partnering to strengthen public governance: the leadership challenge for ceos and boards

Partnering to StrengthenPublic Governance

The Leadership Challenge forCEOs and Boards

World Economic ForumGlobal Corporate Citizenship Initiativein partnership with

January 2008

COMMITTED TO IMPROVING THE STATE

OF THE WORLD

World Economic Forum91-93 route de la CapiteCH-1223 Cologny/GenevaSwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail: [email protected]

© 2008 World Economic Forum, BSR, AccountAbility, Harvard University, IBLFAll rights reserved.No part of this publication may be reproduced or transmittedin any form or by any means, including photocopying and recording, or by anyinformation storage and retrieval system.

REF: 090108

Preface

Page 5

Foreword

Page 6

The Leadership Challenge

Page 8

A Framework for Action

Page 14

The Role for Business: Framework for Action

Page 17

Additional Resources

Contents

Over the past 18 months, the World Economic ForumGlobal Corporate Citizenship Initiative (GCCI) AdvisoryCommittee, which is composed of top corporatecitizenship executives of leading Forum membercompanies, explored how companies can contributeconstructively to efforts to improve public policyframeworks and the capacity of public institutions. Theproject has attempted to improve understanding ofthe business case for improved public governanceand provide guidance on how businesses can engagein public-private efforts to strengthen the effectivenessof such frameworks and institutions. The outcome ofthese deliberations is a CEO leadership statement andsupporting analysis that together provide a roadmapfor business leaders seeking to work withgovernments to improve the enabling environment forsustainable economic growth and development.

Partnering to Strengthen Public Governance: TheLeadership Challenge for CEOs and Boards builds on“Global Corporate Citizenship: The LeadershipChallenge for CEOs and Boards”, a joint statement onglobal corporate citizenship signed by CEOs andchairmen of over 40 companies under the auspices ofthe World Economic Forum Global CorporateCitizenship Initiative in January 2002. Both leadershipstatements recommend frameworks for action, thatoffer practical steps chief executives, board directorsand executive teams can draw upon in developingtheir firm’s corporate citizenship agenda.

The rationale for business to engage in efforts tostrengthen public governance is strong. Governanceframeworks that enable sustained economic growthare far more likely to be developed if businessescollectively engage and capture the opportunities toalign governance structures with their goals foradvancing sustainable business practices.Demonstrating how weaknesses and shortcomings inpublic governance hinder business activity andsustainable economic growth, and providing examplesof how businesses in partnership with governmentsand other stakeholders are helping to improve publicgovernance, Partnering to Strengthen PublicGovernance: The Leadership Challenge for CEOs andBoards offers CEOs and boards of directors someguidance on the development of an effectiveengagement strategy on relevant public governancechallenges.

The CEO-signed leadership statement and supportingreport were produced in partnership with Business forSocial Responsibility (BSR) – our lead partner in thisproject – as well as AccountAbility, the CorporateSocial Responsibility Initiative of Harvard University’sJohn F. Kennedy School of Government and TheInternational Business Leaders Forum (IBLF). Specialthanks are due to Aron Cramer, President and ChiefExecutive Officer, Business for Social Responsibility(BSR), USA; Angel Gurría, Secretary-General,Organisation for Economic Co-operation andDevelopment (OECD), Paris, who drafted theforeword; and the executives of the Global CorporateCitizenship Initiative (GCCI) Advisory Committee,members and other signatory companies, whoprovided the guidance and input on which the reportis based. We are grateful for the helpful guidance andcomments on the report provided by Jane Nelson andSimon Zadek. And we wish to express specialappreciation to Associate Director Valerie Weinzierl,who managed the project very effectively on theForum’s behalf, and her GCCI colleague, SeniorManager Christine Salerno, as well as to Janet Hill andKamal Kimaoui for editing and layout of the report,respectively.

We at the World Economic Forum are particularlypleased to issue this report, which seeks to illuminatean important aspect of corporate global citizenship – aconcept that lies at the very heart our organization’smission. We hope that our partners, members andother constituent communities find it a useful tool forbuilding public-private and multistakeholdercollaborations to advance progress on global andregional problems.

Richard SamansManaging DirectorWorld Economic Forum

Preface

4 | Partnering to Strengthen Public Governance

Investments in places with weak public governancepose some of the most difficult ethical dilemmasconfronting international business today. In addition tothe human suffering it causes, weak publicgovernance forces companies and managers to ask: ifgovernments cannot or will not assume their roles andresponsibilities, what then is the role of business? TheOrganisation for Economic Co-operation andDevelopment (OECD) has developed an awareness-raising tool that provides guidance for companiesoperating in such difficult circumstances. In the samespirit, the Global Corporate Citizenship Initiative(GCCI), which gathers business leaders from aroundthe world, has established a “Partnership toStrengthen Public Governance” with the aim ofdeveloping a framework for business engagement inpromoting more effective public governance.

The OECD and GCCI statements communicate similarand complementary messages. First, both recognizethat everyone – the citizens of weak governancezones, international and local businesses, home andhost governments – has much to gain fromstrengthening public governance: enhanced humanwelfare, higher sustainable growth and the creation ofnew markets. Second, both acknowledge that thebusiness sector is a valuable partner in public sectorreform, one that can do much to create and sustainthe impetus for reform. Yet, such business activitiescan also give rise to suspicions if they are perceivedas improper involvement in local politics. To allay thesefears, the OECD and GCCI both stress the importanceof transparency for such activities and of working inpartnership with national and international actors thatshare their interest.

As the head of an intergovernmental organizationwhose mission is to help governments design andimplement more effective public policies, I recognizethat strengthening public governance is an ongoingchallenge for us all. Moreover, creating and sustainingthe will to reform is a critical ingredient of successful

public sector reform. I can therefore only welcome theGCCI’s offer to be a partner in promoting strongerpublic governance and confirm that the OECD willcontinue to facilitate cooperation on policy reformamong member and non-member governments,business, civil society and other internationalorganizations, drawing on each other’s competencies,roles and responsibilities.

Angel GurríaSecretary-GeneralOrganisation for Economic Co-operation andDevelopment (OECD)

Foreword


The opportunity to leverage business activity to createsustainable economic growth has never been greater.Today, the business community recognizes, as neverbefore, the essential imperative to deliver economicgrowth that marshals natural resources, spreads thefruits of the global economy and contributes to fairand equitable social development. Over the pastseveral years, the business community has devotedconsiderable attention to corporate responsibility,bringing a spirit of innovation and partnership toaddress significant social and environmental questionswith value for business and society. In many cases,however, these programmes have focused onsymptoms rather than addressing root causes.

We believe that the time is right to build on recentprogress and make a more systemic impact. Thisstatement outlines an approach to corporate globalcitizenship, with a focus on business engagement topromote more effective public governance. Publicgovernance includes the fair and efficient workings oftraditional public functions, including setting andenforcing rules and regulations, delivery of publicgoods, development of guidelines for the smoothworking of global trade, operating principles for public-private partnerships (PPPs) and additional means ofpromoting collaborative solutions to public questions.

As such, we are committing to a leadership agenda,expressed in the following framework for action, whichwill broaden and deepen the international businesscommunity’s contribution to improved publicgovernance. Structured along the lines of the 2002Leadership Challenge of the GCCI, this frameworkcharts an exciting new course for corporateresponsibility and corporate citizenship programmes.

We believe that business has an important role to playin this regard. This framework agenda has thepotential to create the conditions in which businessescan flourish, governments can more effectively deliverpublic goods and social protection and, mostimportantly, societies can enjoy the fruits ofsustainable economic growth. While expressedthrough the prism of what business can do, werecognize that business will be most successful inpursuing this agenda where it does so with full respectfor the unique position of government, in a transparentand accountable manner, and in collaboration withcivil society.

We embrace this framework, and invite other businessleaders to:

1.Provide Leadership• Include public governance approaches in

corporate responsibility and corporate globalcitizenship strategies

• Use opportunities for dialogue with public sectorleaders to raise this topic and communicate withcivil society

• Communicate the business case for strengtheningpublic governance, including global governance

• Support public-private-civil society collaborationas an essential tool for addressing core questions

2.Define What It Means for Your Company• Identify the opportunities for impact that are most

relevant to your company• Implement strategies based on your company’s

areas of greatest competence

3.Make It Happen• Make public governance an element of all

corporate global citizenship activities• Align government affairs and corporate global

citizenship activities in support of essentialbusiness strategy

• Set goals, measure performance and reviewprogress

• Build industry coalitions/collaborations to addresssystemic issues

4.Be Transparent About It• Report publicly on progress and challenges• Engage in dialogue with the public sector and civil

society on how to address barriers and increasepositive impacts

We represent businesses from across the world, indifferent industry sectors. While all businesses share acommon interest in effective public governance, wealso recognize that companies interact in a wide rangeof governance environments and that theirapproaches to this question will vary.

I. The Leadership Challenge


Alexander V. IzosimovChief Executive OfficerAO VimpelCom

Jaime Augusto Zobel de Ayala IIChairmanAyala Corporation

John P. ConnollyChairman of the Global BoardDeloitte

Paul S. WalshGroup Chief ExecutiveDiageo

James S. TurleyChairman and Chief ExecutiveOfficerErnst & Young

Michael WareingInternational Chief ExecutiveOfficerKPMG

Richard T. ClarkChairman, President and ChiefExecutive OfficerMerck & Co.

William H. Gates IIIChairmanMicrosoft Corporation

Mark G. ParkerPresident and Chief ExecutiveOfficerNike

Lubna S. OlayanChief Executive OfficerOlayan Financing Company

Jalees Ahmed SiddiqiManaging Director and ChiefExecutive OfficerPakistan State Oil Company(PSO)

Samuel A. DiPiazza, JrGlobal Chief Executive OfficerPricewaterhouseCoopers

Kishor A. ChaukarManaging DirectorTata Industries

E. Neville IsdellChairman and Chief ExecutiveOfficerThe Coca-Cola Company


IntroductionIn recent years, appreciation of the value of corporateengagement in social and environmental issues hasincreased substantially both inside and outside thebusiness community. In 2002, a group of nearly 50CEOs and board chairs of World Economic Forummember companies contributed to this shift by issuinga public call to action to their peers on globalcorporate citizenship1. They called for corporateresponsibility and corporate citizenship agendas toevolve well beyond philanthropy. In addition, theyrecommended a specific management framework forCEOs to use in leading their management teamsthrough a deliberate thought process to construct abroader approach aligned with and integrated intocore business strategies and competencies. Whenproperly anchored in a company’s so-called zones ofinfluence, corporate citizenship has the potential to bea primary framework through which firms manage riskand generate economic value for shareholders whilecontributing more broadly to sustainable economicgrowth and development.

In issuing this leadership statement, these leadingCEOs acknowledged the centrality of effectivegovernance as a critical enabler of economic andsocial progress: “There is little doubt that legitimateand legal businesses prosper where … there isdemocracy with the government operating effectivelyin terms of collecting taxes, promulgating sensibleregulation, within a liberalized and competitiveeconomic environment, facilitating requiredinvestments in needed physical and socialinfrastructure and services, providing a fair andeffective framework for commercial law, and ensuringan absence of corruption.”

Since then, more businesses have taken up thechallenge to include in their strategies a set ofquestions that once were considered “non-business”issues. However, they have also come to understandthe enormous complexities of dealing with theseissues, in both developing and developed countries,which are often characterized by serious problems inpublic governance. Today, having come to understandthe important but often complex link between socialand environmental issues and business success, thechallenge for companies operating internationally isincreasingly how to move beyond managingstakeholder demands and reputational risks related tothese issues (the traditional province of corporateresponsibility) to working with governments and otherstakeholders to address the deficiencies in publicgovernance that often fuel such demands and risks aswell as stunt business activity and economic growth.This is an important new frontier of corporate globalcitizenship in which companies perceive themselvesas stakeholders in the international system in their

own right and make a civic contribution byparticipating actively in the construction of a worldeconomy whose contours and institutional architectureremain very much in development.

Changes in public policy and technology over the pastgeneration have spurred extensive integration ofproduct and services markets across much of theworld economy, in effect greatly expanding the licenseto operate of multinational firms. But in manyinstances, the strength of national legal frameworksand the domestic institutions that administer themremains highly inconsistent, and global frameworkshave yet to emerge to fill the gap. Companies areoften asked to compensate for this uneven andunderdeveloped governance environment by takingvoluntary action, such as signing codes of conduct,conducting their own labour audits or providing health,education or environmental services to thecommunities in which they operate. But these steps,while worthwhile, tend to have a limited rather thansystemic effect since they, by design, seek to workaround or compensate for the underlying problemrather than resolve it.

Like previous GCCI reports, this report seeks both toadvance understanding of a critical dimension ofcorporate citizenship and to illuminate thecorresponding potential for leadership by CEOs andboards. It does so through a combination of analysisand illustration, making special reference to theexperience of GCCI companies to more widelyencourage emulation by Forum members and theinternational business community. Specifically, thereport:1) Describes how weaknesses and shortcomings in

public governance hinder business activity andsustainable economic growth

2) Illustrates the various ways in which businesses indifferent regions and sectors are helping toimprove public governance, often in partnershipwith governments and other stakeholders

3) Provides a framework that CEOs and boards ofdirectors can use to lead their companies in thedevelopment of an effective engagement strategyon relevant public governance challenges

Defining the IssuePublic governance has two fundamental dimensions:rules (law, regulation and administrative guidance) andinstitutional capacity (the resources and capabilities ofagencies that administer rules). It can also involvesituations in which government is one of a variety ofactors working together to establish or implementnorms through collaborative processes includingbusiness and civil society. In this sense, publicgovernance extends to the increasingly diverse rule-making and enforcement environment that marks

II. A Framework for Action


some of the most important debates on sustainableeconomic development.

Problems in public governance tend to take one ormore of three forms:1) Bad governance is characterized by deep flaws

in the domestic enabling environment, such ascorrupt institutions, ineffective or discriminatorylaws or regulations, the presence of civil conflict orother security threats, gross human rightsviolations, etc.

2) Weak governance is characterized by insufficientinstitutional capacity and/or political will resulting ingovernment’s failure to implement or enforcedomestic laws or international obligations, deliverbasic public goods and systems, or plan for andrespond adequately to natural disasters, healthpandemics and humanitarian crises.

3) Underdeveloped global governance ischaracterized by a lack of rules or institutionalcapacity at the multilateral or global levelnecessary to create a level playing field or greatercertainty regarding issues that have an importantbearing on commercial and investment decisionsacross national borders (e.g. labour, environment,product safety or technical standards, etc.).

Each of these types of governance deficits interferesto one degree or another with economic developmentand social and environmental progress. And whilegovernance failures can often be placed within thesediscrete categories, the three types can be related.Where global governance is unclear, for example,greater pressure is placed on underdeveloped nationalgovernance systems, and vice versa. The impact ofgovernance challenges is most often discussed inrelation to developing economies, yet they are presentin developed economies as well, with similar effect. Itis equally true that the public governance challenge isa multifaceted one with complex linkages, asdecisions taken by diverse parties at local, nationaland global levels affect governance in multiplelocations.

Understanding the Business CaseBusiness, no less than any other element of society,has a very large stake in effective public governance.

First, business does not operate in a vacuum.Investment and commerce are crucially dependent onthe quality of a country’s legal and institutionalenabling environment, which is an importantdeterminant of its international economiccompetitiveness. This has been documented over theyears as both fact and perception by, among others,the World Bank’s Doing Business reports and theannual The Global Competitiveness Report of theWorld Economic Forum. Poor public governance has

been clearly demonstrated to undermine theconditions necessary for businesses to prosper andeconomies to grow, notably by fuelling economicinefficiency and political instability.

Conversely, effective governance frameworks createthe conditions in which innovation and risk taking arelikeliest to thrive. Particularly with respect to economicgovernance, the business community has an inherentstake in more effective rules and institutions as well asa special competence to help construct them. At thesame time, companies need well-educated andhealthy workforces and operating environments suchthat, in many countries (including developedeconomies), they have a stake in strengthening keyelements of a country’s social infrastructure, such asits educational and health systems.

Second, as stakeholder demands for action anddisclosure multiply, business has a growingreputational stake in clarifying its role on social andenvironmental questions, and the boundaries betweenpublic and private responsibilities. The weaker thegovernance environment is in a given jurisdiction, thegreater are the societal expectations placed oncompanies. In this sense, the level of public trust inthe business community is linked to the strength ofpublic institutions.

Finally, the business community has an enormousstake in the ongoing international integration ofnational economies, a process that is well advancedbut not irreversible. There is growing concern in manyquarters about inequality, economic dislocation,poverty and migration and, from time to time, theseare manifested in calls to limit trade and investment.The social consensus behind an open global economyhas been eroding in some countries because ofperceptions that international aid, trade, monetary,labour, environmental and other arrangements are notup to the task of generating broad-based andsustainable economic growth. Business is sometimesseen as complicit in these shortcomings of theinternational system. To the extent this lack of publicconfidence in global and national institutions leads togreater protectionism and tighter restrictions on themobility of capital and labour, the internationalbusiness community will be the first to feel its effects.


The chart below illustrates the impact of such governance deficits on business. The linkages displayed point toopportunities for companies to make focused contributions to efforts to strengthen public governance.


Governance Deficit Impact on Business

Bad Governance • Endemic social conflict• Disputed/cancelled/absent

elections• High levels of corruption• Inefficient administrative and

regulatory processes

• Business interruption resultingfrom increased volatility andconflict

• Legal risks and financial outlaysrelated to bribery and corruption

• Unreasonable costs and barriersto establishing and operatingbusinesses

• Increased cost and political risk ofproviding security for people andfixed investments

Weak Governance • Lack of basic public goodssupporting economic and socialdevelopment (e.g. water,healthcare, education)

• Weak or uneven enforcement ofexisting laws and regulations (e.g.labour, environment, consumersafety)

• Failure to adapt rules to emergingproblems and circumstances

• Poorly developed conflictresolution mechanisms (i.e.impartial judiciary)

• Business interruption resultingfrom increased volatility andconflict

• Legal risks and financial outlaysrelated to bribery and corruption

• Unreasonable costs and barriersto establishing and operatingbusinesses

• Increased cost and political risk ofproviding security for people andfixed investments

Underdeveloped GlobalGovernance

• Endemic lack of consensusthrough existing structures (e.g.WTO Doha Round)

• Absence of structures to addresskey global issues (e.g. climatechange, human rights)

• Conflicting or duplicativeframeworks over best way toaddress key regional and globalissues (e.g. climate change,natural resource management)

• Risk of diminished politicalsupport for open trading system

• Heightened risk due to lack oflong-term framework for planningcapital investments

• Diminished license to operateresulting from low levels of trust inbusiness

• Business uncertainty regardingrules and guidelines

Illustrating Business EngagementIn the 2005 GCCI report, Partnering for Success, SirMark Moody-Stuart, Chairman, Anglo American,United Kingdom, said: “As businesses, we cannot andshould not try to address [poor governance] on ourown. But we can join in an effort with civil societyorganizations, with labour unions, with internationalfinancial institutions to try to build the governancestructures which can address this issue.”

Businesses have long been engaged in publicgovernance debates and initiatives, particularly withrespect to issues specifically affecting their industrysector. The past decade or so has seen thedevelopment of numerous business initiatives, often incollaboration with other actors, that directly orindirectly seek to strengthen public governance in awider sense. These examples of businessengagement on such problems as climate change,corruption, and disaster relief – often through PPPs –demonstrate the potential for deeper engagement bythe private sector in collaborative efforts that havepositive impacts on governance deficits. These effortshave taken numerous forms, including dialogue withgovernment; provision of technical expertise and otherresources for institutional capacity building; andparticipation in and support for collaborative rule-setting and enforcement mechanisms.

Business engagement in promoting effectivegovernance is most effective, and most credible,where it reflects key principles including transparency,dialogue and respect for the unique role of publicinstitutions, and recognizes the central value ofworking with civil society organizations.

The ideal way for business to engage effectively is atthe intersection of its capacity and legitimacy.Business maintains its legitimacy where it engages incapacity building that enables government to operateeffectively, rather than displacing core public functionsor intervening in a manner that distorts publicfunctions. Business maintains its influence where it isunderstood to be applying its core strengths for thebenefit of institutional capacity building.

The following is an overview of recent and ongoingcollaborations by business with governmental or civilsociety actors to strengthen public governance as wellas a number of specific illustrations. The examplesreflect initiatives that have a range of objectives. Whilethey may have a particular focus on economic, socialor environmental questions, many of them reflect theincreasing recognition of the inherent linkagesbetween these elements, and lead to strengthenedgovernance that advances all of these goals.


I. HELPING TO REMEDY BAD GOVERNANCE (National/Regional)

II. HELPING TO STRENGTHEN WEAK GOVERNANCE (national/regional)

A) Economic

1) Improving Frameworks and Policies• Brazilian Pact For Integrity and Against Corruption

(PACTO)• Extractive Industries Transparency Initiative (EITI)• Transparency International Integrity Pacts• Partnering Against Corruption Initiative (PACI)*

2) Strengthening Institutional Capacity• Global Partnership for the Prevention of Armed Conflict

B) Social & Environmental

1) Improving Frameworks and Policies• Kimberly Process• UN Special Representative’s Mandate on Business and

Human Rights• Voluntary Principles on Security and Human Rights

(BSR and IBLF)

2) Strengthening Institutional Capacity• South Africa’s Business Against Crime Initiative• The Kosovar Refugee Registration Project• UNHCR Council of Business Leaders

A) Economic

1) Improving Frameworks and Policies• Committee for Economic Development (CED)• Global Information Technology Report (GITR) Country

Policy Roundtable Series*• OECD Corporate Governance Roundtables• Transatlantic Business Dialogue and Transatlantic

Economic Council

2) Strengthening Institutional Capacity• Africa Investment Climate Facility• Business Action for Improving Customs Administration

in Africa (BAFICAA)• Business Action to Stop Counterfeiting and Piracy

(BASCAP)• Business Coalition for Capacity Building• Russian Foreign Investment Advisory Council


1) Improving Frameworks and Policies• Global Fund to Fight AIDS, TB and Malaria Country

Coordinating Mechanisms• ILO Better Work Initiative

2) Strengthening Institutional Capacity• Business Coalitions on HIV/AIDS• Educational Quality Improvement Programme (EQUIP)

and Instituto Qualidade no Ensino• India Business Alliance to Stop TB, China Health

Alliance & Ghana Healthcare Systems Project*• Jordan, Rajasthan and Egypt Education Initiatives*• MFA Forum and its implementation of the Collaborative

Framework in Bangladesh and Lesotho

III. HELPING TO DEVELOP GLOBAL GOVERNANCEA) Economic

1) Improving Frameworks and Policies• Global Governance Initiative*• Institute for International Finance “Principles for Stable

Capital Flows and Fair Debt Restructuring in EmergingMarkets”

• International Monetary Convention Project*• Mainstreaming Responsible Investment (GCCI and

AccountAbility) and Principles for Responsible Investing(Global Compact/UNEP)

• Voluntary Hedge Fund Principles

2) Strengthening Institutional Capacity• Financing for Development Initiative*• Global Alliance for ICT and Development


1) Improving Frameworks and Policies• Carbon Disclosure Standards Board• Forest and Marine Stewardship Councils• Gleneagles Dialogue Initiative*• Global Fund on HIV/AIDS, TB and Malaria• Global Reporting Initiative• Guiding Principles for Public-Private Collaboration in

Humanitarian Action (UNOCHA and World EconomicForum)*

• UN Global Compact• Voluntary Carbon Standard• WHO’s Stop TB and RBM Partnerships

2) Strengthening Institutional Capacity• Global Business Coalition on HIV/AIDS• Logistics & Transport Industry Humanitarian Relief

Initiative*• UNESCO-Fast Track Initiative-Forum Global Education

Alliance*

Business Engagement in Partnerships to Strengthen Public Governance

* Denotes World Economic Forum Initiative

SELECTED ILLUSTRATIONS

• Voluntary Principles on Security and Human Rights promote theapplication of human rights principles in the provision of security in theoil, gas and mining sectors. A coalition of companies from thesesectors (e.g. BP, Shell, Chevron and Rio Tinto), human rights andhumanitarian organizations (Human Rights Watch, International Alert,the International Committee of the Red Cross) and nationalgovernments (the Netherlands, Norway, UK and US), with thesecretariat held jointly by Business for Social Responsibility (BSR) andthe International Business Leaders Forum (IBLF) established theseprinciples and provide a platform for implementation and dialogue.The principles relate to private security providers and public securityproviders, and risk assessments concerning both. The principlesinclude explicit reference to the need for “developing institutionalcapacities and strengthening the rule of law”, and participants“recognize the important role companies and civil society can play insupporting these efforts”. www.voluntaryprinciples.org

• Partnering Against Corruption Initiative (PACI) – Initiated byCEOs from World Economic Forum member companies and launchedin Davos in 2004, PACI brings together over 130 companies, many ofwhich are leaders in their industries (i.e. AIG, Fluor, Merck & Co., RioTinto, Royal Dutch Shell, The Coca-Cola Company, UPS), to combatcorruption by practicing a zero-tolerance policy towards bribery andimplementing effective internal compliance programmes. This multi-industry and multinational initiative is a partnership with TransparencyInternational and the Basel Institute of Governance. Following CEOsignature to the PACI Principles for Countering Bribery, the initiativeprovides a platform for companies to develop, implement and monitortheir own programmes through peer network meetings and supporttools. The initiative began through collaboration within and among theEngineering & Construction, Mining & Metals and Energy IndustryPartnership communities of the World Economic Forum. Theframework they have developed is now being adopted by country-based groups of companies (e.g. Romania) and development financeinstitutions (e.g. the IFC and IADB/IIC). www.weforum.org/paci

I. Helping to Remedy Bad Governance (National/Regional)

• Business Action to Stop Counterfeiting and Piracy (BASCAP) –Facilitated by the International Chamber of Commerce (ICC), thiscross-industry initiative aims to leverage collective business action toenhance government efforts to fight counterfeiting and piracy,strengthening protections for intellectual property. This effort bringstogether businesses from all parts of the world to enhance innovation,protect health and safety, and reduce the loss of tax revenues arisingfrom black market products. Businesses, working with the ICC andother industry groups, have made available new information resourcesgovernments can use to combat piracy; conducted awareness raisingefforts to highlight the costs of piracy and counterfeiting, and havemapped public and private efforts to protect intellectual propertyrights to avoid duplication. Through regular inputs intointergovernmental forums such as the G8, the World IntellectualProperty Organization and the World Customs Organization, BASCAPalso seeks to strengthen national and international regulatory andenforcement efforts as well as enhance policy-related initiatives andpublic-private partnerships to address this question.www.bascap.com

• Global Health Initiative and Global Education Initiative CountryPartnerships – In 2004, the World Economic Forum’s Global HealthInitiative (GHI) catalysed the creation of an innovative, large-scalepartnership in India to extend the reach of the public healthcommunity’s efforts to eradicate tuberculosis. The India BusinessAlliance to Stop TB engages 34 Indian and multinational companies inthe provision of prevention and treatment services to approximately 4million employees and dependents. Similarly, the GHI recentlylaunched the China Health Alliance, a group of Chinese andmultinational firms that is developing a pilot programme in Guangdongprovince to provide HIV/AIDS and TB prevention and treatmentservices to their workforces in cooperation with Chinese public healthauthorities and donor agencies. The Forum’s Global EducationInitiative has pioneered large-scale multistakeholder partnerships tostrengthen public primary and secondary education systems inJordan, Rajasthan and Egypt. In each of these health and educationpartnerships catalysed by the Forum, groups of businesses enter intoan arrangement with the national and/or provincial government for theexpress purpose of strengthening their capacity to provide qualitybasic human services to their populations by applying relevant corebusiness competencies. www.weforum.org/globalhealth;www.weforum.org/education

II. Helping to Strengthen Weak Governance (National/Regional)

• Gleneagles Dialogue Initiative – In 2005, at the invitation of BritishPrime Minister Tony Blair, a group of 24 World Economic Forum CEOsdeveloped a set of recommendations regarding climate change policyfor the G8 Summit in Gleneagles. In particular, the diverse group ofbusiness leaders called for action to create a long-term policyframework to guide energy and environmental policy. At the summit,G8 leaders created a three-year Gleneagles Dialogue process with 12additional countries for the purpose of expanding understanding ofpaths to a low-carbon energy future. The Forum was invited tofacilitate further private sector input into this new process, whoserecommendations will be delivered to G8 leaders at their July 2008summit in Hokkaido, Japan. In partnership with the World BusinessCouncil on Sustainable Development, over 40 Forum Industry Partnercompanies are now working on three sets of policyrecommendations: a long-term climate policy framework to succeedthe Kyoto Protocol; a financing mechanism to leverage public capitalin the World Bank and other multilateral development banks for thepurpose of stimulating private investment in low-carbon energysystems in developing countries; and steps that governments andbusinesses could take together to stimulate changes in the behaviourof consumers to take advantage of the many opportunities to reducegreenhouse gas emissions that have a zero cost or even produce apositive financial return.www.weforum.org/en/initiatives/ghg/index.htm

• Institute for International Finance “Principles for Stable CapitalFlows and Fair Debt Restructuring in Emerging Markets” – In2004, major sovereign issuers of international bonds and globalleaders of private finance agreed to general principles to provide abasis for strengthening crisis prevention and enhancing predictabilityof crisis management in the banking and financial markets ofemerging economies. The principles focus on four areas:transparency and timely flow of information; close debtor-creditordialogue and cooperation to avoid restructuring; good faith actions;and fair treatment. The agreement on the principles represents theresult of an unprecedented cooperative effort by leading emergingmarket issuers and the private sector. The current focus is to furtherbroaden the support for the principles and to move forward toimplementation. It is expected that the principles will evolve over timeto ensure that they remain consistent with changing global realities.By doing so, the principles can make a continuing significantcontribution to the robustness of the international financial system.www.iif.com/emp/principles

III. Helping to Develop Global Governance

Business Engagement in Partnerships to Strengthen Public Governance

Business leadership to promote effective publicgovernance is needed to meet the most urgent publicchallenges and create the conditions for sustainableand widespread economic growth. The key challenge– and opportunity – is to build on existing collaborativeefforts to achieve more systemic impact.

The following is a leadership agenda, expressed in theform of a framework for action, that can broaden anddeepen the international business community’scontribution to improved public governance.Structured along the lines of the 2002 GCCI

Leadership Challenge, this framework charts anexciting new course for corporate responsibility andcorporate citizenship programmes. It has the potentialto create the conditions in which business canflourish, governments can more effectively deliverpublic goods and social protection and, mostimportantly, societies can enjoy the fruits ofsustainable economic growth. While expressed interms of what business can do, this agenda is likely tobe most successful when business pursues it with fullrespect for the unique position of government and incollaboration with civil society.

III. The Role for Business: Framework for Action


1. Provide Leadership• Include public governance approaches in corporate responsibility and corporate global citizenship

strategies• Use opportunities for dialogue with public sector leaders to raise this topic and communicate with civil

society• Communicate the business case for strengthening public governance, including global governance• Support public-private-civil society collaboration as an essential tool for addressing core questions

2. Define What It Means for Your Company• Identify the opportunities for impact that are most relevant to your company• Implement strategies based on your company’s areas of greatest competence

3. Make It Happen• Make public governance an element of all corporate global citizenship activities• Align government affairs and corporate global citizenship activities in support of essential business strategy• Set goals, measure performance and review progress• Build industry coalitions/collaborations to address systemic issues

4. Be Transparent About It• Report publicly on progress and challenges• Engage in dialogue with the public sector and civil society on how to address barriers and increase

positive impacts

Adoption of good governance principles provides greater transparence to governmentactions and increases the political efforts efficiency by favouring the coordination of privatesector expectations on the governmental intentions and actions. Good governance helps tostrengthen companies, harmonizes interests and contributes for less volatile results. In thissense, good governance can enhance the investors’ confidence and, particularly when thegovernment also adopts good practices, can promote the overall economic soundness.

Henrique de Campos MeirellesGovernor of the Central Bank of Brazil

“ “

1. Provide LeadershipEngaged leadership from CEOs and boards of directorsis essential to advancing this agenda. Senior executiveshave a unique ability both to legitimize business actionon this topic and provide clear directional advice aboutways their companies and industries can act mosteffectively. Business leadership employing the power ofpersuasion by setting the agenda is one of the uniqueways progress can be achieved on effective publicgovernance.

Include public governance approaches incorporate responsibility and corporate globalcitizenship strategiesCorporate citizenship has sometimes been viewed aswhat companies do in spite of government, ratherthan an agenda undertaken in collaboration with thepublic sector and engaged civil society organizations.By establishing board processes to ensure thatcorporate responsibility and corporate globalcitizenship strategies embrace a public governancedimension, business leaders will ensure that theirsocial and environmental strategies are more effective.Just as business leaders redefined corporatecitizenship in 2002 as going “beyond philanthropy”,visionary executives can take the next step bydemonstrating and reinforcing the importance ofachieving systemic results through improved publicgovernance.

Use opportunities for dialogue with public sectorleaders to raise this topic and communicate withcivil societyBusiness leaders are in a unique position to make thecase for improved governance through theirinteraction with public sector leaders and civil society.By taking appropriate opportunities to communicatetheir interest in this agenda, the private sector canplay a catalytic role. As numerous recent pollsillustrate, poor governance is considered one of theprimary barriers to economic growth anddevelopment. Where business executives expresstheir interest in creating fair, transparent and efficientgovernance structures, these can help to improve theinvestment climate in a manner that benefits citizens,business and the public sector.

Communicate the business case forstrengthening public governance, includingglobal governanceThe business case for engagement is clear, but needsreinforcement. Business leaders have the opportunityto underline the importance of this agenda throughinternal communications, in industry settings and inpublic dialogues. The business case is demonstratedby noting the negative impacts of poor governance,by demonstrating the potential benefits of improvedgovernance and, most importantly, through action.

Support public-private-civil society collaborationas an essential tool for addressing corequestionsAction is the ultimate opportunity for leadership. Byconsistently and publicly endorsing partnerships toaddress business’s support for advancing keydevelopment questions, progress on publicgovernance is likelier to advance more quickly andthoroughly. Business can also demonstrate neededleadership by looking for opportunities to developindustry-wide collaborations for broader impact.

2. Define What It Means for YourCompany

This framework will be most effective wherecompanies shape their activities to be consistent withtheir core strategies, strengths and interests. Publicgovernance is a broad topic, presenting the risk ofaddressing questions outside a company’s corecapacity and legitimacy. Just as other aspects of acorporate responsibility or corporate global citizenshipstrategy must be relevant to a company’s activities, sotoo should this initiative. The following steps can helpdefine a specific agenda and mode of engagement forindividual companies.

Identify the opportunities for impact that aremost relevant to your companyNot all aspects of this topic will apply to allcompanies. Some questions, such as governance andits impact on climate change and equal application oflaws, are relevant to all companies. Where companiesin different industry sectors have distinct areas ofinterest, ranging from access to water to intellectualproperty rights to infrastructure development, tailoredstrategies are best. For this agenda to resonate,companies need to focus their attention on thequestions most material to their medium- to long-terminterests.

Implement strategies based on your company’sareas of greatest competenceCompanies that have engaged on this topic havechosen different means of engagement. Some havecatalysed new partnerships and collaborations, lenttechnical assistance or provided support forinstitutional capacity building. Others have chosen tofocus their efforts on advocacy or shaping formalpublic policy efforts on a national or intergovernmentalscale. Each of these options has legitimacy andimportance.


3. Make It HappenThe overall agenda of corporate engagement insociety and for the environment has matured beyondan era of awareness raising to the development ofactionable solutions. The same dynamic is present inaddressing public governance.

Make public governance an element of allcorporate global citizenship activitiesFew topics on the corporate global citizenship agendaare without a public governance dimension.Companies will make real progress by establishing thepractice of assessing what the governance issue isand how they can integrate a public governancedimension into the solutions they develop. This canmean looking at the opportunity to bring public entitiesinto the discussion of solutions, identifyingmultistakeholder opportunities to address keyquestions or considering how to transition innovativeefforts to sustainable models invoking public-privatecollaboration under clear governance models.

Align government affairs and corporate globalcitizenship activities in support of essentialbusiness strategyWhile traditional government affairs activities andeffective public governance are not identical concepts,they overlap. Sometimes the agendas for these twoactivities are developed in isolation, or may evenconflict. Companies can contribute to effective publicgovernance by seeking greater alignment betweentheir corporate global citizenship efforts andgovernment affairs initiatives.

Set goals, measure performance and reviewprogressAs with all business activities, measuring progress isessential. While measuring contributions to effectivepublic governance can be challenging, opportunitiesto do so include:1) Setting a goal of including a public governance

element in all their critical corporate globalcitizenship initiatives

2) Measuring whether key initiatives result in systemicchanges that include the public sector

3) Ensuring that all multistakeholder initiatives inwhich a company participates have an effectivegovernance process established and implemented

Build industry coalitions/collaborations toaddress systemic issuesThere are sometimes limits to what individualcompanies can do, and those in a given location orindustry often face similar public governancechallenges. One valuable way to address this isthrough industry collaboration. The sensitive nature ofthis topic is particularly well suited to progress throughcollaboration. Companies should look for opportunitiesto leverage their influence alongside that of industrycolleagues, those with common interests in particularissues and others working in geographic clusters.

4. Be Transparent About ItThe public nature of this topic suggests the need fortransparency, which in this context has two mutuallysupporting pieces: reporting publicly on thecompany’s actions and pursuing dynamic dialoguewith stakeholders about efforts to promote effectivegovernance. As with so many other aspects ofsuccessful engagement on public issues,accountability is critical.

Report publicly on progress and challengesThe growing imperative for transparency in businessreporting has spawned many useful platforms forpublic communication on this issue. Companies candemonstrate their commitment to improvinggovernance by including information about their effortsin their sustainability reports, and includingmeasurements of progress and shortcomings.

Engage in dialogue with the public sector andcivil society on how to address barriers andincrease positive impactsBusiness actions to promote effective governance arelikely to be strengthened by collaborative action withother institutions knowledgeable about the topic. Aswith many elements of the debate around business’sengagement in society, business has much to learnfrom institutions with perspectives different than itsown. Interaction on key dilemmas will likely unlockunforeseen opportunities to develop innovativesolutions with complementary partners who will makesuch efforts more effective.

We encourage companies to undertake efforts toimplement the steps outlined here, and look foropportunities to widen the circle of companies seekingto make progress on this critical issue. We commit toreporting annually on our efforts to implement thesteps described here, and to identifying barriers toprogress and opportunities to address those barriers.


• Doing Business, The World Bank Group,http://www.doingbusiness.org/

• Global Governance Initiative, World EconomicForum, http://www.weforum.org/globalgovernance

• Nelson, Jane, “A Responsibility for Government –How Far Should Companies Go?”, in WhoseResponsibility? The Role of Business in DeliveringSocial and Economic Change, ed. Amanda Jordanand Amy Lunt. Smith Institute, 2006.

• Nelson, Jane, The Public Role of Private Enterprise:Risks, Opportunities and New Models ofEngagement, CSR Initiative, Harvard University.

• Partnering for Success, CSR Initiative, HarvardUniversity and International Business LeadersForum, and World Economic Forum GlobalCorporate Citizenship Initiative,http://www.weforum.org/pdf/ppp.pdf

• Schwab, Klaus, “Global Corporate Leadership:Working with Governments and Civil Society”,Foreign Affairs, 2008.

• The Global Competitiveness Report 2007-2008,World Economic Forum,http://www.weforum.org/gcr

• Zadek, Simon, The Civil Corporation, Earthscan,2007.

1 Global Corporate Citizenship: The LeadershipChallenge for CEOs and Boards, World EconomicForum in partnership with The International BusinessLeaders Forum, 2002

Additional Resources



Victoria P. GarchitorenaPresidentAyala FoundationPhilippines

Julie EngerranGlobal Director of Corporate ResponsibilityDeloitteUSA

Hanns Michael HölzGroup Compliance Officer for the SustainabilityManagement SystemDeutsche BankGermany

Geoffrey BushDirector of Corporate CitizenshipDiageoUnited Kingdom

Deborah K. HolmesAmericas Director, Corporate Social ResponsibilityErnst & YoungUSA

Lord Hastings of ScarisbrickGlobal Head of Citizenship and DiversityKPMG InternationalUnited Kingdom

Jeffrey L. SturchioVice-President, Corporate ResponsibilityMerck & Co.USA

Daniel BrossSenior Director, Corporate CitizenshipMicrosoft CorporationUSA

Amjad Parvez JanjuaGeneral Manager, Corporate PlanningPakistan State Oil Company (PSO)Pakistan

Thomas ScheiwillerGlobal Leader, Sustainable Business SolutionsPricewaterhouseCoopersSwitzerland

Anant G. NadkarniVice-President, Group Corporate SustainabilityTata GroupIndia

Michael StopfordGroup Director, Corporate ReputationThe Coca-Cola CompanyUSA

For further information please contact:Valerie Weinzierl, Associate Director, Corporate GlobalCitizenship, World Economic Forum91-93 route de la Capite1223 Cologny/Geneva, SwitzerlandTel.: +41 (0)22 869 1212Fax: +41 (0)22 786 2744E-mail: [email protected]

You can also find more information about the WorldEconomic Forum’s engagement on corporate globalcitizenship at www.weforum.org.

GCCI Advisory Committee Members


The World Economic Forum’s public-privatepartnership initiatives engage leading business,government and civil society partners in collaborativeefforts to improve the state of the world through jointaction and dialogue. Senior executives of thesediverse institutions drive structured project activities,interactive discussion, and cutting-edge research andanalysis to generate new insights, build partnershipsand catalyse action. Initiatives are facilitated by Forumstaff teams with a breadth of sectoral and regionalexpertise. www.weforum.org

Business for Social Responsibility (BSR) is a not-for-profit business membership organization that helpsits 250 member companies integrate social andenvironmental matters into their strategies andoperations. BSR serves its member companiesthrough consulting, research, convenings, andcollaborative action. Headquartered in San Franciscowith offices in Paris, Beijing, Guangzhou, Hong Kongand New York, BSR works with companies andstakeholders to create a more just and sustainableglobal economy. http://www.bsr.org

AccountAbility is an international non-profit,membership organization established in 1995 topromote accountability innovations that advanceresponsible practices of business, government, civilsociety and other institutions. Its 200 membersinclude businesses, service providers, non-governmental organizations and research bodies; theyelect AccountAbility’s international Council, whichincludes representatives from all five continents.AccountAbility has developed the AA1000Sustainability Assurance and Stakeholder EngagementStandards, as well as leading-edge research on thegovernance and accountability of partnerships andlinks between responsible business practices and thecompetitiveness of nations. AccountAbility works withits members to help them build alignment betweencorporate responsibility and business strategy byadvancing joint learning and development of analytictools. www.accountability21.net

The International Business Leaders Forum workswith business, government and civil society toenhance the contribution that companies can make tosustainable development. Founded by H.R.H. ThePrince of Wales, it is an independent, not-for-profitorganization currently supported by over 100 of theworld’s leading businesses. www.iblf.org

The Corporate Social Responsibility Initiative ofthe Kennedy School of Government, HarvardUniversity is a multi-disciplinary and multistakeholderprogramme that seeks to study and enhance thepublic contributions of private enterprise. It exploresthe intersection of corporate responsibility and publicpolicy, with a focus on the role of business and newtypes of partnership between companies,governments and civil society organizations inaddressing global development challenges. Foundedin 2004, the Initiative undertakes research, educationand outreach activities that aim to bridge theory andpractice, build leadership skills and supportconstructive dialogue and collaboration amongdifferent sectors. http://www.ksg.harvard.edu/m-rcbg/CSRI

The World Economic Forum is an independentinternational organization committed to improvingthe state of the world by engaging leaders inpartnerships to shape global, regional andindustry agendas.

Incorporated as a foundation in 1971, and basedin Geneva, Switzerland, the World EconomicForum is impartial and not-for-profit; it is tied tono political, partisan or national interests.(www.weforum.org)

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