Cry for Alp: corporations step into political leadership void
As politicians stay away from Davos and confidence in state institutions evaporates, executives are ready to step up
Regardless of its apparent unpopularity, Davos gets bigger every year. Each January the global elite descend on a small mountain town high in the Swiss Alps to discuss the existential issues of the day. This year, they came in record numbers, turning the quiet Alpine retreat into a circus once again.
About 3,000 people attended the World Economic Forum – equivalent to more than a quarter of the population of Davos. Five-thousand Swiss army personnel were drafted in to provide security. Dozens of private jet flights will have landed at surrounding airports. Processions of dark Mercedes limousines, stretching past the town limits, brought traffic to a standstill morning and night.
Davos yet again served up some of the contrasts that so often result in it facing charges of hypocrisy.
Inside the conference centre Sir David Attenborough urged delegates to help save the world’s oceans, reducing some to tears with slides of starving walruses; outside, a six-foot tuna was seen being pulled along on a sledge, presumably to cater for a sushi supper.
A stream of speakers pledged their commitment to ending poverty amid one of the greatest concentrations of wealth in the world (one party was rumoured to have hosted 28 billionaires).
But the main theme this year was who didn’t come. After topping the billing last January, the most obvious absentee was Donald Trump. “I am respectfully cancelling my very important trip to Davos ... My warmest regards and apologies to the @WEF!” Trump tweeted earlier this month. In fact, despite a promise to send a high-level delegation in his place, the sole appearance from the White House was limited to secretary of state Mike Pompeo via live video feed from Washington.
“Out of consideration for the 800,000 great American workers not receiving pay, President Trump has cancelled his delegation’s trip to the World Economic Forum,” press secretary Sarah Sanders said. Trump has yet again captured the zeitgeist.
Theresa May has called off her visit as she attempts to save Brexit; French President Emmanuel Macron, who is struggling to stop the violent street protests of the “gilet jaunes” from wrecking his presidency, is also skipping the event. Chinese president Xi Jinping too has chosen to stay at home, just as China’s economic growth slows to its lowest rate in three decades; and Indian prime minister Narendra Modi will not be making an appearance either, as he fights for a second term at home.
All five have been top of the bill at Davos at some point during the past two years. The long list of big-name no-shows is a blow for an event that prides itself on an ability to attract the most influential figures from politics, finance and business, as well as major film stars and other top entertainers.
Critics say the turnout reflects a world in crisis – embattled leaders are aware that rubbing shoulders with tycoons at a time of domestic crisis isn’t a good look with voters. It was left for a smattering of other world leaders to address the delegates.
Shinzo Abe briefly sounded an upbeat tone, boasting that Japan was on course for record economic growth and ready to embrace multilateralism. But others, such as Angela Merkel, were decidedly downbeat. The German chancellor said she had “grave concerns” about “a new approach” among the world order that prioritises self-interest.
Despite Abe’s best efforts, the overall mood was distinctly sombre, prompting UBS chairperson Axel Weber to complain that everyone was “too pessimistic”. Harvard professor Ken Rogoff said: “It’s just a feeling that it won’t be so great this year.”
With faith in the world’s leaders seemingly at its lowest for decades, a consensus is building that there is an opportunity for businesses to step in and lead the way. A major survey published on the eve of Davos (and quoted by just about every business person you talked to in Davos) fuelled hope that the public are regaining trust in big companies.
The Edelman Trust Barometer, which surveyed 33,000 people from around the world, found they have more faith in companies than their political leaders. Three-quarters of respondents said they trust “my employer”, compared to 48% for governments. The same survey also found that there has been a massive collapse in public faith in the major US institutions. The decline is the steepest yet measured among the general population.
“The United States is enduring an unprecedented crisis of trust,” said Richard Edelman, chief executive of the Edelman Trust.
Amid the vacuum, society is turning to companies for answers, claims Larry Fink, boss of the world’s biggest fund manager BlackRock. “Unnerved by fundamental economic changes and the failure of government to provide lasting solutions, society is increasingly looking to companies to address pressing social and economic issues,” Fink declared in his letter to company bosses this month.
It is a view that was shared among top bosses from around the world at Davos. “It’s important to have institutions that govern us,” said Satya Nadella, chief executive of Microsoft. “We can’t do away with what governments have always done. But at the same time, we as companies can’t abdicate our responsibilities.”
To be effective, companies must demonstrate a clear purpose that benefits wider society, including employees, clients and the communities where they operate, many influential figures argue.
“We have positions of power and responsibility. Having a mission and vision that inspires is vital,” said Dan Schulman, boss of PayPal.
Critics argue that purpose often comes at the expense of profit but that view is increasingly being challenged. Fink says the opposite is true: that companies with a clear purpose will be more profitable. In fact, he argues that without purpose, profitability cannot be sustained. “You need a licence to operate. Those companies who live that purpose and articulate it constantly will persevere and be leading companies in the world.”
At a time of rising nationalism and populism in many parts of the world, the key, insists Fink, is that capitalism is reshaped to promote more inclusive prosperity. “The marketplace is looking to big companies to be much more transformational. We need to make sure the wealth isn’t so concentrated,” he said.
The question of trust is even shaping the choices that consumers make, whether it’s the food they eat, the clothes they wear, or the toiletries they use, the bosses of Unilever and Walmart claimed at Davos. Alan Jope said the mass-produced consumer goods market of the past 100 years is undergoing “seismic changes” amid soaring demand for brands to put “purpose” over profit. Consumers want to know how brands are “making society and the planet a little better”. Products that could demonstrate a clear purpose experience “dramatically better growth”, he said.
His words were echoed by Walmart boss Doug McMillon, who said consumers wanted to know “how the product was made and delivered and how people were treated in the supply chain”.
Others are less convinced.
Raghuram Rajan, the former governor of the Bank of India, questions whether companies can be part of the solution when they are, at least in part, the source of many of the tensions. “The US was very happy when US companies produced in China and sold back into the US,” said Rajan. “That has changed partly because these corporations saw China as a market they wanted to enter and felt China was erecting barriers. Today a lot of this fight is not just inter-government. It is also between the big companies, all of which want a global presence.”
Meanwhile, the backlash against the giants of Silicon Valley has reignited the debate about whether big corporations are a force for good or evil. Are some of the very biggest now too big? “There are clearly benefits of scale – lower prices and better products get passed on to the customer,” Rajan said. But he believes there is a more pressing question: “Who has the power – elected governments of countries or the unelected boards of companies?”
The vast majority of chief executives are simply too scared to speak out on major issues for fear of taking sides in the political debate and alienating customers. In recent weeks, concerns have been expressed about the relationship between the UK treasury and some of Britain’s biggest businesses, and how they appear to be working in tandem to block a hard Brexit.
Still, CBI boss Carolyn Fairbairn insists companies deserve credit for expressing a view. “Business leaders have had the courage to speak out. It’s not been easy for them. People don’t know how difficult it is, you don’t want to frighten or worry your employees but at the same time if you don’t speak out about the risk to your business and then they happen ... ”
Others question whether this is the right moment for businesses to be speaking out at all. Fuelled by the anti-business campaign of the UK’s Labour Party, there is a feeling among many British business figures that public trust in companies has in fact declined. And instead of leaping to the defence of capitalism, the government has frequently seemed to distance itself from business, leaving bosses afraid to take a stance on big issues.
Meanwhile, there is concern that a series of high-profile scandals such as the collapse of Carillion, an eye-watering pay package for the boss of housebuilder Persimmon, and calls for Sir Philip Green to be stripped of his knighthood after BHS went under, have reinforced the image that business benefits a few at the top to the detriment of everyone else.
“There is a lot of pressure to speak out on issues right now, including Brexit, but most don’t see the point,” said one senior figure on the sidelines of Davos. “A lot of the big voices have been tarnished and therefore the message won’t hit home. A few bad players have ruined it for the rest.”
For its critics, that last thought could be the Davos jamboree’s unofficial motto.
– © The Sunday Telegraph