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Economy, industry, innovation, and
technical democracyInformation Society: Governance,
Ethics and Social ConsequencesNamur May 22, 2006
Philippe DefraigneCullen International
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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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Financial capitalism
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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Financial capitalism
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)