Podcast transcript: Who will tackle the issues that matter: capital or the capitol?

31 min approx | 26 Nov 2019

Yassmin Abdel-Magied

Welcome to The Better Question, the EY podcast series that will answer the questions that will help you lead your business through this transformative age.
What will happen when trends that we already know are underway today start to transform society?

I am Yassmin Abdel-Magied, engineer by trade and writer by vocation. Over the course of six episodes, we are asking some of the most probing minds around the globe about the world-changing issues that are just over the forecast horizon. And we are asking them, What’s after what’s next?

And I have here with me writer, futurist and the curator of What’s after what’s next?, Chris Meyer.

Chris Meyer

Great to be with you, Yassmin. I am Chris Meyer, and my ongoing work with EYQ, the EY global think tank, is focused on the question, What’s after what’s next?

Abdel-Magied

Chris, so good to chat again. So, what are we talking about today?

Meyer

We are going to look at our biggest, hardest topic so far, I think. We call it the new social contract.

Abdel-Magied

Okay, hold up. You mean like 18th century philosophy, Rousseau, Hume, Locke, all sorts of fancy names?

Meyer

Yes, that is what I mean. The relationship between a society’s individuals and their governments. What do they each owe each other?

Abdel-Magied

Respectfully, Chris, how can a question debated 300 years ago be What’s after what’s next?

Meyer

Well, some things have changed radically, and the solutions that have been reasonably stable and successful are not working so well anymore. There is a need for change, and we are starting to see different solutions around the world. And nothing has changed more than the role of the corporation.

Abdel-Magied

Again, respectfully, but I thought the social contract was the deal between citizens and governments. Where do companies come in?

Meyer

You have nailed one of the central questions. When the ideas of representative democracies, or for that matter, authoritarian governments, were codified, corporations had relatively little power compared to governments. This was true as late as the period after the second World War. But now there are only a handful of governments in the world as powerful as the top hundred global corporations.

Abdel-Magied

Yes. And those global corporations are truly global, and unelected. And the governments are quite different, right?

Meyer

Well, not all the governments are elected, but they are certainly not global. And this points to a second big change, which is, many of the biggest challenges we face are global, meaning they are in no single government’s jurisdiction, but they do affect global companies.

Abdel-Magied

So, I am thinking immigration, climate change, terrorism, emergent diseases — national governments cannot do much about these on their own.

Meyer

Exactly. So, today’s better question is: Who will tackle the issues that matter, capital or the capitol?

Abdel-Magied

Meyer, how are we going to get any kind of handle on this in half an hour?

Meyer

A good question. We are lucky enough to have two guests perfectly equipped to frame this issue.

Abdel-Magied

Let us hear from them.

Meyer

Kees Kruythoff is joining us after his 23-year tenure with Unilever, until this month, the global head of Unilever’s Home Care business. Unilever is probably the corporation best known for advocating companies taking ownership of global issues. He’s on our show representing his personal views.

Kees Kruythoff

I am Kees Kruythoff. I have been working for Unilever for 27 years all around the world, from Europe, to Africa, to China, to Brazil, to North America and then global.

Meyer

And with him, Ethan Zuckerman, a former tech entrepreneur, who heads MIT’s Center for Civic Media. He focuses on the rights of citizens and their power to organize in a connected world.

Ethan Zuckerman

My name’s Ethan Zuckerman. I direct the Center for Civic Media at the MIT Media Lab. I study the ways that people around the world use media to make social change.

Meyer

So, Kees, Unilever has been perhaps the most visible global corporation calling for companies to take responsibility for some of the issues that have become bigger than any government’s jurisdiction or power to resolve. As corporations wield more power, what happens to their responsibilities?

Kruythoff

You know, I think the topic of today really is a big one, obviously. And it is not only that companies need to take more responsibility. But it is the discussion, how to do that, and, as it should be, it is not only about having the impact on society. We need to prove to the world that it is both better for the business and better for society. So, I think the real discussion is to make sure, yes, we will need to make an impact and create a better world, but it has to be looped back into what it is. And that is around business performance and making sure that it has impact both on business and on the planet.

Meyer

So, how did you arrange to do that?

Kruythoff

We were part already of things like sustainable fishery and all those types of programs. So, again, you know, we have been continuing this notion around doing the right thing as an organization. Ultimately, it is important in this discussion, it is about the total corporation, that it is the vision, the strategy of the company. But you need to make sure is that you deliver that towards consumers, towards citizens of the world in a relevant way. And for us, that is through our brands.

Meyer

So, you joined the executive committee in 2011. I am wondering, since then or at that time, was there dissension at all in that group about the rights of shareholders or conflict among your stakeholders?

Kruythoff

Yes, of course. And it should be. It is always tension which creates the right sharpness in the discussion. But very early on, some of us were saying, you know, the Unilever Sustainable Living Plan is our growth model. It is our growth strategy. Early on in the journey, there were still many people who actually saw this as two separate parts. You run the business on one side, and on the other side, we had the Unilever Sustainable Living Plan. And what is most important is that you created one and the same thing.
The theoretic model is absolutely clear, is that, you know, this model is a superior model; that this model is driving more relevance of the business in society. Therefore, it is that people are buying into your brands, which means that because of that, people ultimately have a preference for your brands, and therefore, you grow faster and have a superior performance in the marketplace, which therefore will come back into shareholder value.

Of course, there are moments, is that these doing the difficult right adds cost into the system. And therefore, those are the moments where, you know, the discussion about is this a long-term versus a short-term? Do we get it back ultimately into better performance, or already in the short-term? And all those discussions should be there in the right way.

Meyer

So, the crux of that argument would seem to be that individuals will change their behavior, their buying behavior, because of preference for sustainably created offerings from a corporation. And that, to a degree, rests on individuals organizing to vote with their wallets and persuade others.
So, I want to ask Ethan, as both former technology entrepreneur and media expert — the past decade has shown that networks give individuals some ability to organize, and persuade and apply pressure; do you think that is changed the balance of power between individuals and corporations?

Zuckerman

I would like to back up a little bit and talk about why we think networks might be powerful. And I think the reason we are interested in the power of networks is that some older aspects of the social contract are not working especially well. The social contract, as I understand it, is this idea that individuals essentially subjugate themselves to institutions that concentrate their will and power. So, in a democracy, we say it is really, really hard for 300 million of us to make decisions. We are going to pass that off to a small set of people who we elect. And they are going to come up with laws that we are all going to follow, and they are going to govern our behavior. And this is a fair system because we are voluntarily giving up our power to an institution, which then represents our interests.

I think a lot of what is going on socially right now is a sense that those institutions are not working especially well. And lots of people, both on the left and on the right, feel like those institutions are not doing well for them. You see this with left-wing insurrection movements. You see this with right-wing movements. So, when people look to networks, they are looking for a different way of asserting power. They are looking for a way of essentially saying, “Hey, if I do not like the behavior that a corporation is taking, maybe I am not going to be able to make change through passing laws.”

But the reason you would organize through a network is that you do not feel like you can get your government in a country to take action around that issue. So, networks are both really good news — they are the possibility that individual consumers can get together in a way that is more organized than those really diffuse market signals, right? The market signals of, hey, we are going to stop buying Unilever products until Unilever is more responsive on palm oil, that is a pretty diffuse signal. People getting together on a network and putting together a petition or figuring out how to approach the company, that is a much more focused signal.

But still, at the end of the day, it is not necessarily great news if people are organizing purely through the network and are not reaching out to existing governmental institutions as a way of trying to make change, as those are the institutions that under the social contract, we are supposed to have influence through.

Meyer

The social contract as it is today varies widely around the world, and I want to ask you about some specifics about government responsibilities and whether they are changing. So, let us start with privacy and security. How do governments trade that off, and how does that vary around the world? And what do you think we should expect in the future?

Zuckerman

It has been really interesting to watch the difference between the United States and Europe around questions of privacy. Europe has a very strong tradition around data privacy. What a lot of us expected to happen was that Europeans would put strong privacy protections in place, with things like GDPR, and we would see companies have to sort of bow to European authority. Now what has happened instead is, no, not so much, actually. What we have seen instead is companies get very flexible about operating in different markets. In the US, where there is a lot less legal protection on privacy, they are collecting huge amounts of data. In Europe, they are collecting slightly less data.

I think what is interesting in this is that very few people are expecting the US Government to take really meaningful action to protect privacy. That just does not seem to be the motivating factor, in the US context, at least. It is possible that you might see US action around sort of civic harm — this idea that certain types of myths or disinformation are really bad for us as a society. That is a place where I could imagine government stepping in and trying to preserve that sort of civic space. But it is going to be a very different set of motivations than the privacy motivations that are so powerful in a European context.

Meyer

Let us talk about another responsibility of government and where, again, there may be a difference in Europe. After World War II, the European governments decided it was their job to guarantee employment. Should governments guarantee economic security, and if so, through what means?

Kruythoff

You know, ultimately, I believe the market should play its part, and ultimate economic growth needs to help to create a world where employability is for all. So, I think at the heart of everything is this notion about education, and relearn skill and continue to skill, whether it is there for — from the youths all the way to the elderly. And that is the biggest part of functioning society.

Zuckerman

A lot of my work at MIT is with different progressive social change foundations around the world. And what has been really interesting over the last 15 years is to watch their focus on different rights. I would say 15 years ago, many of these foundations were focused on a pretty narrow set of human rights, and there was pretty much a belief that as long as you preserved the right to speak, the right to assemble, the right to vote, the right to bodily integrity, that people would find ways to go ahead and organize for a better world. Now I am starting to see a lot of language around a right to work, economic rights and sort of a recognition that asking someone who cannot make enough money to feed themselves to be politically active is sort of an absurdity.

The old school rights philosophers did not like this idea of economic rights. They wanted this idea of some very basic human rights, and then we let the market work it out. I think what we are starting to find is that that just does not work all that well. And a lot of people are getting really frustrated that democracy and stability is not necessarily leading to higher levels of employment, higher levels of economic justice. So, I think we are going to see increasing pressure to say that human rights have to include the right to have a decent life, not just the right to have a voice.

So , we have got to get ahead of this. We have to start thinking in terms of not necessarily just a universal basic income, but I think a right towards meaningful work. I am not sure that employability does it for me. I think employability may fail to recognize the fact that who we employ and how is changing quite radically at the moment.

Kruythoff

Just to add to this, in terms of human rights, that is why I love the notion about how it shifts in terms of prioritization and the difference of human rights. Just think about this notion around the right for clean air versus polluted. And so, I think this whole notion around environmental distress and therefore, you know, this notion around, once again, also in China, how that shifts in terms of where real quality of life sits. We immediately will get it back into what truly is this notion about sustainable living and making sure that we define that in the right way, and that we address that therefore in not only the economic but also in the social right way.

Meyer

Yes. A decent life is not so decent if you cannot breathe.

Kruythoff

Yes, exactly.

Meyer

One of the differences in government posture around the world is whether governments take some responsibility for income inequality or economic injustice, whether through redistribution or other means. How do you see that issue evolving in the world’s social contract?

Zuckerman

I think we are wildly out of whack historically in terms of inequality. Or more to the point, I think we have gone back to historical levels of inequality, but they were really levels from the age of dominant monarchies and feudalism and such. This was a modern situation that we were able to overcome through things like a progressive income tax. In the United States in particular, we have really moved away from this. And this is a movement that started in the 1970s and 1980s. The neoliberal project under Reagan and Thatcher, where you started making less investment in state resources; the idea that the government could do no good and that the market should do everything.
And so, on some level, we have to fix inequality as a baseline in fixing these other institutions. One of the reasons we have such low faith in the United States in our government institutions is that everybody understands that there is a class of people who are not paying their fair share and are not subject to the same rules and regulations.
Meyer

Yes, so I am wondering if either of you sees somewhere in the world a model that you believe will attract adherence and become a standard social contract.

Zuckerman

I will give you an optimistic and a pessimistic answer to that.

Meyer

Great.

Zuckerman

Like most American progressives, I am a big fan of the Nordic model. It is a model in which you have very high tax rates. You try to redistribute income, and you try to focus on social services and public goods as a way of increasing national happiness and prosperity. It is very hard to believe that a country like the United States will adopt it. It would mean such an incredible shift in culture, and sort of senses of individualism and senses of what the market does.

I fear in many ways that the model that I am actually seeing gain prominence around the world is the Singaporean model. And this is a model that favors social stability above all else, in a way of essentially saying, “Look, we are not going to permit certain types of organizing or dissent because we know that in the long run, that is not going to allow us to have the control over society.”

What is interesting about Singapore is that it is not a dystopian nightmare. It is actually quite a lovely place. It is a nice place to live. It is a nice place to visit. But it is also not a liberal democracy. And I think the viability of these hybrid regimes — neither fully democratic, neither fully authoritarian, but very appealing and very successful — I think they probably have greater legs than the very democratic, very redistributed Nordic model that I would love to see take off.

Meyer

Kees?

Kruythoff

Yes. I also had Sweden and Singapore immediately in my mind, interestingly enough. Being back in Holland after having lived 20 years outside of the Netherlands, I must say there is one other lens which we have not discussed yet. And that is kids’ rights and the youth. And, you know, already for the last 10 years, there is a study done by the economists, which basically looks at the happiness index for children. And that is in the Netherlands. So, I think you need to add this notion about where do you have freedom and joy, and the kids’ rights index should be a part of the thinking. I am also surprised how few businesses are actually stepping into this space. And the real point around how we as business need to make sure is that business truly is a force for good, where it is ingrained in how we make the difficult right versus the easy wrong decisions; how we can shift the financial markets towards this, which by the way is really, really happening as we speak.

And so, I absolutely believe, you know, in many of these forces, is that we still have too few business leaders who truly drive this part and prove that it is a better-performing business model. And of course, it will help to function the world better.

Meyer

Let me offer maybe an optimistic hypothesis for comment by both of you. EY actually just researched the CEOs of 200 large global companies and also their board members and investors. And the hypothesis is that they are about to reach a tipping point, and in addition, that their board members and investors will support it. So, the conclusion of the study could be, to the CEO, do something. You will get more support than you think. So, optimistic hypothesis. What do you two think?

Zuckerman

So, I am going to offer some optimism, but it is in a slightly different direction, Chris. It is a sense that when it is difficult to influence a government, or when it is difficult to take on something as massive as a sustainable development goal around something like climate change, what a lot of people find themselves doing is changing the institutions they feel like they have the most control over. And in many cases, those institutions are the workplace. It is from people essentially saying, “Look, maybe I do not like the way that the whole country is going, but at least I can say something about a boss within my division who is mistreating employees.”
I do think we are at a moment where workers, paradoxically, may have a lot of power. We are worried on the one hand that maybe automation is going to get rid of all workers, and we will have no power at all. But right at the moment in the United States, you are at about 3% unemployment. The quit threat is a very real thing. There is an incredible talent war for certain types of talent, particularly programmers. You’ve seen worker action have real effects, where people stand up and say, we do not want the company working on armed drones, for instance.

So, I am really interested in this idea that the change may not come from the board or the CEOs. And I actually think that that may be the place where you see the most positive change — people essentially saying to companies, we want to feel good. People want to feel good about their work. And part of feeling good about their work means feeling capable of changing the workplace and turning the workplace into something that is a force for positive social change. And that is a place in which I see a great deal of hope.

Meyer

There is a beautiful symmetry in the idea that if companies have become more powerful than governments, if you want to change the institutions, you change your workplace, not government policy.

Zuckerman

Yes. I think that is exactly right.

Meyer

Kees?

Kruythoff

Yes. Just to add to the thought, because fundamentally, I am absolutely an optimist by heart. And, you know, the reason why I am most optimistic at the moment is actually because of the force from the youth. My biggest hope comes from the fact that the next generation is actually highly engaged. They will not only work for companies who are there to make money. They really only want to work for businesses which are a force for good. That force will really be the force which will help to redirect, especially because they are moving their economic choices towards the forces for good. And then to your point, that is actually where the real movement and therefore the real tipping point, needs to happen.

Meyer

Wow. You have come to a kind of consensus that the force that will revise social contracts will be individuals, and that they will not only vote with their wallets, but with their values and with their skills, to create change in the powerful institutions, among which the largest are currently corporations. That is remarkable.

Let us do our closing game, which we call ping pong. So, our listeners are C-suite executives, CEOs or aspiring CEOs. And I would like to ask you to offer them advice on shifting beliefs about corporate responsibility and leadership.

Zuckerman

Ask the question, who gets to invent the future? Too often, we have a very small number of people who get to imagine and implement futures. As a result, you end up with a really limited path forward. Think about the most diverse part of the company and think about how those people could work with you to invent future products practices.

Kruythoff

New power. Make sure that the outside in is truly being represented.

Zuckerman

Be kind. It is the simplest thing to do. It is the simplest thing to lose track of. It is probably the single thing that matters most in any workplace environment.

Meyer

What a great place to end. Thank you both. This really was a wonderful conversation, and I could not thank you both enough.

Meyer

Yassmin, we covered a lot of ground there. Why do we not try a ping pong round of our own here? Let us each name an element that made a difference to us. What is your first?

Abdel-Magied

So, the first was this idea that corporations have the capability to become more trusted than governments. And some are already moving in that direction, including Unilever. And others, perhaps those who have had a bit of that tech-lash, are moving in the opposite direction.

Meyer

Monopolists can do new things with market power — influencing political views, for example. But competition could be a way to minimize it, if we change the way we think of antitrust.

Abdel-Magied

The other was the concept of guaranteeing either employment or income were less popular with the guests than the idea that the state would guarantee citizens’ employability. So, who does the guaranteeing?

Meyer

Change will happen by individuals changing their workplaces, not through government policy, both because people have more ability to influence their workplaces and because these companies have more power than government.

Abdel-Magied

Every one of these points has big implications. But do they add up to anything coherent?

Meyer

Yes and no. No, because it is impossible to foretell how this many components of a vector of change will interact to shape the social contract. For the most part, the social contract we have been participants of is the result of the Industrial Revolution.

Abdel-Magied

Our listeners in the C-suite must be wondering what this means for them.

Meyer

Since governments move more slowly than corporations, people are looking for companies to lead. And here is the opportunity for the C-suite, I think. Companies that listen, experiment, explore will have an advantage in the talent market. And for performance, Kees told us that once they decided on their growth strategy, the Plan for Sustainable Living, it became a profitable business strategy.

Abdel-Magied

Chris, this is a tough one I think, but what questions would we tell the C-suite to pay attention to based on this conversation?

Meyer

I agree. These are tough, because so much is going on. And what’s after what’s next is really difficult to predict. But let me take a shot!
First, does your organization take seriously the shifts in the attitudes of the skilled talent you need? How do you expect to access the skills you need if you must recruit them to your purpose?

Second, is your leadership open to rebalancing how the value created by your company is distributed?

Third, in the long run, are you better off with the social contract as it is today, or with a renewed set of relationships among stakeholders? All in all, this leaves us with the better question: Who will tackle the issues that matter, capital or the capitol?

Abdel-Magied

EYQ just finished some research with 200 global CEOs, plus board members and investors, that suggests CEOs are beginning to pay more attention to social contract issues though, right?

Meyer

Yes. The research looked into whether corporations were still better off remaining above the debate on major issues confronting society, or whether the less risky strategy has become to get more involved. And it looks like this shift is actually underway.

Abdel-Magied

Listeners, you might want to hear about that. And we have a surprise for you! We are extending What’s after what’s next? with a special episode to report on what EYQ learned from this survey and how some C-suite executives are reacting.
Tune in next time for The CEO Imperative on The Better Question.

Abdel-Magied

And that concludes today’s episode of The Better Question. For more on this subject, visit ey.com.

If you would like to share your better question with us, leave a review.

I am Yassmin Abdel-Magied. The better the question, the better the answer, the better the world works. Until next time.

Disclaimer: The views of third parties set out in this publication are not necessarily the views of the global EY organization or its member firms. Moreover, they should be seen in the context of the time they were made.