And
if the leader insists on certainty of
success before venturing into the
frontier, his/her organization never
will do so. I have answered the third
question already.
To paraphrase one of your focus
areas ‘does globalization kill virtue?'
It doesn't have to but it can. My view
is that the future of globalization
rests on whether globalization raises
or lowers the average civil
foundation around the world.
Consistent with my earlier
statements about the relative
thinness of the civil foundation in
developing countries, I believe that
advanced country corporations have
a pernicious arbitrage opportunity
when they invest assets in
developing countries. Because the
civil foundation is much thinner in
the host country, the corporation in
question can set standards for
activities in the developing country
that are well below acceptable
standards at the top of its home
country civil foundation but are
actually at the very top of the civil
foundation in the host country.
In this case instead of investing
dollars in its home country, by
investing them in the developing
host country, the corporation is
engaged in averaging down the
global civil foundation—i.e., a
greater weighting of dollars has gone
into an economy with a lower civil
foundation and the investment is
made at the top of a lower civil
foundation.
If, instead, the corporation has to
decide that it didn't matter what was
required or expected in the host
country but instead it chooses to
apply its home country CSR
practices in the host country, its
activities in the host country would
be well inside the host country
frontier. Over time, this would have
the effect of pulling up the civil
foundation of the host country and
thus the corporation would have
contributed to the averaging up of
the global civil foundation. This is
the challenge for globalization.
Globalizing advanced country
multinationals need to operate in the
frontiers of their developing country
hosts in order to contribute mightily
to the averaging up of the global civil
foundation. If they do, globalization
will proceed and it will contribute to
making the world a better place. If
they don't, the opponents of
globalization will stop its forward
progress and start to roll it back.
What is the role of regulation in
ensuring high standards in CSR?
Should they be made mandatory? For
instance, mandating the companies
to devote a certain percentage of
their revenue to CSR initiatives?
Regulation is tricky on this front. It
plays an important role in the civil
foundation by creating the
compliance quadrant. And if one
tried to regulate mandatory
performance in CSR, all there would
be is one quadrant—the compliance
quadrant.
I would not favor that. The
approach assumes that governments
can judge precisely what amount of
CSR by every corporation is the most
positive for the economy. I don't
think it can—not even close.
I also think this sort of approach
would stifle innovation in the
Frontier. Corporations would
increasingly think that they don't
have anything to think about CSR
except while complying with
government CSR regulations.
I prefer governments in a
responsive mode. When a group of
companies trying to do something in
the structural frontier approaches
government and suggests a
regulation that would make a good
thing possible, I would want
government to listen carefully. Or,
when an initiative that started in the
strategic frontier and migrated to the
choice quadrant of the civil
foundation, by way of others copying
it, government should think about
transitioning it from the lower left
quadrant (choice) to the lower right
(compliance) by way of regulation.
