WASHINGTON, DC – Once again business, political, and academic leaders from around the world descended upon Davos for the World Economic Forum Annual Meeting, where they had much to discuss with respect to the current state of the world and how to improve it. This year’s theme was “Responsive Leadership,” which, according to WEF founder Klaus Schwab, “requires a deeper commitment to inclusive development and equitable growth, both nationally and globally.”
In the United States, an acrimonious and divisive presidential campaign, Donald Trump’s election, and a wave of post-election protests all speak to the importance of paying attention to both political messages and cultural divisions. Many observers expected the 2016 election to be a referendum on cultural values, but voters instead sent a clear message about an economy that has excluded them.
The American working class wants someone to pay attention to the fact that their jobs have been displaced by technology and globalization. They want the dignity that comes from work, but the jobs they once performed have disappeared. So now they want someone to fix that problem, and they voted accordingly.
Business itself wasn’t on the ballot. But as someone representing a multinational organization, I found myself looking in the mirror when I discussed the election outcome. Multinational organizations and businesses have prospered from global markets and dramatic advances in technology. These changes have made significant contributions to productivity, but they have also created the perception that jobs were outsourced, as manufacturing moved to economies with lower labor costs. The lesson is that we should think about the economic long term when making decisions that have broad social consequences
And, of course, voter unrest is not limited to the US. As the Brexit negotiations approach, many are worried about Europe’s future. National elections in Italy, France, the Netherlands, and Germany this year will likely challenge the principles of openness and integration. And any resumption of large refugee inflows could pose an existential threat to European unity.
Economic inequality is clearly a public concern. As countries turn inward, amid rising nationalism and intolerance, responsive leadership demands that we listen to the underlying message and act accordingly.
In advanced economies, that message reflects three trends. For starters, there are diminishing economic opportunities for the middle and working classes. While immigration and globalization are often blamed, the real culprits are chronic slow growth and technological innovation.
Second, there is a widespread belief that advanced economies’ urban elites – in government, the media, and business – are either uninterested or unable to address their societies’ most serious problems: economic inequality, banking crises, aging populations and overburdened social-security systems, terrorism, porous borders, rapidly changing community identities, and much else. These issues cannot be ignored; they play out in people’s lives every day.
Third, social media and hyper-connectivity are dividing us as much as they are uniting us. To be seen in today’s crowded media landscape, one must be provocative – an imperative that leads to increasingly extreme points of view, polarization, and the creation of alternate realities. In this environment, policymakers feel more pressure to act quickly, weakening representative democracy’s emphasis on deliberative and consensual decision-making.
Responsive leaders need to learn from past mistakes. The likelihood that Trump will ease regulations and cut taxes has pumped oxygen into US markets, and many business leaders are confident that economic growth is on the horizon. But while growth should be welcomed, we must ensure that we do not simply retrace the missteps of the last decade, when the benefits of growth were not widely shared.
In the face of today’s political disruptions, responsive leadership requires that we address all forms of inequality. We need to change the standard business model so that incentives and priorities align with responsible corporate citizenship. That means rethinking corporate governance, and the core values, norms, and interests that drive corporate behavior. All stakeholders, from executives, boards, and investors to governments and civil-society organizations, should play a role in crafting a long-term, conscientious response to the issues people care about.
And businesses must be seen to care, by paying closer attention to the social and political implications of their actions. Multinational organizations need to consider seriously how decisions about outsourcing, shifting profits, and finding tax advantages overseas will be perceived. Will cutting employment and job-training programs land a company in the news? If a company adopts productivity-enhancing technology that eliminates jobs, will it do anything to help its displaced workers remain equipped to participate in the labor force?
In a volatile, “post-truth” media environment, blaming the government or insisting that globalization is good will likely backfire. Multinational organizations helped create the problems that confront us today, and they should work with governments and the public to come up with innovative solutions to them. Companies should ensure that their workplaces are safe spaces for dialogue, because diverse views improve outcomes. More generally, we need to rethink the existing social contract between business and society, and reimagine corporate governance as a powerful tool for expanding economic and cultural inclusion.
Multinational organizations can address today’s challenges only with responsive leadership – the kind of leadership that finds common ground with governments and members of civil society to envision a new way forward. With collaboration, we can help build a more inclusive economy that benefits everyone.