Bennett Freeman has at the intersection of governments and international institutions, multinational corporations and responsible investors, activists and unions to promote corporate responsibility and sustainability over the last two decades. As Deputy Assistant Secretary of State for Democracy, Human Rights and Labor in the Clinton Administration and as Senior VP for Sustainability Research and Policy at Calvert Investments from 2006-15, he has been a leader and innovator in shaping global worked human rights standards from sectors ranging from extractives to the internet. He consults for major multinational corporations, foundations and NGOs as Principal of Bennett Freeman Associates LLC and as a Senior Adviser for BSR. He is Chair of the Advisory Board of Global Witness; Board Secretary of the Global Network Initiative; Chair of the Board of the Responsible Sourcing Network; and member of the Governing Board of the Natural Resource Governance Institute.
Christopher P. Skroupa: We’re a year and a half into this presidential term with huge consequences already, and further implications ahead for Corporate America. Major companies always balance conflicting interests and pressures; what’s been different?
Bennett Freeman: November 8, 2016 unleashed historic domestic political and geopolitical disruption. Not many of us saw it coming, even after “Brexit,” which was a shock even to its foremost proponents there. This wave of populism and nationalism will continue to roil the trans-Atlantic waters politically, economically, and socially for years to come.
It was clear the morning after the election that the business world, particularly American multinational corporations, would have to navigate unprecedented cross-pressures. American multinationals are no strangers to pressures from all corners and all comers. They must balance shareholders and stakeholders; politicians and regulators; their employees and customers; the priorities of their lobbyists in Washington, Brussels and elsewhere; and their American and global identities and interests. The cross-pressures aren’t new, but their intensity and severity seem to be. Companies have been confronted with inescapable, implacable choices and trade-offs on issue after issue since the election. Many of those choices and trade-offs were triggered by the new President’s statements and actions – and forced companies to react.
Last January 2017 on Inauguration week, company after company immediately opposed the first version of the Administration’s travel ban. Last September many of those same companies and others opposed the newly announced policy to end the Dreamers program. The President and General Counsel of Microsoft, Brad Smith, tweeted that the company would provide legal assistance to Dreamers among their employees and do everything possible to help them remain Microsoft employees and U.S. residents.
Look at the response to the decision to exit the Paris Climate Agreement last June 2017. Again, company after company, in industry after industry, publicly supported the agreement and opposed the decision to withdraw. Since then many of the giants of Corporate America announced that they would meet or exceed their established carbon emissions reductions targets. Major institutional assets owners and managers reinforced their expectations that companies double-down on their emissions targets. Governors and mayors from state after state, city after city, took similar stands to show that the U.S. would remain in the game with or without the Trump Administration; Governor Brown of California is hosting a global climate summit later this year to make the point.
Skroupa: What factors and forces are compelling companies to take these kinds of stands?
Freeman: Different factors and forces are at work; let me point to a couple examples. The Washington Post reported in February 2017 that Tiffany, Apple and Intel supported continuation of Dodd-Frank Section 1502. That provision (not related to Wall Street reform but parked at the last minute in the same bill in 2010) requires companies registered in U.S. stock exchanges to disclose their due diligence efforts to identify and curtail the use of the “conflict minerals” that have contributed to the bloodiest conflict in the world since the end of World War II. That conflict in the Democratic Republic of Congo has killed two million people, displaced millions more and disrupted the Great Lakes region of central and east Africa. No doubt many companies have been pleased by congressional efforts to repeal the provision and by the SEC’s decision not to enforce it. But some major companies support its continuation for at least a few years for two reasons: first, they have invested significantly in such due diligence efforts and; second, they understand that some of their shareholders, stakeholders and customers care about human rights abuses in supply chains and end products, even if they don’t follow the issues closely.
Fast forward to last July 2017, to the aftermath of the shocking event in Charlottesville and the reaction of the occupant of the Oval Office: Ken Frazier of Merck led by example and other major CEOs followed with critical statements and resignations from the White House industry advisory councils. CEOs don’t go out of their way to rebuke sitting presidents. But as Frazier later explained, the reaction by this President crossed a line.
Those are just some of the extraordinary set of examples that we’ve witnessed this past year and a half as companies have been forced to balance conflicting interests. They’ve had to balance dynamics between Democrats and Republicans; the White House and Capitol Hill; the House and the Senate; blue states, red states and purple states; their customers and markets at home and abroad. Plus, they recognize that more of their shareholders are self-declared responsible shareholders who care about the values and policies, actions and practices of the companies in which they invest.
CEOs and companies also consider the expectations and aspirations of their own employees more than ever. We’re in an era now where millennials and the generation coming behind them – and still some of us late baby boomers and “gen Xers” – want to work for companies and other employers where they see an alignment of values. The tech sector seems particularly sensitive to those expectations and aspirations. When a CEO like Tim Cook stands up for human rights – from the right to privacy to LGBTI rights, he knows that most Apple employees share those values and that many Apple customers do too. Likewise, with Marc Benioff of Salesforce; plus, he’s one of the few American corporate CEOs who is a leader in the B Team trying to promote corporate responsibility and sustainability in the private sector and the public policy arena alike.
Skroupa: These statements and actions from Corporate America are significant – and maybe unprecedented. But can and should we expect more of this kind of corporate leadership? And who do want to call the shots in a democracy? You’ve served in the U.S. Government, worked in the corporate, the investment and the activist worlds: what’s the right balance?
Freeman: We need continued leadership from major companies along the lines we’ve seen in recent months to stand up and be counted where fundamental values are at stake whether from respecting diversity and immigrants to moving forward not backward on climate change. But we must rely on ourselves, too: as citizens; as voters; as investors; as consumers.
We have the responsibility as citizens in a democracy to hold companies accountable. But let’s ask ourselves where we want power to be located and exercised. As one who has spent much of my career working to strengthen corporate responsibility and accountability. I believe that objective remains necessary, But I believe just as strongly that corporate responsibility on its own is insufficient.
Government regulations and programs can’t solve every problem; we learned that in the Sixties and Seventies. But I’m sure glad that we put the federal government on the side of civil rights; tried to wage a war on poverty; expanded the federal role in education; and established the EPA (under a Republican President). Since then we’ve looked for private sector solutions wherever possible. No doubt our private sector’s dynamism – its entrepreneurship and innovation – has changed the world for the better.
But we need government responsibility, not just corporate responsibility. We must do a much better job in the public and private sectors alike in supporting families, communities and entire regions of our country through the economic and social dislocations that have been intensified by the wave of globalization across the last few decades. That will take public as well as private investment. Corporate leadership is part of the solution but not a substitute for what government does best: setting fair rules of the game for us all in a democracy and investing in public goods such as education and infrastructure on which our economy depends. I don’t think that governance works without sufficient government; when we lose the balance between corporations and governments, both the public and corporate interest are undermined.
About 15 years ago, I came up with a formula that for fun I’ve call the “Freeman Theorem” that explains the idea: demands for corporate responsibility tend to rise in inverse proportion to government irresponsibility. In other words, when government fails or is missing, we turn to companies to step in, sometimes beyond their legitimacy if not their capacity and often not in our interest as citizen of this country or others.
Look abroad at the expectations and burdens that American companies face due to this kind of imbalance. Our oil companies operate in the Niger Delta where corruption is rampant, conflict is latent and community unrest remains ever-present due to decades of poor governance in that region of Nigeria. At the same time, our apparel brands source garments from suppliers with inconsistent standards for workers’ rights and factory safety in Bangladesh and Cambodia where there is weak government enforcement of the standards that are supposed to be in place.
That’s why I think it’s in the interest of American multinational corporations to support – now more than ever when they appear to be at risk – international institutions, norms and standards meant to diminish corruption and to support worker rights, and more recently to deter climate change and to promote sustainable development. American multinational corporations have a stake in the international rule-based system of which the United States has been the foremost architect and guardian; our companies have been among its foremost beneficiaries.
Corporations have a vital role to play; a more critical role than ever at a time of disruption as well as innovation. As one with a couple degrees in history, I’m shy about making bold predictions for the future. But we should know that history isn’t over; that American democracy is under stress; and that our leadership in the world is at stake.
Bennett Freeman will be moderating a panel entitled On Top of the World: Multinational Companies and Burgeoning Human Rights Expectations at the Reframing Human Rights conference on June 27 in New York, NY.
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