The Responsibility of Moral Capitalism – Barie Carmichael | The Open Mind

The Responsibility of Moral Capitalism – Barie Carmichael | The Open Mind


HEFFNER: I’m Alexander Heffner,
your host on The Open Mind. Is there a future for
a socially conscious capitalism, what
Congressman Kennedy recently deemed
moral capitalism, when such extraordinary
havoc has been wreaked on working people. Will companies respect
the dignity of work, high wages, and the
diversity of the American people, geographic, racial,
cultural differences? Many companies have united
in their backlash to the sometimes ignorant and
hateful politics of Donald Trump and the global
resurgence of nativism: his Muslim ban his
withdrawal from the Paris Accord and his and
his party’s attack on environmental stewardship and
even the idea of regulation. But are these symbolic
gestures of companies enough when inequity
persists and monopolies drive the profit
margin at all costs. Misinformation,
data theft, political violence,
considering these questions and antidotes,
business models that do good is my guest
today, long-time corporate communications counselor,
Barie Carmichael, Batton Fellow at the
Darden School of Business at the University of Virginia, she is coauthor of “Reset:
Business and Society in the New Social Landscape.” Welcome. It’s great
to finally meet you. CARMICHAEL: Thank
you Alexander. Yes. HEFFNER: Would you say in
your conversations with business people that
there is a concern, we just discussed
this off-camera, that what you describe
as an inherent negative sometimes of business
practices are unchecked and even government
and its abdication of responsibility is
incentivizing those inherent negatives, which
is sometimes the cost of doing business? Is there the beginning of
a consensus that the old school Republican Party
approach of deregulation, deregulation, deregulation
is actually not in the best interest of
society right now? CARMICHAEL: Yeah. I think there are a
couple of macro trends that are driving that. The first is the arms race
that’s currently underway for the next
generation talent. Baby boomers are retiring
at the rate of 10,000 people a day and that’s
going to happen for 18 years and in it’s place
are the millennials and the generation z’s who
have entirely different expectations for what is the
role for business in society. So you’ve seen companies take
activist positions onyoutube stands and very often that
is part of making sure that they can win that
competitive talent race because if they don’t, they’re
going to be in a disaster. In addition to that,
companies have looked at what 70 percent
of the crises, headline-producing
crises that happen, happen because of
things within management’s control, so that means
management needs to look into their company,
not what’s coming, to understand what are
they doing that might create that damage and
that’s where you get to something like
inherent negatives. Inherent negatives are
something that are aspects that are embedded in a
business strategy that as the company grows, so
does its negative impact. Companies that examine
their own footprint, their own social footprint
and take action to mitigate those inherent
negatives are the ones that are going to attract
that next generation talent and win in the next gen,
next workplace. HEFFNER: You were saying
to me that the story came out just recently that the
chairperson of Microsoft, president of Microsoft
is concerned about the absence of regulation,
facial recognition, bias, in the technologies
that may be discriminatory unless there are some
regulations that are in effect, CARMICHAEL: Yes, HEFFNER: And now after
Facebook and Twitter and the negative influence of
disinformation and
misinformation online, there may be some
steps taken preemptively. CARMICHAEL:
Preemptively, yes. You know, the, the
technology environment that we’re in right now
is kind of like the wild, wild west, on a
very basic level, how we travel,
with driverless cars, how we communicate, social
media and even facial recognition for
things like civil defense, things like that, are all
brand new ways to do it. And what’s unique about
the Microsoft stand is to get ahead of it by figuring out
the guardrails in advance. The M.O. of Silicon Valley up
until now has been build a scale and then worry about what’s left
in your wake later. And that’s not
working so well. HEFFNER: And scaling an
impact that is negative is not healthy for
society. So… CARMICHAE: It’s not healthy
their business either. HEFFNER: So how do you
think about this in a historical trajectory when
you have folks who donate to philanthropic endeavor,
in their secondary or tertiary lives, but don’t
commit to the values of humanitarianism in
their actual products? So I don’t think you can
say this as explicitly from Microsoft and Gates,
but it is true that the Gates philanthropy came
as a secondary channel, now that might even be
more labor intensive than what Gates was doing
in the private sector, but the reality was he set
an example where I’m going to build this
company, right, and then I’m going to have
the socially conscious impact on society. And you saw it again
with Zuckerberg whose role model he says his gates
in building a cooperative, not even a real nonprofit,
but an initiative to address what he considers his
philanthropic commitments. And to me it’s mind
boggling that we can’t understand that those
social goods have to be performed
through the companies. CARMICHAEL: Yeah, I think
that the standard though is getting impatient.
I think that kind of hall pass, the expiration date,
whatever you want to say for this, go as fast as
you can and then see what happens is expiring.
So with Microsoft for example, one of the things Bill
Gates said is that the biggest mistake he made
early on with Microsoft was to fight regulation. He should have learned
earlier to be part of the solution and you can see
with the statement of the Microsoft CEO being part
of the solution in terms of facial recognition is,
is needed, Facebook and social media,
and they’re not the only ones, Facebook,
Twitter, Instagram, and the whole YouTube
as well as Google and Twitter, they all have the
same business model that makes money by how people
engage online so that you can micro target the ads. That means that that
incentivizes viral content that can be entirely
destructive and erect social harm, especially
in developing countries. That model can’t go on without
some kind of guardrails. It has to have them. If they were smart, they’d come
to the table and join that. Now, other
industries, I must say, that are not in this
whole new Wild West, right? Think about companies like
Unilever who is a largely recognized company for what
they’ve done in sustainability. I mean, they’ve identified
sustainable living brands where they’re trying to
design products that as you consume them as
users, you’ll consume less natural resources such as
dry shampoo or washing for in third world country
that consumes less water or Coca Cola, who realizes
that the more they manufacturer, Coca
Cola, the more water they withdraw, which is a
diminishing natural resource. So they have now actually
achieved their objective of replenishing 100
percent of the water they withdraw in the manufacture
of their beverages. So companies have taken a
look at what their social footprint is, where’s
their inherent negative and address them. The new technology though
is one that for which there’s no precedent. HEFFNER: Right. Well, as you
describe the inherent, the innate quality of
viral communications, CARMICHAE: Yes, HEFFNER: Jeopardizes
the social fabric and good from the
get-go for a Facebook or a Twitter, but then you have
the historic precedence because I think of that
information as carcinogens for the mind, but then you
have the examples of real life carcinogens
with the BP oil spill, which was the most
blatant example. Then you go a generation
earlier and look at the cigarette and
tobacco making companies. CARMICHAEL: Here negative
can be in the product itself. So for example, cigarettes
when used as intended can kill you, but it can also
be as part of the business lifecycle of the product. How do you source the
material like Coca Cola or let’s take
another example. UPS or FedEx are
service providers. The more they grow, the more
grows their carbon footprint. So that’s inherent in
their product as well. And they’ve taken action. And UPS in particular has
got a program called Orion in which they’ve reduced
by 10 million miles annually the number
of miles they drive. So you can get at it
if you recognize it, one example I would give you
this new in cigarettes is Juul. That’s the vaping company. They have got a product
that they designed to help people quit smoking.
That was the intent. So they design this
product that had a tactile feel of a cigarette
and one capsule of Juul, which is like a
big USB piece, will have the nicotine load of
an entire pack of cigarettes. Now the growth of Juul
hasn’t been from people who are trying
to quit smoking. It’s been from teenagers
and even junior high kids who are now being exposed
at levels of nicotine that are addictive,
that was not intended, that should have
been anticipated, and now it’s an example of kind
of cleaning up afterwards. So that’s certainly an
inherent negative and what I’m not saying is that all
companies recognize the inherent negatives
and address them, but in fact, if you are
profiting as Juul is, for example, from your
own inherent negative, you must address it. HEFFNER: What does it
look like to reset when it comes to
equity in society? We see the reset and
response to Donald Trump and his xenophobic
or nativist identity, and that companies pretty
universally have used Super Bowl commercials
and other opportunities to market themselves. There’s one way to reset
symbolically as I said in the intro, there’s another
way to reset the social landscape and understanding
the graveness in understanding the gravity of
the inequality today. CARMICHAEL: Yeah, and I,
and I think that in this new environment, you now
have citizen reporters as well as in activist
employees who are calling on their own c ompanies
when they calling foul on their own companies
when it’s necessary. To me in the absence
of government actions, for example, in
social media, I think the government is
reticent to act because they don’t quite
understand it themselves and they don’t want to
be part of an unintended consequence of a
regulation that doesn’t work, but at the
end of the day, watch the
Google employees, for example,
staging a walkout, a nation-wide walk out. Starbucks wasn’t a, here’s a
progressive company like
Starbucks. They started to ordinary
mobile ordering for coffee at the same time; they increased
the complexity of the drinks. What they didn’t do was
increase the number of Baristas to be able
to serve that coffee. So 10,000 Starbucks
employees protested Starbucks up through a
site called coworker.org to ask for better
wages, more baristas, more staffing as well
as changes in their compensation, and
Starbucks responded. So you have a, a kind of a 24/7
auditing of the corporation, both within the
company from their own employees as well
as consumers now. And I think that the ramp
time for calling foul on a lot of these companies
has totally expired. HEFFNER: One campaign
in the media world is Sleeping Giants that
wants to make bigotry less profitable and
specifically pressures any television programs or
anchors on the companies that will promote
their products on those, what they consider hateful
or bigoted broadcasts and pressures them to remove their
sponsorship of those programs. So that is one active and
ongoing campaign from the consumer’s perspective. But let’s go back to this
bigger picture question of wages and tax reform. So is it becoming
clearer to even corporate executives, we
saw Orange County, which is home to some
business and corporate retirees and
active entrepreneurs, turn Democrat, all of these
districts in Orange County. Now that might’ve been
wanting to restore check broadly on
Donald Trump’s power, but I also think in some
of these districts that generally have heeded the
philosophy I’m going to vote for Republicans is
they’re going to keep my taxes low, there’s
some recognition that, that there’s, that
there’s an oversight, in thinking that way about taxes
on the individual level, but certainly taxes
on the corporate level. And so the tax reform that
was proposed and passed; reduced taxation
on major companies. Since then, we haven’t
seen rises in wages. We haven’t seen the kind
of promise of benefits to provide economic security
to working people. And it seems like the only
advantage would be if you own shares of
that company. So how are people
responding to this tax legislation that may be just
exacerbating the inequities? CARMICHAEL: Yeah. Well, first of all, I
think that the labor market itself is driving,
I think there has been some wage increases. Not substantial
like I grant you that, but just the, the numbers
show that in order to get the kind of skills you
want in the people you want, that’s going to
have to change with the, because the baby
boomers are walking out. The institutional
knowledge walking out of companies right now is
absolutely astounding. You’ve probably heard that
a company like Patagonia has chosen to donate the
equivalent of their entire tax benefit to
environmental causes. HEFFNER: Right. CARMICHAEL: But
Patagonia’s kind of in a class by itself
and always has been. I think increasingly
there comes a time where the fiscal policy itself,
it’s just not sustainable. I mean we have got so much
debt growing as well as long overdue
infrastructure that at some point it will
collapse on itself. I’m looking more though at
what is the market doing for executives who
need to recruit the next generation talent and
especially as they’re concerned about getting
dis-intermediated through a lot of the technology
that’s coming around and their ability to attract that
next generation talent. And I think that’s going to
drive the changes in wages. HEFFNER: But I also
think that resetting means understanding that public
private partnerships have not produced what they have
promised in recent decades. CARMICHAEL: Yep. Well, in fact, the whole
point of “Reset” is that the companies that are
likely to succeed in this new environment or the
companies that not simply do the Venn diagram that
says a core capability with a consumer need
and where there’s an intersection, now
you have a business. There’s a third
intersection that says where it also meets a
social need and where you can do up payoff on all
three are the companies that are more
likely to succeed. So let me give
you an example. There’s a story of, of that I
like to tell of waste
management. Waste Management is a
company that the more they, they grow
on waste creation, right? So talk about an inherent
negative that was the essence of their business,
but their customers said to them, how can you
help us reduce waste? Their CEO thought this is
not the greatest question to ask for my
business model, but then realized their
core competency could also help their
customers reduce waste. So he applied that
capability to their business as well
as managing waste, and their stock,
doubled from 2012 to 2016, so it’s possible to find
that three-way intersection. HEFFNER: Is another
part of that intersection realizing the divide
between Wall Street and Main Street and engaging
folks to participate in the sector that they would
otherwise just see through a
401k? CARMICHAEL: I
think first of all, it means that the
businesses have to take an honest look at their
business model just as every company has a
carbon footprint, it has a social footprint,
and how do they really understand from all the
way from sourcing raw materials to the
disposal of the product. Where are the avenues
in which they can have a negative social impact and
what’s their obligation to fix
that. Now, what a lot of
companies are finding in this reset is that in
their way of finding those inherent negatives, they
can also find a way to be a shared solution with the
public or even shared advocacy. Give you another example. Most posts use textiles,
end up in landfills. 80 five percent of
the clothes we wear, even if they donate it,
they end up in landfills. So companies that are in
the apparel business have actually gone together
and very often these industries do come
together to look at how can we recycle, develop
recycling at the thread level so that a disposed
garment can be unwound and made into
something new. Those are the kind of
creative solutions that happened when you first
start and look at your problem, in this case,
it ends up in landfills, and then look for shared
advocacy in a shared solution. Those are the companies. Those are the industries
that are going to thrive in this environment. HEFFNER: And then what is the
standard we want to set? I’ve heard the expression
moral capitalism, you know, moral ethical
business practices. We’ve discussed on this program
compassionate capitalism. There is a skepticism now that
those things are even
achievable. CARMICHAE: Yeah, maybe. My preference is, I
always shy away from moral connotations because it
implies that somehow the company is all knowing and
knows better than others of what is moral. I would rather say responsible,
responsible capitalism. Are you responsible
to yourself and your stakeholders that include
your employees as well as the footprint of your capability
and your business? HEFFNER: What kind of
political leadership is going to bolster that
responsible capitalism? I’ve asserted here
that I don’t think the legislation that was
intended to stimulate job growth is actually
going to do that, or at least not good jobs, CARMICHAEL: The kinds
of jobs, right? HEFFNER: There had been
the hope that through the diminishing tax
burden of companies, corporate tax rate that
they would relocate in and rebuild here. And there was no evidence
of that really so far. So what if, if
Donald Trump as the entrepreneurial
turn president now, his business experience
was not what suited the country or at least
the Republican tax legislations not what
is going to suit us in long-term, what would? CARMICHAEL: Well, I
think it’s a time for the business sector, the
government sector as well as the social sector to
come together because the problems in front of us
right now are just too pressing to say to point
fingers at each other. I mean, it’s going to take
a collaborative solution and frankly for the tech
sector and getting back to where we started this
interview for facial recognition, for example,
there’s an opportunity of a whole new field
out there that’s, has no guard rails for
which that is a perfect place to look at how do
we develop some rules of the road that also drive
jobs, drive new employment and create good
along the way. If we can get to the
level that we’re doing it preemptively rather than
cleaning up the mess after the fact, then
we’ll be somewhere. HEFFNER: How much
confidence can we have in the interim that in the
absence of a Paris Accord, that there is some
accountability as a coalition of companies
continue to insist that protecting this planet is
important and that their businesses are not going
to stand in the way of what was that objective. CARMICHAEL: Yeah, I
mean increasingly, well, companies know
that they have got a huge financial risk
with climate change. I mean, one of the things
that as I was co-writing “Reset” towards
the end of the book, my biggest “Aha” was
where are the boards of directors in all of this? We keep talking about
CEOs and other things, but boards of directors
have a responsibility for some of the risks that
are ahead of the fiduciary responsibility for success
of their companies. Climate change is a
classic example of how companies can be hurt
tremendously because of that, so I think that it’s
absolutely essential for a lot of companies, which
are already doing this, staying the course. If they’ve carved out a
path that they’re going to do to address climate
change I don’t see too many of them changing. There were a lot of
them changing then. Probably the biggest
concern I got right now is that the consumer behavior
of now going back to big cars and lower gas are… I
remember the 1970s when everybody went
to smaller cars. Well, that’s now long gone
and I think the latest result is that our
carbon emissions are up. HEFFNER: In the
seconds we have left, Barie, you mentioned
boards of directors, and I can’t let you leave
here without weighing in on the Amazon situation
more specifically, a lot of cities vied
for the headquarters and it’s split now, between to
predictably urban a relatively urban
communities when there was a real opportunity for
Jeff Bezos to say the America I know is
expansive and let’s do this in Tulsa, Oklahoma,
and pick your favorite Midwest or abandoned
city if you will, by the urban sprawl. In New York City
specifically as of this recording he’s come under
fire because he has chosen Long Island City but there
are no people of color on the board of directors. So there are no people
really with functional experiential knowledge,
and yet you are relocating to a borough that has a
great amount of diversity. And that seems to
not showcase a reset. It seems to be very much
the same old-boys network and refusing to acknowledge your
governing decisions, which is ultimately
your boards of directors, have to reflect
knowledge of communities that you are
supposed to be serving. CARMICHAEL: I happened to
be in New York when it was announced in Queens and I
live in Virginia and my daughter lives in the
area where it’s at and was watching both of them and
I remember that in advance of that decision I’ve been
given many talks about “Reset” and one of my
slides talk about big business blowback and I
have a picture of the Amazon building in Seattle
and the blowback there for homelessness and things
like that that come when you have such a
big business impact. I don’t know what their
plans are for addressing what are clearly
anticipatable impacts for where they’re going. I mean they know
this already, right? I can’t fault them
for where they picked. I used to work in the
chemical industry and I know what goes
into site selections. It’s very complicated,
but they do know what to expect and the
likelihood of forcing out affordability of homes,
it’s extremely high. Then leading to
homelessness for people that can’t afford it. I will be very interested
in following what they choose to do and as to the
board level I think the tech, the Silicon
Valley area or group in particular as well as high tech
has got a diversity problem. HEFFNER: Barie. Thank you for
acknowledging that for your time today and thanks
to you in the audience. I hope you join us again
next time for a thoughtful excursion into
the world of ideas. Until then,
keep an open mind. Please visit The
Open Mind website at Thirteen.org/OpenMind to
view this program online or to access over 1,500
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