. I'm proud to say that we have worked very
hard to increase the retention of a diverse
workforce. We've made great progress on that,
I won't give you all the stats but I think
every executive, every individual of our organization,
if they're going to be long-term sustainable
organizations they have to have the diversity
of experience, diversity of backgrounds, diversity
of thought, diversity of gender, all those
things that come together to form the right
decisions and get to the honest debates that
need to take place. So it's a critically important
topic and it goes without saying that it's
one of the key ingredients to long-term sustainable
organizations.
Edelman: So I'm going to ask each of the panellists
for two sentences or three max. What are you
going to do when you go back about rebuilding
trust?
Cordes: Well, I think I dwelled on it today,
as I said you know, be transparent, be clear
and let people know that you will not tolerate
unethical behaviour and that's, I think, the
way we have to act.
Edelman: Tim?
Flynn: In my organization in working with
our people make sure that as we make difficult
decisions, we don't rationalize our answers,
we don't look for implied permission and we
don't do them out of fear. We do them for
the right reasons, and I'm going to hopefully
be very active in the debate that we have
here today. The world is not perfect, we've
got ways to go but we're making great progress
and we need to make sure we have the healthy
debates of all constituencies to drive forth
what needs to be done, a long-term sustainable
recovery for all stakeholders.
Edelman: John?
Monks: Well, I don't have much choice with
these unemployment figures that have been
mentioned and are continuing to rise in 2010.
We'll be scrambling around trying to keep
jobs and trying to generate employment, particularly
for young people who are particularly hard
hit. What particularly I'll be working at
is, how do we get the wider needs of the economy
to be served by the financial services and
not for financial services to in a sense be
running the wider economy in their own interests.
I think that's a fundamental point.
Edelman: Ferit?
Sahenk: Probably one thing I will tell my
people, leadership is very important and leaders
should be even a more role model in the company
and in the society. And communication is more
important than ever now. And what I have heard
today is I think very important for the core
values of a company, sustainability. Sustainability
in everything, because in good times we hired
a lot more people that we could have in our
companies; the bad times came, we fired them.
I think sustainability is the name of the
game and I am very happy that in Davos we
are talking about more core values now. I
think this means that we are sharing the problems
all together; it's not my problem, it's not
his problem only, it's everybody's problem.
When it's everybody's problem, I think we
can solve it.
Edelman: Ruben?
Vardanian: I don't want to sound arrogant
but I don't want to, I don't need to go to
rebuild the trust; I didn't lose the trust.
After the crisis it got much stronger; I believe
trust in our company is very high. My major
point that I'm trying to find the solution
which I don't know how to do it, it's success
management system needs to be changed. Until
we know how to change the success management
system that is the main success measured by
money and only money. We can speak about everything
about the person who will – I'm a happy
person, I'm glad that I have a private company
and not the shareholders pushing me every
quarter to show profitability. And I can spend
25% of my time to NGO, I can do business school,
I can do many other things and my employees
understand and ask why I'm doing this and
they accept my partners. But others are not
so lucky which is why I say the success management
system if it will not be changed will face
again and again the same problem because in
the end people will say, 'We like you very
much but how much you make in the last year?'
and if you don't make compare to others you
will be fired if you are CEO. So I will say
my major issue about rebuilding the trust
is the first key values which exist thousands
of years, but the second problem if the system
will not be changed we'll face the problems
again.
Edelman: Okay, so thanks to the panellists.
Just a final thought, I think chief executives
need to be private sector diplomats. I think
they need to act as well as to communicate
better. I think that, you know, your question
about diversity was very smart, same about
sustainability. Business has to figure out
its role in society and explain it well. So
thanks to all of you for being here on that
snowy day. All the best.
