Marc Le Menestrel

Can we prevent Policy Capture? Reflections about Public Interest in Business Decision-Making

Marc Le Menestrel — 2017-04-04T10:42:38Z

On March 30-31, I was invited to the OECD Global Anti-Corruption & Integrity Forum in Paris. I had prepared the following short piece to reflect on the theme of our panel: Policy Capture. Thanks to the wonderful colleagues at the panel and the moderator, the conversation took an unexpected turn, promoting intellectual honesty and emotional maturity. I was thrilled to feel the audience, during and after the panel, engaged in tackling these difficult subjects in a smart way, from the heart and inspired.

To benefit public interest while pursuing business interest is one of the greatest challenges of business decision-makers. For business actors, aligning the private and the public, the personal and the professional, the ethical and the profitable represent an ideal that all want to attain. For policy makers, sustaining such alignments and providing the conditions of their manifestation lie as at the source of their vocation. We as humans are all capable of thinking of ourselves and beyond ourselves, and our happiness is closely related with our capability to act both in our name and in the name of others.

And it is interesting to think that our ethical vulnerabilities, the mark of our experience around failing to combine our individual and collective motivations in an ideal way, are actually one of our core characteristics. Although everything lies in everything as a whole, we know that most of the time we are entrenched in one or the other of our motivations and sacrifice the other.

As human decision-makers, we must learn to live at the frontier of ourselves, the place where a line is drawn in the gray zone. Whenever
Our ability to think, to communicate and to act at the frontier of business and public interest may in fact be one of the most important skills to face our human future. In some circumstances, business interests indeed collide with policy making aimed at public interest. To some extent, these situations question the very idea of democracy and market economy promoted by the OECD.

Consider the following examples extracted from my recent research and assignments:

Whenever the demand for fossil fuels grow, their price tends to remain high, leading to sustainable profits for extracting companies. So from this point of view, public policies aimed at promoting demand for fossil fuels are of the industry interest. On the other hand, they are not in the interest of reducing the consumption of fossil fuels.

The Chief Scientist of a technology company receives early warning signals about the hazardous character of an advanced solution. He is having dinner with a former senior executives now working in the corresponding government agency. How could the regulatory dynamics be evoked?

As a policy to reduce the incidence of some particular health issue is publicly discussed, a pharmaceutical company that sells drugs treating affected patients ponders on its lobbying strategy: should this policy be delayed?

As a candidate for national elections advocates peace and partnership with a traditional enemy, the chairman of a defence contractor is reflecting on whether they should stop to finance the party of the candidate: is peace genuinely desirable to all?

These examples are typical of business ethical dilemmas where a business actor faces a decision that either favours his/her/its expected interest or the perceived general interest. Should one strictly apply the idea that the responsibility of business is to maximize profits, a decision against public interest would be prescribed. Business actors thus have the temptation to enter into “political activities” that influence policy makers against public interest (See our discussion with Julian Rode about Why Business fails to listen to Early Warning Signals about technological hazards).

In my experience of the classroom, it is undeniable that business actors are tempted to engage in actions that capture public interest. And of course they sometimes do it. It is also interesting to note that they don't like it and are capable of perceiving the ethical issues that lie behind.

Lobbying, revolving doors, political party financing, and more structurally market commoditization of violence or of drugs or confidentiality of technological innovation are certainly not only good, they also have a dark side. The difficulty to speak about these dilemmas openly is a mere proof of the emotional difficulty that we face in admitting our guilt, our shame or our fear in the ultimate consequences of such practices.

In my experience, it is close to be a systematic opinion among business executives that the current dynamics is unsustainable. There is an obvious truth in the consideration that incentives can orient business behaviours against public interest. As a result, another temptation appears, and in particular among policy makers, which is to condemn these behaviours and their actors as “corrupted”. Corruption becomes the “evil” that ruins the world and we should fight against corruption as a priority. We constitute two categories: good and bad actors and we divide ourselves once again, “us” in the good category, “them” in the bad.

If, as advocated in the OECD introduction to the issue of policy capture, citizens reject the current system that does not serve them, politicians must be corrupted for the system to sustain. There would be therefore no genuine fight against corruption without questioning the system. Moreover, not questioning the system would be a signal that no genuine effort against corruption is truly implemented. We would be once again in a game of words and the anti-corruption discourse takes the risk of a cynical and hypocritical intention.

To which extent OECD questions the system in which it plays a role? And if we take OECD core values as a concrete translation of what “system” means, the question therefore is:

Does OECD question, for instance, the search of economic growth as a political priority? Representative democracy as a political system? Or the extension of market capitalism?

These values are in fact at the core of an ideology that is not perfect and should not be advocated as such. Opening a constructive communicational space to discuss the frontier of these ideas is a must for tackling the issue of policy capture in a credible way.

Market capitalism has ensured the institutionalisation of an economic licence to operate for companies. However, democratic structures are attaining their limits at managing their political licence to operate. One may find the reasons for this in the transnational nature of the economic and financial power of business actors, a power that outmatches the national sovereignty of western democracies. Also, the aggregation of specific business interest creates suboptimal collective outcomes that threaten the welfare of the citizens as well as the ability of human societies to live in their natural environment.

If the distinction between business interest and public interest is not new, the current global situation calls for a new way of drawing the line in these grey zones. As a professor of Decision Making, teaching to business decisions makers and from time to time to policy-makers, I have been advocating and developing tools and methods to tackle business ethical dilemmas like to ones evoked above. It is with precaution that I share three skills that emerge from this experience:

Principle 1: Shadow and Light

Each decision-maker can train his/her/its ability to see the shadows casted by his/her/its own interest and hidden by his own moral justifications. One should be able to understand why one's own interest is in itself problematic and does not only include desirable features. There is a need for a systematic analysis of the ethical dimension of business actions. And it is interesting to note that such an analysis requires suspending our judgement so as not to analyze only what supports it, which should be seen as a prejudice. The courage to face one's own shadows helps to draw the line with less violence, towards others and also towards oneself. It also reduces bad faith argumentations where supposedly win-win approaches are mainly the result of impression management and cover up more important issues.

Principle 2: Dilemmas and Win-Win

Each decision-maker can develop his agility in navigating to see both sides of the frontier separating different interests. Of course, one should be able to understand the interest from one's point of view and from the others' point of view. It is then possible to formulate more precisely the dilemmas and the conflicts of interests, which are somehow always present. It is indeed interesting to note that not all win-win are genuine. As it is always possible to do better from the moral point of view, there is always somewhere a line to be drawn. Whether this is done in full conscience and in the respect of the sacrifices that it entails is a major skill to work out. And when, making the difficult choice of what is good for all, we end up discovering good surprises that are also in our private interest, thse win-win are a most formidable reward.

Principle 3: Collective Dream

Decision-makers benefit from being invited to formulate an ideal solution. The power of dreams allows us to think beyond specific objectives. We should not limit our vision of the future and our conversations to what we think we can do. In fact, we need to create the conditions for emerging solutions to surprise us for the better and this is mostly happening in appropriate collective communicational settings.

Today, and especially in developed countries, it is my impression that the context favours business interest more than public interest in critical issues. This is detrimental to the harmonious development of societies. I thus concur with the intention to preserve public interest from business decision making. In line with the principle above, I am however reluctant to promote any confrontational way. The situation requires us to move to the next level and bring these dilemmas as the main subject of discussion. In this spirit, I suggest three directions for considerations:

Business actors, be them companies, associations, lobbyists, individuals, should be invited to take positions in front of these dilemmas. As these positions affect the public interest, they should be public. As they affect their business interest, they should be included in their reporting. This should promote proactive business behaviours and create advantages for those who consider public actors their allies. It should be respectful of the immense difficulty for some actors to take a position.

Policies as normative and prescriptive solutions may prevent our ability to invent new ways to combine business decisions and policy-making by trapping us in advocacy. We should learn to express without violence or judgement the main dilemmas that business decision-makers face at the frontier of business and public interest. Formulating and releasing to the public space such dilemmas in an objective manner, for example industry by industry will increase our capabilities to face the challenge our societies face.

Business and policy-makers should gather in forums to build ideal solutions to the tensions inherent to the combination of national democracy and transnational market capitalism in the age of globalization. Beyond the market, there is a need for spaces where digital capabilities allow participative approaches to complement political representation. That would also help to harness the growing demand of citizens for a harmonious development, beyond profit maximization of companies and national economic growth.

Angola: Searching for a new Spirit by Looking at the bright side

Marc Le Menestrel — 2016-12-08T04:44:18Z

December 2nd, 2016 was a historical day for Angola. Not because I was invited to speak at a conference on Corporate Governance in Luanda but because this is the day President dos Santos decided not to present himself to the coming elections. After nearly 40 years with him, Angola is in search of a new Spirit. I looked at it from the bright side.

And this is not necessarily easy. As Angola was to access independence from the Portuguese at the end of one of the most sombre European dictatorship of the 20th century, Angola was also discovered to be the bed of a great amount of oil. Under sea, yes; expansive to extract, yes; but of excellent quality. And as Angola is nowadays the largest oil producer of oil in Africa, it has also been the victim of the fall of oil prices in the last years. To be sincere, it has somehow been the victim of oil since its discovery: the famous Dutch disease or Oil Curse that characterized countries which rely too much on the sole wealth of oil to drive their development. But I said I was looking at the bright side. So the question is: how oil can help to nurture a new bright spirit for Angola? I witnessed the strong belief that it should not be through violence. Everyone wants to forget the bloody civil war and build on the stability which followed by the victory of future ex-President, his army and his party. I sincerely hope that the days ahead will allow the national forces to hold the ground and protect the country. With slightly rising oil prices, and a global momentum to move away from a carbon-based economy, there is a great chance to have the right amount of added value from oil to support a diversification. It was especially interesting to learn at the conference how people there dream of self-sufficiency in basic sectors such as agriculture, textile or raw material for construction. In Angola, globalization may not preclude autonomy.

A second most important question was also very much related to the global dynamics of the time: under which conditions banks can help finance this transition? If the dedication of Angola banks seemed sincere and competent, the question arises from correspondent banks that can ensure the connection of Angola's economy with the rest of the financial world. In our discussions, the power of the mighty dollar system was very much felt: as the given currency for oil of course (oil represents 95% of exports), but also through the norms pertaining to transactions and governance. Angola is asked (forced?) to adopt the accounting standards of the United States. And it is interesting to note that such exercise of power uses ethics and anti-corruption efforts as a means. Sensitive to this dynamics, and to the emotions felt by a country so proud of its political independences after a long-fought battle, it is not obvious to find a bright way out. There is however no other solution than taking the best of all systems. As Deng Xiaoping said (around the time Dos Santos came into power!), capitalism and communism are two ways to serve the welfare of the people. There is no need to oppose ideologies and there are many smart ways to combine them in order to avoid the worse of each. Angola may fiercely come to terms with practices that now belong to the past and it may do so without selling its soul.

To this end, the obvious bright side of Angola is the proud richness of its people and of its grounds -be it off shore or for agriculture. We dreamed of them leap-frogging to a green and circular economy that uses wisely the new conscience of our unsustainability. Besides the wise men who founded the economic successes of the country over the past 15 years, it was wonderful to meet a new generation of Angola people proud of their roots and farseeing in their visions. The unity provided by Portuguese as a language spoken all over the country is certainly a resource. Moreover, it seems that Portuguese themselves, who were very present at the conference, and expatriates in general, are grateful for the wealth Angola provide to their business or to their home country. In the difficult circumstances of the time, there is an obligation and an opportunity for a win-win post-colonial relation, based on a sense of care for the country itself and for its promises. The question is thus whether these Angola leaders will dare to invent their future on their own terms under the pressure of external conditions, be them coming from other nations or from nature itself.

This is in this context that I deliver my speech on governance as the wise use of power. Treating the global level as well as the corporate and the personal levels, I proposed three principles for the wise use of power.

Firstly, a principle for the mind that I termed duality. As the mind naturally thinks in classes and value-judgement, I invited participants to make the effort to think contrarily to their natural categories and to their prejudices. As Hermann Hesse wrote in Siddharta, “the contrary to any truth can be as true as the truth itself”. It is thus necessary to suspend judgments and apply critical thinking to our natural thoughts, beliefs and methods.

Secondly, a principle for the heart that is certainly called love. The mind can be treacherous to motivate us and there is nothing better than doing what we love to do it sustainably and with courage. Moreover, being able to accept our vulnerabilities helps to have the emotional maturity to thing broadly and creatively.

Thirdly, a principle for the soul that I called dreams. In a time of disruptive uncertainty, dreams can be like a light house in the storm. We do not necessarily head straight towards them, not even reach them exactly, but they offer an irreplaceable sense of guidance for our vision. Dreams help to avoid the many traps that direct routes hide below the surface.

It is with a sense of achievement that INSEAD organizers concluded the conference. There is a genuine opportunity for such events which allow conversations to take place beyond polemics and prejudices. An academic approach combined with a strong sense of relations in the respect of diversity, all with a superb organization, offer a bowl of fresh air in today's difficulties. In such conferences, the brilliance of INSEAD alumni prove that INSEAD is a business school for the world and it was indeed my privilege to be part of it. I wish Angola, its people and its Alumni to find a bright new spirit for the days ahead.

The Spirit and the Power of Money: A Creative Session at THNK

Marc Le Menestrel — 2012-06-30T12:07:02Z

On June 27, I discovered THNK, the Amsterdam School of Creative Leadership by delivering a creative session on the Spirit and Power of Money.

I met the participants of their main Creative Leadership Program in an old brick building, entirely renovated as a spacious, open, colorful and adaptable place. We all sat in a circle on cubes with a very diverse energy. Some of us had taken a short Taï-Chi session while some others were arriving straight from their outside life.

We began with a dialogue exercise of active listening. In pairs, one was responding to the question “How have you been doing with money so far in your life?” while the other was trying to offer the most trustful space by simply listening, without judgment nor interpretation. This already brought us to a common space and we could follow with a guided journey.

We all reached a safe and comfortable place to meet ourselves in the future, learning about who we are, about the Very Important Persons who accompany our inner and outer life, about work and about our achievements. Those who wanted could prepare themselves to be taken in a journey inside the journey in an attempt to meet the spirit of money. In this first exploratory step, there was no other intention than having a first meeting, and maybe also collecting some appropriate message or share some feeling.

I liked very much the sharing of one participant, who met a horse that would flee whenever he was getting closer. On the other hand, the horse would come to him whenever he was walking his own path. Then, as the encounter developed, he was able to ride his "spirit of money" in a transformed relationship.

The atmosphere was thick with our spiritual presence and it was joyful at the same time. I attributed this success to the maturity of the participants, already so much open to living their life as an adventure. After a pause, we could then move to the second part of the session dedicated to the power of Money.

Participants had read my case “A Day at the Big Bank” that I had prepared with Julian Rode in early 2008, anticipating the financial crisis for the top leaders of Bank of America. They presented their strategy to a Board chaired by Brenda Childers, the Director of the Amsterdam Institute of Finance and featuring Kwela Hermanns and Menno Van Dijk from THNK. The board was prepared to be tough on them in order to explore the tensions between corporate strategy of a Big Bank and our willingness to move towards a more ethical financial system.

Participants did a wonderful job, but to some extent, maybe not as creative as they could have been. When trying to analyze their strategies and the way they were presenting, I had the feeling they were somehow impressed by the board and the power of money it represented.

The ambiguity of our relationship with money, well expressed and analyzed by Lynne Twist in her book “The Soul of Money” (which was by the way a main source of inspiration for my work on my own relation to money), was somehow preventing them to express their full potential. Clearly, this could be a good learning, in particular when participants will later look for financing their own projects. I hope our experience with the Big Bank will motivate them to be fully daring with their own social entrepreneurship endeavors.

Eventually, this session allowed us to audaciously raise the fundamental questions of the role of money. I think of them as divided in three main realms of different scales:

– What is the role of money in this world?
– What is the role of money in a company?
– What is the role of money in an individual?

In the design of my pedagogical flow for this special creative session, I looked for each participant to develop their answers from themselves to the world. For most individuals, money is a means at the individual level. Maybe it could also be considered as such at the corporate and global levels?

Dreaming of a world where money would truly be at the service of society, of companies and of individuals, as a sort of universal means towards infinity of specific purposes is nourishing a paradigmatic change that I am trying to contribute to.

Dreaming to change the role of money is at the same time obvious and impossible: a perfect opportunity to re-invent ourselves.

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Can you teach ethics to The Big Bank?

Marc Le Menestrel — 2008-07-06T10:05:00Z

In early 2008 and hence before the public unfolding of the financial crisis, I was invited by a U.S. “Big Bank” to design, write and teach an interactive case-study that I wrote with Julian Rode about strategic ethical decision-making. I was to start with a theoretical session about the role of values and ethics in business. The teaching was part of a three-day Senior Leadership program.

The case contains a diverse range of issues which arise in the age of global financial capitalism: corporate responsibility, values-based consumerism, international regulations, political influence and public opinion (including media). These aspects of the relation between business and society are prominent factors in contemporary business decisions, yet alignment with business values is clearly not easy. This is a taste of the set-up:

“We are in the near future… The financial landscape is deeply shaken by a series of crisis and scandals, financial power continues its mutation and a coalition of international institutions, governments and social actors propose a global mechanism to regulate and tax financial transactions. The explicit political rationale is to contribute to the alleviation of poverty and to help the transition towards sustainability. It turns out that the newly elected U.S. government is favorable to the regulation. Moreover, social activits are in the street to fight for financial justice. The bank's executive committee convenes and three Senior Executives propose three different strategies to react to the situation:

1) aggressively fight the politics and work on public opinion in order to avoid regulation,

2) wait and see while communicating good intentions,

3) align with the political effort and turn it into an opportunity to meet stakeholders' expectations and re-invent the Big Bank.

2011 Wall Street protests strikingly resembles the situation describes in this 2008 case

The C.E.O. of the Big Bank has to decide about the strategy but, during the meeting, the Big Bank is the subject of an international grass-root campaign from activists who fight against financial injustice and for increased accessibility of the poor to financial services. The highly sophisticated campaign is lead by a former executive of the Big Bank, laid off officially for ethical reasons but convinced of having been scapegoated. She proposes a credible ultimatum to the C.E.O.: either he cooperates or he will be personally targeted. Media and financial analysts are already asking for the Big Bank's reaction.”

The Network of Global Corporate Control (from Vitali et al., PLoS ONE, 2011)

So what should the CEO do? In the role of bank executives, participants are asked to prepare a detailed strategy at the operational and communication levels, including an appropriate reaction to the activists' campaign.

Prima facie, embracing the political effort to fight poverty and promote sustainability by accepting the taxation and regulation is not an obvious profit-winning strategy. On the other hand, fighting against the initiative is raising the ethical issue of disregarding a social effort supported by a large range of stakeholders, not least the democratically elected government. Implementation also raises some ethical issues. The underlying question is the role and responsibility of business in society, and in the present case the role and purpose of a leading financial institution in the shaping of the regulation of international markets.

It is my experience that in practice, senior business leaders continuously face the problem of aligning 1) their own values about what is important and meaningful for them in their life, 2) the values of the company as explicitly stated in its communication but also as ingrained in its culture and implicit ways of doing business, and 3) the values of society as upheld by the multiple stakeholders.

For most business leaders, the dream of their professional life is to be true to their own values while working at their full potential for a company that shares these values and strives to serve society.

When working with them, it strikes me how much analytical reasoning about ethical issues in business is a must to achieve this goal, but one that needs to be complemented with emotional intelligence. For instance, it turned out that two major psychological issues were obstacles to proposing powerful strategies that align values at the individual, company and societal levels:

A Zoom on the network of major actors in the financial sector (Source: Vitali & al., PLoS ONE, 2011)

Firstly, regulation was perceived positively at the personal and global level while it was judged negatively from the point of view of the company. Even when some participants were identifying proactive business strategies that aligned with regulation, the problem was to accept the imposition of such regulation by the government. In a context where “no government intervention” is a pervasive attitude, it seems easier to cooperate with competitors against society than to cooperate with the government at the risk of challenging the position of industry coalitions.

Secondly, activists were perceived negatively even when the substance of their message was analyzed positively from a personal and societal point of view. In particular, the way of putting pressure onto the company was seen as aggressive and aroused negative affects. As a result, most participants ended up proposing strategies that were in line with the activist' intentions, but refused to cooperate with them. This, however, renders social credibility and trust-building nearly impossible to achieve (or at least much more costly).

The senior executives' perception of governments and civil society actors is thus a major determinant of the company's ability to proactively implement ethical strategies.

To me as an academic, writing and teaching this case was a great opportunity. By going to the field and interacting with senior leaders of the banking industry, I experienced once again how much the role of business is changing and how senior executives are concerned about values. Working with such a Big Bank, I became convinced that we will not be able to avoid questioning the role of money in the world and in finance in particular.

The Topology of Global Corporate Control: nearly 40% of the control over the economic value of corporations in the world is held by a group of 147 corporations in the core, which has almost full control over itself. (Source: Vitali et al., PLoS ONE, 2011)

At the individual level, our relation with money is deeply ambiguous and a fascinating theme of personal development. But at the company level too, work on our relation with money is needed: it makes less and less sense to design strategies and take decisions with the sole objective of financial performance. Outside companies, stakeholders expect business to play a role in addressing major societal and environmental challenges. Inside companies, business leaders are willing to find opportunities to express their personal values and become agents of change, thereby creating the business world of which they dream.

Click here to download the full case-study