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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, Batten 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 on 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,
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…
CARMICHAEL: 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,
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 companies 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.
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.
CARMICHAEL: 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 other interviews and do check us out on Twitter and Facebook @OpenMindTV for updates on future programming.