April 3 – As part of the ongoing “Rising to the Challenge” speaker series, the Chief Executive of BP, Sir John Browne, addressed the topic of “The Role of Multinational Corporations in Economic and Social Development of Poor Countries.”
Lord Browne began by citing the “climate of distrust” that surrounds international trade and investment in general, and the role of big business in particular. “If you ask Americans whether they trust what big companies tell them, only 16 per cent say yes,” said Browne.
Both rioters in the streets of Seattle and Genoa, and “serious international NGOs” have articulated a view that in the poorer countries of the world, the role of multinationals is “exploitative, environmentally damaging, [and] hostile to human rights and democracy,” the Chief Executive of BP continued. Furthermore, 75 per cent of Americans believe that the US is “already unduly dependent” on oil imports from the Middle East.
“I believe all those views are mistaken, and indeed dangerous,” argued Lord Browne. Global trade is key to ensuring world prosperity, and “trust is the basis for globalization,” he continued. One of the consequences of globalization for has been a restructuring of the corporate sector to create firms that can “compete in a global marketplace.”
This can often look like “a concentration of power in the hands of a limited number of gigantic companies.” However, Lord Browne argued that companies work within a framework of law and that power is limited by competition. “Economics aren’t king, as September 11th reminded [us] and companies are as vulnerable as any other part of society to events completely beyond their control,” he added.
Lord Browne admitted that the benefits of globalization sometimes seem to take longer to arrive than the costs. “It is clear that to restore trust companies have to demonstrate that our presence, particularly in the poorer countries and the emerging market economies, is a source of human progress.”
The BP Chief Executive went on to outline the three strands that the company was undertaking to demonstrate its commitment to human progress. “The first strand is about behavior,” began Lord Browne. Trust is about creating a track record of delivering on promises. Starting from the Chief Executive and reaching down through the companies executive teams, employees must demonstrate that “substance is more important than form.”
Lord Browne highlighted BP’s experience in the 1970s and 80s in South Africa as an example of this principle. “We came under great pressure from anti-apartheid campaigners to withdraw” from South Africa. However, the company decided to stay, “to see if it was possible for us to work to our own standards.”
The experiment was successful, and Lord Browne described the “very moving occasion” when Nelson Mandela came to London to say thank you. BP is now firmly committed to “development without corruption,” and Lord Browne touched on an example of how BP was working with President dos Santos of Angola to improve the transparency of BP operations in the region.
BP’s second strand to demonstrate its commitment to human progress pertains to how the company applies its skills base. “As a long term business, investing on a thirty or forty year horizon, we have to recognize that as part of society we benefit from its health – so we must contribute to that health,” Lord Browne outlined.
He pointed to the company’s lead position on climate change – the company plans to reduce its emissions of greenhouse gases by 10 per cent below the 1990 level. “Real motivation stems form the sense of having made a difference.”
BP’s third strand is to offer a company that is both a meritocracy and a diverse place to work. In all the regions in which it operates, BP “wants to be the employer of choice, and to use the that role as a means of raising aspirations.”
Having outlined the affirmative action that BP has taken, Lord Browne went on to outline some of the steps that the company will seek to avoid. In particular, “we won’t fund any political activity or any political party,” he said.
“The anti-globalization forces are wrong … globalization is not a zero sum game in which the rich get richer and the poor get poorer,” the BP executive concluded.
Lord Browne was speaking as a part of a forum, moderated by HBS Professor Rosabeth Moss Kanter. The forum also included contributions from Stanley Litow, President of the IBM Foundation. Previous to the forum, HBS RC students undertook cases on BP’s environmental policy, and recent developments in global warming.