WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY?

Transcription

1 WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY? Are we heading for a spring of hope or a winter of despair? By Professor Jean-Pierre Lehmann - June, 2008 IMD Chemin de Bellerive 23 PO Box 915, CH-1001 Lausanne Switzerland Tel: Fax: info@imd.ch

2 There has been a good deal of debate recently about responsible business leadership. Sounds nice! What does it mean? There is indeed a risk that it becomes one more bit of business buzz, something we already have in considerable excess. So what does responsible business leadership really constitute in the early 21st century? First, a few comments on our age. The great contrasts are reminiscent of the opening lines of Charles Dickens A Tale of Two Cities (published in 1859!): It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of light, it was the season of darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us Thus, in summing up the highly complex panorama of 21st century global society, we can say that it is characterized by unprecedented opportunities on a scale that would have been undreamt of even 20 years ago, and at the same time an extremely acute sense of injustice and inequality. The last 20 years of high growth and low inflation have witnessed a considerable reduction in poverty and rising income levels. However, for a plethora of reasons, inequalities and perhaps even more inequities have become further highlighted and hence aggravated. This is true pretty much throughout the world, in industrialized countries as well as in fast developing countries such as China, India, Vietnam and Mexico. At the same time, as the economist Paul Collier reminds us, there are one billion people, one-sixth of humanity, who still do not live in the 21st century but in the 14th (1). So, are the opportunities the proverbial silver lining to the dark cloud of inequality and inequity, or are inequality and inequity the dark lining of the silver cloud of opportunities? Are we heading for a spring of hope or a winter of despair? Though the answer will clearly depend on the responses of various actors, and the role of governments must not be underestimated, business has a key role to play. And this role will depend on the quality and degree of responsibility of its leadership. Responsible business leadership in the 21st century is constituted of four essential and highly interlinked attributes. Though individuals may shine more in one or two attributes than the others, none can be dispensed with. These are the sine qua non (in no order of priority): IMD - WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY? Page 2/6

3 Business acumen Business leadership requires a high degree of skill and professionalism. It requires the capacity to create wealth, to enhance both shareholder and stakeholder value on a long-term basis. This is not as obvious as it sounds. I would contend that we have not been particularly well served by business leadership in the last couple of decades as measured by this key attribute. Think of how much wealth has actually been destroyed by failed business. Though some of it is due to dishonesty, to unrestrained egomania and to greed, there is also a not inconsequential dose of sheer managerial incompetence, i.e. lack of acumen. The 21st century responsible business leader must have a higher degree of professionalism. Global knowledge The responsible business leader of the 21st century must have a sophisticated level of global knowledge, which in turn should rely on the local knowledge that she/he will have acquired during a career that should span several different global regions, including important emerging ones, and of course in listening to the people located in those regions. This attribute too, seems wanting. For example, in spite of the fact that virtually all companies have considerable commitments in China, how many CEOs know China well, how many board members of these companies speak Chinese? China is complex; it is arguably both the greatest potential boom of the 21st century global economy and the greatest potential threat. It requires highly skilful policy and diplomacy on the part of all key parties, especially business and governments, to ensure that the boom is realized and the threat avoided. But there are myriad other examples. Let me give one more. On the basis of my observations and conversations, the Middle East-based representatives of Western multinational companies were quite convinced that the invasion of Iraq was highly risky and would cause regional destabilization. Knowledge of Iraqi history, society and economy certainly seemed to bear this out. Yet many CEOs, instead of listening to their representatives with sound local knowledge, either supported the war or failed to oppose it. The same scenario risks are being played out with respect to Iran. Business leaders with good global knowledge can make the difference between war and peace! The important point is that in this integrated and highly complex world which, contrary to the hype, is neither borderless, nor flat, nor any of the other trendy clichés the business leader must be a renaissance person or at least have the intelligence and humility to rely on persons around him/her for achieving the kind of global knowledge and sensitivity that are and will be increasingly required. IMD - WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY? Page 3/6

4 Ethical compass The ethics of capitalism are embedded in what Max Weber termed the protestant ethic (2). The ethics may have been more often ignored than observed, but at least one knew (or thought one knew) how the ethical compass functioned. Max Weber, however, was writing in an age when Western dominance in the world economy was at its peak. Today that dominance is rapidly eroding. The world is becoming more multi-polar not only in respect to manufacturing, trade, finance and innovation, but also in respect to cultures and values. Business leaders will be faced with multiple ethical dilemmas that may more frequently arise from conflicting values. Just one example: the Danish newspaper cartoons depicting the prophet Mohamed caused considerable loss of business to Danish companies in Islamic countries. In the 21st century world, how do we measure the ethical value of something that may titillate a few Danes, but offend a billion other inhabitants of the planet? In this integrated world, do the Western ethics of freedom triumph over the Islamic ethics of blasphemy? These are the kinds of questions and dilemmas to which the responsible business leader of the 21st century will have to struggle to find answers. Playing the ethical ostrich is not an option. Committed citizenship In their book, "A Future Perfect" (3), John Micklethwaite (current editor of The Economist) and Adrian Woolridge, coined the term the cosmocrats to define the global era s new elite. While this was the most meritocratic and genuinely global elite the world had ever seen, they made the point that it was also the elite that was the most divorced from the rest of society. The Shanghai investment banker has no problem at all connecting with her London, Madrid, Mumbai, São Paulo, New York counterparts, but has great difficulty communicating with her compatriots 50 km inland. And the same will apply to all her counterparts in respect to their own societies. In his seminal book Montaillou (4) on a French village during the early 14th century, Emmanuel Le Roy Ladurie demonstrates the degree to which the feudal elite was in fact well integrated with society s lower orders. They spoke the same language, ate the same kind of food, drank the same wine, sang the same songs, prayed to the same god, etc. This is emphatically not the case with the present global elite. Most recently David Rothkopf has gone further than Micklethwaite and Woolridge, in defining and describing what he terms the superclass that constitutes the global elite that he estimates at about 6000 people, stressing the chasm between this superclass elite and the rest of humanity (5). IMD - WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY? Page 4/6

5 That chasm is probably primarily visualized by the outrageous (and not seemingly earned) pay the superclass attributes to itself, especially at times of crisis. But even beyond that, the social divide is increasingly broad and deep. This is not sustainable. Responsible business leaders must be and must be seen to be true and committed citizens and members of society. It is not clear that current elite social mores and their educational systems are paving the way for responsible business leadership. Business school curricula, for example, tend to give much emphasis to personal development or individual life-work balance, at the expense of the individual s responsible leadership obligations. This caters to the narcissism which stands out as a characteristic of our age. Even those not well versed in Indian history are probably familiar with Gandhi s famous aphorism: Earth provides enough for every man s need, but not for every man s greed. As current food prices may condemn millions to hunger and to a return to poverty, while the superclass wines and dines on ever more luxurious fare, there is a grave risk that greed may plunge this planet into the winter of despair. Responsible business leadership in the early 21st century is not a luxury. It is an urgent imperative. Jean-Pierre Lehmann is the Professor of International Economy at IMD and Founding Director of the Evian Group. He is co-director of the Investment and Risk Management in Shipping program. He also teaches on the Building on Talent program and the Program for Executive Development. ( 1) Paul Collier, The Bottom Billi on: Why the poorest countries are failing and what can be done about it, Oxford University Press, Oxford and New York, (2) Max Weber, The Protestan t Ethic and the Spirit of Capitalism, ( 3) John Micklethwaite and Adrian Woolridge, A Future Perfect: The Challenge and Promise of Globalization, Random House, New York, (4) Emmanuel Le Roy Ladurie, Montaillou : Village Occitan, 1975 ( 5) David Rothkopf, «Superclass and the Inequity of Globalization», YaleGlobal, 14 May IMD - WHAT IS RESPONSIBLE BUSINESS LEADERSHIP IN THE EARLY 21st CENTURY? Page 5/6

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