defraigne ethics conference

8/6/2019 Defraigne Ethics Conference

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Economy, industry, innovation, and

technical democracyInformation Society: Governance,

Ethics and Social ConsequencesNamur May 22, 2006

Philippe DefraigneCullen International

[email protected]


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The ethical firm? Tony Vandeputte (LLB May 20, 2006)

Ethical firm defined as oftening the negative effects ofglobalisation beyond what is requested by regulation

The role of a company is not to make up for the statesshortcomings

The sole role of a company is to create wealth

Is there room for the ethical firm?

The firm is ethically neutral but, employees, in particular managers, are facing

numerous ethical problem

Above all strike a balance between the interest of thevarious stakeholders.


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What is ethics?

Ethics is not about prohibition

Ethics is not about risk assessment

Ethics is not against Economics it concerns its meaning Ethics is about tensions between what exists and what

should exist


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Le Corbusier: Firminy, 1962-67


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Le Corbusier: la villa Savoie 1931


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Corporate Social Responsibility (CSR) Hank McKinnell, chairman and CEO, Pfizer, and

Chairman of the Business Roundtable

CEOs are increasingly committed to socially responsiblecorporate behaviour because it is essential to

profitability.

If were seen by the community as providing goods and services

that enable people to live a happy, long life, society will want us tosucceed. If they see what were doing in education and sports

programs, thats important. Otherwise, society will hope that we fail.

If we continue to be disrespected by the public, it makes us a target.

People will say regulate them. Excessive regulation is certainlyone of the costs. (New-York Times April 29, 2006)


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Why business cares about society?Self

regulation

Regulation


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Corporate Social Responsibility (CSR)Coca-Cola, PepsiCo and Cadbury Schweppes havedecided to remove sugary beverages from school vending

machines. (FT May 5, 2006)

Under threat of regulation and law suits:

In 2005 Arnold Schwarzenegger had banned soft-drinks vending machines from Californias states schools. A number of Republicans have dropped their oppositionto regulation in the light of growing evidence that obesity isharming productivity and contributing to rising healthcosts.

17% of US children are clinically obese (up from 14% in1999) !!!


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Corporate Social Responsibility (CSR)David Varney, Chairman, mmO2 plc, Chairman, Business in theCommunity (Feb 2004)

CSR has got to be part of the DNA. It's got to be in the lifeblood ofthe organisation, or it's not going to work.

Why are we doing these things? Is it because we're interested inprofits? Yes, absolutely. It's our job to make profits. We'd be out of ajob if we didn't.

We behave responsibly to protect our corporate reputation. If we hada lousy reputation, we wouldn't get customers. But society shouldshare in the profits of our success.CSR is win-win. It's good for us. It's good for the community. It makes

employees feel motivated about what they're doing. It makescustomers feel good about what they're buying. It makes goodbusiness sense.


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Corporate Social Responsibility (CSR)David Varneys typology of critics of CSR

The conservative, free-market view

Corporate philanthropy essentially means stealing from shareholders.

Milton Friedman once famously said, the responsibility of corporate

executives is to stay within the law and to make as much money for theirinvestors as possible. Anything else is harmful to the owners of thebusiness.

Varneys response

True CSR does not come free but that's a short-sighted critique.Shareholders are interested in sustainable profitability. Whatever CSRtakes out, it puts back in - in long-term value.A company cannot survive and thrive if it does not look beyond the bottomline. Any shareholder who's interested in sustainable profitability isinterested in all the benefits that CSR can bring.


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Corporate Social Responsibility (CSR)The leftist view

CSR is a good thing, but it's not working as well as it should. Needto strengthen it with regulation.

Varneys response

A successful approach to social responsibility cannot be achievedwith a regulatory cookie cutter. It has to be indigenous to the cultureof the company.

Each industry - and each environment - calls for a different approach.

A one-size-fits-all regulatory system will do far more harm than good.


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Corporate Social Responsibility (CSR)CSR is hypocritical

CSR is a smokescreen to hide the truth - mere window dressing ona system that is ruthlessly self-serving.

The example they often give is the company that claims to be

socially responsible - while making people redundant.

Varneys response

My answer is: this is capitalism!

In a system such as ours, companies sometimes have to adjusttheir workforce to survive. That's an inevitable outcome of a

dynamic marketplace. That's its strength. When companiesdownsize to survive, the system produces other opportunities


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Financial capitalismIn the pastIndividuals invested in companies through financial intermediaries

such as banks

Today

10-12 m individuals control half the market capitalisation worldwide.

Investors allocate directly their capital to firms through the stockmarket. This is known as financial disintermediation.

It does not mean that every individual trade their shares incompanies themselves but pension funds and insurance companiessimply managed their clients funds for a fee and pass on the gainsand losses. They are not real intermediates as bankers used to be.


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Financial capitalism

Power inside a company has shifted from themanagement to the funds.

50% of stocks held by funds managers

United States holds half of the financial assetsworldwide.

Europe controls 30% including 10% for theUK alone.


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Financial capitalismPension funds

North American: 2/3

Europe < 15% (incl. 11% for the UK alone).

Direct consequence of European countries choice to fund pensions on

a pay as you go basis rather than through the accumulation offinancial assets. Calpers, the pension fund for California civil servantmanages assets worth > $150bn.

The indirect consequence is that financial markets are dominated byUS fund managers.

These funds buy all the stocks constituting stock indices such as theDow Jones and then, under the corporate governance banner, weigh

heavily on management of those companies.


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In Ireland, fund managers investing Irelands 15bn National

Pension Reserve Fund (NPRF) have been told their 2005performance was lacklustre and warned their mandates areunder review. (FT fm March 13, 2006)

NRPF explained that while their equity performance in 2005

was in line with its benchmark, our objective was to outperform. Instead, it underperformed the index of Irish pension funds,

which achieved 21.2% return against the NPRFs 19.6%.

According to the FT, the pressure the NPRF is putting on its fundmanagers represents continuing evidence that short-term criteriaare applied to portfolios with even very long-term investmenthorizons the NPRF will not distribute any of its assets topensioners before 2025!


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FT notes that although the NPRF is wary of openly criticizing its

fund managers, Paul Carty, chairman of the commission appointedby the government to over see the fund remarked that some activemanagers have outperformed.

This was taken as a big hint that some managers had not.

They know who they are said an official at the NationalTreasury Management Agency, the government agency that

runs the fund.


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Financial capitalism Booz Allen Hamilton survey of CEOs succession 2004

In 2004, underperforming CEOs were removed after 4.5 years(World average)

In BAHs judgment, this is an appropriate period. A 15-year vision is

irrelevant.

Research shows CEOs need 3 to 5 years to develop their strategiesand see them through to their results.

CEOs on a short leash tend to become more risk averse and maybe reluctant to embark on riskier projects, such as big investmentsor M&A activity.


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Financial capitalism In Europe in particular, the pendulum may already have

swung too far toward the short term.

In 2004, CEOs removed for poor performance were inoffice for a median tenure of two and a half years, anastonishingly and counterproductively brief period of

time. Many of the fundamental changes needed to make

companies competitive require more than two years to

take effect, especially given the regions tradition ofcooperative labour relations and the high social costsassociated with transformative change.

Europe may be entering a cycle in which transformativechange is required


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Financial capitalismIs he still in charge?


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Financial capitalismEurope mad auctions for 3G licences

20812October 2000Italy

61850.8August 2000Germany

1812.7July 24, 2000Netherlands

62036April 2000UK

Bid per popin

Total bids/licence fees in

bn

End of theauction

Country


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Ethics and information societyThe obvious subjects

Privacy

Internet and human rights

Internet governance

Closed Circuit TV

etc.


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Ethics and information societyCyberspace

Anybody being potentially connected with anybody anytimeanywhere brings radical changes in the our perception of space(death of distances) and time.

Human cyborgMITs Media Labs, William Mitchell argues that the advent of mobiledevices and wireless Internet access, digital bits no longer exist in aseparate sphere called cyberspace but have gone on location in the

real world. The trial separation of bits and atoms is now over.The result is the rise of a human cyborg: a biological coresurrounded by extended, constructed systems of boundaries and

networks. In this new world, the social ties that exist are no longer

provided by a continuous home turf; increasingly, my sense ofcontinuity and belonging derives from being electronically networked

to the widely scattered people and place I care about.


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Ethics and information society The network of our friend is increasingly mediated by electronic

address books in SIM cards, mail browsers and buddy lists.

Impact on our intersubjectivity: common-sense, shared meaningsconstructed by people in their interactions with each other and usedas an everyday resource to interpret the meaning of elements of

social and cultural life.

How to feel responsible for others?

We need urgently to decipher what this proliferation of newtechnologies will

do on our brains (why remember things when you have google)

have on our relationships affect our sexuality


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Why should business care?

Business as

usual

Social

inclusion -

sustainability

Ethics is not a

barrier to doing

business it's thefoundation


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ICT EU policy How is ICT seen by the EU?

ICT industries are one of the main drivers of economicgrowth.

Their impact on the improved efficiency of othersectors has multiplier effects far greater than the sizeof the industry itself.

How about expected benefits forICT users?

Bridge digital divide, lower prices, better quality


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ICT EU policy

Commissioner Reding appears particularly enthusiasticabout mobile telephony: a natural successor to mobile

telephony.

The results of the first pilot projects suggest half of

European mobile phone subscribers (200 million people)may become mobile TV users.

In early 2007, the Commission will issue a Communicationon "Strengthening the Internal Market for Mobile TV". It willpropose specific further steps to unlock the potential ofMobile TV.


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ICT EU policy

Radio Frequency Identification Devices (RFID)

RFID market is expected to grow fast over the next ten

years.

Cumulative sales of RFID tags so far amount to 2.4billion, with 600 million tags being sold in 2005 alone!

The number of tags delivered in 2016 could be over 450times the number delivered in 2006.

The deployment of RFID technology is expected to make

a major contribution to growth and jobs.


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ICT EU policy

How the Commission sees its role?

The Commission believes it is necessary to build across-society consensus on technical, legal andethical issues associated with RFID and to intervene,

where required, with regulatory instruments. Theissues which need to be addressed include privacy

The Commission sees that to exploit the economicpotential of RFID, privacy and consumer concernsassociated with the use of RFID tags need to behandled constructively, with the assent of all

stakeholders.


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Outlook

The legitimacy of technological innovations requires

a connection between the technical justifications andthe social ones, to consider their ethical meanings

and to demonstrate their democratic opportunity.

Difficult to have a dialogue between intellectuals ofall countries. The complexity of globalisationweakens that dialogue while the simplicity of profit

maximising strengthens (Peyrelevade).


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OutlookSelf

regulation

Regulation

Business as

usual

Social

inclusion -sustainability

Ethics as the DNAof business


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The shift to the knowledge societyshould be an opportunity!

Financial capital Human capital

Re-humanisation of management

Scarcity

abundance

Growth: quantitative qualitative

Goods without ethical value goods with ethicalvalueReconnection with sustainability and qualitative

growthIF


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Change Brussels capital of Europe


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Change Porte de Ninove 2020


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Porte de Ninove 2040(Projet Joel Claisse Architectures)

defraigne ethics conference

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