The World Economic Forum: A Call to Exercise Global Leadership, Not Just Self InterestPublished: February 07, 2007 in Knowledge@Wharton
This year's convening of The World Economic Forum in Davos, Switzerland, brought together approximately 2,400 corporate executives, heads of government and leaders of organizations like the World Bank and Human Rights Watch to debate issues ranging from global warming to the rise of the Internet and the future of the Middle East. Michael Useem, director of Wharton's Center for Leadership and Change Management, attended the five-day event. Below, he offers his report on what he calls Davos' "culture of transcendent leadership," which he defines as "a willingness by those with company or country responsibilities to make decisions that benefit those far beyond the decision maker's own organization or nation."
A Unique Marketing Platform
For many participants, the 2007 annual meeting in Davos provided unique opportunities to discuss wide-reaching business concerns, such as the state of the auto industry, as well as public policy concerns, such as the need to move free trade negotiations back onto the front burner. It presented an exceptionally unique marketing platform as well, especially for country leaders envious of the enormous rise of foreign investments in China. For example, in a session attended by more than 1,000 people, Brazil's recently re-elected President, Luiz Inacio Lula da Silva, declared that during the past four years, his policies have lifted 11 million citizens out of poverty and created five million new jobs. The message for those in the audience running multinational companies and private equity funds was clear: Being bullish on Brazil is good strategy.
Mexico's newly elected President, Felipe Calderón Hinojosa, declared that his country had "decided in favor of the market and democracy," and although the country has not yet reached the "promised land," it was growing rapidly. By 2040, he predicted, Mexico would join the world's largest developing economies -- Brazil, Russia, India and China, known as BRIC. At that point, Calderón suggested, the acronym should be changed to "BRIMC." Again, the message was that foreign investment is not only welcome but also needed to help make this happen.
Pakistan's Prime Minister Shaukat Aziz reported that his country's per capita income had doubled over the past eight years, in large part because of liberalization of the economy, downsizing of state bureaucracy and a growing "absorbtive capacity for reform." He observed that foreign direct investment in Pakistan has grown more than 15-fold since he introduced the reform initiative, from $300 million in 1999 to more than $5 billion this year. Pakistan's liberalization has come with a social component as well. The Prime Minister noted that eight of his cabinet ministers are women, as is one-fifth of the parliament. These economic and social reforms should also make Pakistan an attractive target for the world's investors.
A Culture of Transcendent Leadership
Yet while the pursuit of such tangible benefits as increased foreign investment brought many to Davos, the event also served to define and reinforce a shared culture among participants. Central to that culture is an emphasis on transcendent leadership -- the idea that standing above all other values is the ideal of a joint commitment to bettering the planet. Corporate and political leaders, said speaker after speaker, should deploy their resources not just for company or country gain. Those most responsible for the globe's greatest institutions must, they contended, also devote their energies to collective goals.
Some speakers, for example, warned that unchecked globalization is heightening inequality, displacing millions and destabilizing countries. German Chancellor Angela Merkel declared that everybody would "have to look beyond their own noses" if globalization is to become a fair and equitable force. "I'm convinced," she said, "that the essence of globalization today provides the world with many more opportunities than risks," but for it "to benefit everyone, we have to create a new balance of power -- in world trade, in the consumption of resources, in education, in the fight against AIDS.... To put it in a nutshell, we need a global economy which complies with the rules of a fair regulatory environment."
Jordan's King Abdullah warned that the era's political imperatives require joint action as well, since all will suffer if the problems remain unresolved. In particular, he argued, bringing the Israeli-Palestinian discord to an acceptable end is essential. "We must act," he concluded, "and we all have a contribution to make."
Several prominent figures argued that the flattening of the world is reducing the normal trade-offs between private interest and public purpose, making the embrace of transcendent leadership less costly at home. British Prime Minister Tony Blair, for instance, told a packed hall that countries, companies and other institutions have become so interdependent that their self-interests are increasingly coincident with global interests. "If we let Sudan and Somalia slip into the abyss," he said, "the consequences will extend far beyond the region." If Afghanistan and Iraq "fall back into failed states," he warned, it will affect us all. If global warming is left unchecked and trade protectionism allowed to increase, all will bear enormous costs.
Business leaders, the British prime minister suggested, must therefore move beyond "corporate social responsibility" to embrace a "strategic engagement with the moral imperatives of the era." Rather than modest engagement in good works, he contended, individuals everywhere must take active leadership in what he sees as the three most important issues of the day: climate change, world trade and African poverty. To do so is not only in the public interest, suggested Blair, but increasingly in countries' own interests as well.
Ukraine Gets an Earful
Forum participants were told many times, in many different ways, that each has a contribution to make to improve the economic environment for all citizens. The candid dialogue prevailing in some Davos sessions helped political and business leaders leave with a more realistic appraisal of exactly what their contribution should be.
Consider a private luncheon focused on the future of Ukraine. Prime Minister Viktor Yanukovich reported that he was strengthening his country's democratic process, creating better transparency in national decision making, improving corporate governance standards, achieving 7% annual growth and joining the European Union. Yet four subsequent speakers explicitly cautioned the Prime Minister -- now seated next to them on the luncheon stage -- that his momentum behind these improvements was not yet sufficient. Latvian President Vaira Vike-Freiberga warned him that "the speed of reform in Ukraine has been too slow." Investor George Soros said that the country required "greater transparency."
The European Union Commissioner for Enlargement, Olli Rehn, cautioned that Ukraine must still embrace "the rule of law." The former President of Poland, Alexander Kwasniewski, urged that Ukraine engage its neighbors in more active dialogue. Former U.S. President Bill Clinton said in a videotaped message that Ukraine "will need to open its economy to go for EU membership." The Latvian President told the Ukraine prime minister in closing, "Make up your mind, do it, and we are with you!"
Though rarely scolding, candor and criticism wove through other sessions as well. And just as at any corporate off-site event, lighter moments lessened the tension. Having promoted reform for seven years against deeply entrenched interests, for example, Pakistan's Aziz said he would like to rewrite Newton's Third Law: For every action there is an equal and opposite reaction. While applicable to the physical universe, Aziz said that in his political universe, the Third Law should instead read: "Every action brings an unequal and gross reaction."
Gordon Brown, Britain's Chancellor of the Exchequer and likely successor to Prime Minister Tony Blair, found ironic delight in a slogan that he had seen at a recent rally: "World-Wide Campaign against Globalization." And a beleaguered Tony Blair, anticipating that he would return to the Forum's next annual meeting as a private citizen, said, "I look forward to coming back to Davos to tell other country leaders how they went wrong and how easy the job is."
A Call to Action
The Forum's motto, "Committed to Improving the State of the World," was emblazoned virtually everywhere, a reminder of the responsibility that the participants have for addressing global challenges. The Forum's more prominent figures reinforced this point during the event's final meeting. E. Neville Isdell, CEO of Coca-Cola and co-chair of the Forum, warned that the outside world sometimes viewed Davos as "the epicenter of ego" -- and that the calling was now for all participants to make it, instead, "the epicenter of commitment." James J. Schiro, CEO of Zurich Financial Services and another co-chair of the Forum, followed with a call to action. "I've been coming here for 15 years, and what's evident is the rise of a focus on leadership and change." Consequently, "I would ask everybody, when you return home, to exercise your leadership."
Accepting the values of the Forum will not necessarily translate into what the business and political leaders will do at home. Culture and behavior are not always consistent, and in a final underscoring of the Forum's ultimate purpose, WEF founder and executive chairman Klaus Schwab closed the entire gathering with this pointed comment: "We invite back those who are concerned about the world and will do something about it."