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Sunday, February 12, 2006

Who Profits from War?


Do corporations have any responsibility besides the maximization of profit?

Diplomat Without Portfolio in Davos, by William J. Holstein, NY Times: Dr. Daniel Vasella, chief executive of Novartis, the Swiss pharmaceutical giant, attracted attention in Europe when he questioned Secretary of State Condoleezza Rice ... at the recent World Economic Forum in Davos, Switzerland. He asked whether the United States was "playing into the hands of enemies" through its tactics in fighting terrorism. Here are excerpts from a recent conversation with him:

Q. Are there winners and losers in the process of globalization? A. The concept of winners and losers is wrong. If one looks at economic growth, child mortality and other factors, which you can take as the measure of a country's health, you can see that the number of people living on less than $1 per day has declined steadily, from 38 percent of the world's population in 1970 to 20 percent today. But there has been a very different evolution of various parts of the world. ... The advanced countries have benefited more. If you look at Latin America, East Asia and South Asia, their average income per capita has increased significantly. There is one remarkable exception, where we see stagnation, which is Africa. In sub-Saharan Africa, there has been very slow and poor development.

Q. Do you think the distribution of wealth needs to be improved? A. There is a maldistribution in the sense that we have about 20 percent of the richest 6.1 billion people in the world getting 74 percent of the income... If you take the poorest 20 percent, they only have 2 percent of the income. So there is no way we can say it is well distributed.

Q. Why would you, as a chief executive, raise these issues with Secretary Rice and other world leaders? A. The first responsibility of a C.E.O. is to run his company successfully and generate products which are useful to your customers, resulting in economic value creation. We also have to act responsibly, respecting not only the law, but also fulfilling legitimate expectations that society has of us. Today these expectations in most instances go beyond short-term profit maximization. What people want is that businesspeople behave in a responsible way in communities in which they live, that they treat employees fairly, respect the environment and demonstrate sensitivity to the problems of other, disadvantaged people in the world. I think corporate social responsibility has taken a much more important role than it used to.

Q. What did you say to Secretary Rice about the war on terror? A. It is not a question of whether one should fight terror or not fight terror. Terror is absolutely unacceptable. What we have to stand for is to create and maintain a free and open society. With terror, you destroy open societies.

But in an open society, there must be a place for expressing one's opinion. Critiquing is in some ways an expression of respect. If you do not respect somebody, you do not bother to critique them. Having said that, I do believe that if you are economically, politically and militarily a superpower, then you have to be a role model for the world. If you talk about values and you stand for democracy and respect for human rights, then you have to act accordingly. The world will look very closely to see if there is consistency between what you say and how you act. You will empower your enemies and weaken your supporters if you deviate from your values and principles.

Q. What do you mean specifically? A. You cannot fight a war without casualties and without taking prisoners. But other questions remain, like, Do you torture? We, the open societies in the world, have to apply the strictest standards. We need to treat people with respect. We need to be very thoughtful about not offering ground for anybody to be against us. We have to be thoughtful about the fact that poverty and the lack of education are excellent breeding grounds for terrorists. They can indoctrinate children. That's what's happening in many countries. The perception in people's minds about who we are gets very distorted.

Q. So you're suggesting that there is a connection between poverty and terrorism? A. No question. You are more willing to risk one's life and one's family when you have nothing to lose. People become more thoughtful when they have something to lose. ...

Q. Why do you think American chief executives are so reluctant to talk about poverty and the roots of terrorism? A. I don't know. You will have to ask them. I know that some of my fellow C.E.O.'s believe they should not express themselves on political issues at all. They should just do business. I think that is not the right attitude. First of all, we are citizens of whatever country we are from. We have a citizenship responsibility. Secondly, I do believe we have to examine our own beliefs and value systems regularly. We cannot act in a void. I think there is very clear responsibility.

Q. Might expressing your views hurt your business in America? A. I don't believe so. I believe the Americans are tolerant and self-assured enough to stand up to these questions. ...

Q. But do you think any American chief executive would publicly confront Secretary Rice on these issues? A. Why not? It depends on the understanding of your role as a business leader. Do you just have responsibility for your business and just your people?

Or if you are given this kind of job as a result of fate, your skills or whatever circumstances, do you have also to take stands on subjects that are not directly linked to your business but are important? Many think that politics have supremacy over business, but does this also imply that business is just a tool for government? On this, history teaches us some interesting lessons.

See here for more on the povery-terror connection from Alan Krueger.

    Posted by on Sunday, February 12, 2006 at 09:53 AM in Economics, Iraq and Afghanistan, Terrorism | Permalink  TrackBack (0)  Comments (4)


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