The Diplomat in the Corner Office

Corporate Foreign Policy

Timothy L. Fort

• Publisher: Stanford Business Books
• Year: 2015
• ISBN:
  9780804796705
• Edition: 1
• Topic: Commerce
• Subtopic: Gouvernement et monde des affaires

In The Diplomat in the Corner Office, Timothy L. Fort, one of the founders of the business and peace movement, reflects on the progress of the movement over the past 15 years—from a niche position into a mainstream economic and international relations perspective. In the 21st century global business environment, says Fort, businesses can and should play a central role in peace-building, and he demonstrates that it is to companies' strategic advantage to do so.

Anchoring his arguments in theories from economics and international relations, Fort makes the case that businesses must augment familiar notions of corporate responsibility and ethical behavior with the concept of corporate foreign policy in order to thrive in today's world. He presents a series of case studies focusing on companies that have made peace a goal, either as an end in itself or because of its instrumental value in building their companies, to articulate three different approaches that businesses can use to quell international conflict— peace making, peace keeping, and peace building. He then demonstrates their effectiveness and proposes policies that can be utilized by business, civil society, and government to increase the likelihood of business playing a constructive role in the conciliatory process.

This book will be of enormous use not only to students and scholars but also to leaders in NGOs, government, and business.

PART I

Mainstreaming Business and Peace

1

Corporate Foreign Policy

During the Arab Spring in 2012, Google and Twitter defied the edicts of Egyptian President Hosni Mubarak to create a “speak to tweet” application that allowed protesters to communicate.¹ At the same time, Facebook permitted streaming videos and messages from Cairo’s Tahrir Square.² Conversely, Vodafone and France Telecom complied with government orders to shut down; when their services were reactivated, the government allowed only pro-Mubarak messages to be sent to customers.³ Nokia-Siemens and Blackberry, along with Google, Twitter, and others, had previously cooperated with governmental authorities, which led to major news in the summer of 2013 when Edward Snowden revealed the U.S. demands for information from tech companies.⁴

Each company faced a choice. It could align itself with a government in power or defy the government in some way. Aligning oneself with the powers that be hardly seems novel. Companies and people do that all the time. Why make the government, especially one willing to use a gun to punish dissent, angry? Defying a government is a good deal riskier. Moreover, in the cases of Google and Twitter, it did not appear that they were aligning themselves with their own country per se in a way that might be found, for example, in a Cold War standoff between the United States and the Soviet Union. The United States itself seemed torn as to what position to take, balancing its foreign policy between long-time support for a crucial ally (Mubarak) and also sympathizing with a popular effort to secure freedom and protest heavy-handed oppression.

Google and Twitter allied themselves with a set of values associated with free flow of information. Such values are fundamental to democracy, of course, and are also fundamental to their identities as companies. Beyond this question, however, lie other questions: Why do companies find themselves asking them in the first place? What is different about the world in which we live today? What is different about the place of business in the world?

As I will argue throughout this book, one thing that is different is that many companies have their own independent identities that interact with other political and social entities. As they interact, companies form their own foreign policies, forcing them to make choices. Those choices may or may not be as dramatic as the ones Google and Twitter made, but they must make them and draw from some source(s) as to how to do so. Moreover, it is also important to recognize that many companies from many different sectors will be implicated in this. Actually, all companies will be implicated in this, but, to begin to see this, consider other examples of companies with acute needs to address these concerns.

As with sovereign states, the notion of foreign policy in business is to mindfully weave multiple strands of institutional capabilities and best practices into a strategic model that allows a company to respond to crisis and proactively position the company within the shifting balances of power that characterize a “market” comprised of political and moral factors that have a strong impact on the economic bottom line.

Like nation-states, companies must find their way through these complexities with a base that supports them. They may differ as to whether they find that base in the personal commitments of their founders, alliances with their home (or host) government, and/or the loyalty of their shareholders, customers, and employees. In the case of the Arab Spring, Google and Twitter appealed to their shareholders, customers, and employees, whereas Vodafone and France Telecom allied themselves with the Mubarak regime.

Raw material extractors find themselves immersed in the vagaries of geopolitical unrest as well. First Quantum invested heavily in copper and cobalt extraction in the southeastern part of the Democratic Republic of the Congo only to have its license revoked. Freeport-McMoRan Copper and Gold has been known for taking a strong role in working with local populations to achieve living wage standards and protection of human rights, a positive approach that Shell and many other extractives have attempted.⁵

Of course, companies have long practiced lobbying and various kinds of influence-promoting activities, sometimes within legal boundaries and sometimes outside of them. Beyond such activities, companies may proactively attempt to influence constructive change in societies as well. SiThaMu explicitly sets itself out to be one such company, by bringing together competing—sometimes warring—factions in Sri Lanka to work together as fellow employees. Similarly, during the Northern Ireland “Troubles,” the Confederation of British Industry actively promoted the cause of peace by demonstrating a peace dividend that would result if the violence stopped; in a gesture similar to SiThaMu’s, a nonprofit called FuturWays intentionally populated its workforce with equal numbers of Catholics and Protestants to give them the opportunity to work together.⁶ The U.S. secretary of state annually recognizes at least three American companies whose work overseas is so positive that it promotes good relations between the host country and the United States.⁷

Sometimes companies unwittingly find themselves in the middle of controversy. That happened to McDonald’s when it changed the formulation of the oil in which they cook their famous french fries from one containing beef tallow to pure vegetable oil and then back to beef tallow. The problem was that they didn’t inform the public of the last change, which caused vegetarians to consume beef and for Hindus to unwittingly violate religious precepts. The results were protests and even attacks on McDonald’s restaurants in India and elsewhere; one angry protestor even ironically smeared cow dung on the exterior of one of the restaurants.⁸

Some public relations messes take on a bizarre character. Consider the toilet manufacturer that, for some reason, sketched figures of Eastern spiritual deities on the product. Responding to complaints, the company said that it meant no offense; after all, it had a few commodes with the Virgin Mary as well.⁹

Whether they like it or not, companies are judged by more than economic criteria. Nor is it easy to hide these days; between political events and the ability of the Internet to capture corporate, as well as political, behavior, we have a chance of keeping an eye on businesses and politicians. In light of that public attention, what should a company do?

In this book, I will argue that companies can and should anchor themselves in a strategy of fostering peace. Such a strategy begins with attending to one’s core constituents (shareholders, customers, and employees) and then extends to crafting a corporate foreign policy that diplomatically supports peace building. With few exceptions, peace and stability are in the best interest of business. Yet it is one thing to benefit from peace; it is another to contribute to it. The former suggests either a pawnlike role for business within a geopolitical balance of power or a free-rider position where businesses simply reap the benefits of others’ peace (and ethics) building work. The latter calls for businesses to take on an active role to interact within a balance of power to cocreate a social and corporate interest in peace. A starting point is to understand three forms of power to which companies are subject.

An Introduction to a Three-Pronged Model of Power

International relations expert Walter Mead sets out a framework to explain a matrix of power with which nation-states must deal. It serves as a helpful framework for corporations as well.

Mead differentiates among three kinds of power: sharp power, sticky power, and soft power. Sharp power pertains to military capability. What armaments, personnel, and other physical capability does a country have to be able to impose its will on others? Sticky power is typically economic; it pertains to the trading systems that powerful countries can establish as the infrastructure for conducting commerce. Soft power pertains the realm of ideas and values.¹⁰ Corporate foreign policy (CFP)—an idea first conceptualized and introduced to me by my coauthor Stephanie Hare—must address all three.

Though a defining feature of the nation-state is its monopoly on the use of force, companies do face force-related issues in three ways. The first way relates to the company’s dealing with nation-states. In what ways are companies subject to or threatened by the use of force? For instance, is a government threatening to nationalize the industry? Are corporate assets at risk of being redirected toward a country’s military efforts?

The second way pertains to how the nation-state’s military capabilities can be used for the benefit of the company. At what times and places can such force be relied on (via police or legal enforcement of established rights and interests) by companies?

A third way deals with the autonomy that companies have to use force separate from the government. For example, companies typically use their security forces to remove an unruly visitor, make an initial response to a crime, or even patrol the premises. The extent to which companies can actually wield such power, or do so in conjunction with state security institutions, depends on local laws and agreements. Especially when doing business in conflict-sensitive zones, the issue of sharp power is one of interest to corporate action.¹¹

Companies regularly wrestle with issues of sticky power because such power directly pertains to economics. The navigation of trade agreements, export-import laws, regulation, enforcement, competition with other companies, and a myriad of other sticky-power issues arise in CFP. Companies spend considerable time focused on this particular dimension of power, and it draws the attention of practitioners and scholars alike.

Companies, of course, wield their own sticky power as well. Nations need companies to employ people and to pay taxes, which is why governments will go to great lengths to encourage companies to locate in preferred regions. The threat of a company leaving an area can cause considerable disruption for a government. Further, the markets and consumer tastes created by marketing and advertising create webs of buying trends, supply chains, and employment that establish entirely new economic patterns. It seems inconceivable today that human beings navigated life less than thirty years ago with nary a cell phone—obviously manufactured and sold by businesses—in sight.

This naturally leads us to the final dimension of power dimension: soft power, or the power of ideas. Despite the apparent strength of military and economic might, soft power remains the strongest of all. Ideas may be the seeds of new military capabilities and economic markets, but they range much further to touch on the very nature of why and how we live and the institutional arrangements that we rely on as we journey through our lives.

Writings on CFP to date argue that, like sovereign states, companies must face issues of institutional legitimacy, which is the essence of soft power.¹² Corporate social responsibility often focuses on this issue in companies as well. In paying attention to social and moral issues, businesses again parallel the reaction to public demands that governments also face.

Today, even the most authoritarian of states couch their policies in terms of respect for human rights and government programs that are beneficial for the populace. In an exhaustive 900-page book, international affairs and legal scholar Phillip Bobbitt argues that the period from 1914 to 1989 constituted one long war fought among liberalism, communism, and fascism, and each contended—frequently via armed conflict—that it was a superior form of government.¹³ Fascism offered efficiency and certainty; communism proposed equality; liberalism touted freedom. How each implemented such notions raises other questions, but among these sets of philosophical alternatives, arguments for legitimacy were central to each ideology’s claim to authority.

The same holds true for corporations. If a company is British, it may logically be regarded as an extension of the United Kingdom, but if that company does work in fifty different countries, then its character is less British and more “something else.”

To be sure, few suggest that companies should be democratic institutions, though some companies do set themselves up as such.¹⁴ But liberal principles extend beyond the identification of voting rights. They also include issues of voice, human rights, freedom, justice, equal opportunity, and responsibility. Corporate leaders, whether they think these ideals are compelling or not, do trumpet their companies’ commitments to such things.

Though sometimes eschewed as public relations window dressing, the fact that CSR consumes a large portion of company time demonstrates that companies recognize the vitality of legitimacy. Indeed, one can examine the actions of Google and Twitter during the Arab Spring as a crucible for adhering to the value of free-flowing information.

Corporate Legitimacy

These notions of corporate legitimacy, appropriate busine...