That’s when Herkstroter, a self-described “bookkeeper” who was Shell’s chairman, began to feel the ground shift under his feet. “At a certain moment you realize that you are beginning to lose touch,” says the now retired executive. “That the world is much more open and that communications, opinions and ideas are moving fast. And perhaps you begin to underestimate the forces out there.”
Welcome to the 21st century, Mr. Herkstroter. Today multinational corporations like Shell are driving the most phenomenal economic growth in human history. As they grow ever more enormous, with vast mergers like AOL-Time Warner or Glaxo-Smith Kline announced nearly every week, they are doing the hard work of globalization. In some ways, multinationals may even be the most powerful social glue left in a world where governments and ideologies are growing weaker and ethnic tensions stronger. But there is a flip side to this new prominence: increasingly, the rest of the globe no longer expects them to act as mere companies. If multinationals have become the world’s new power elite, then the public expects them to be good global citizens and indeed to show leadership and some noblesse oblige as well. What corporations like Shell have discovered is that public-interest groups, now more numerous than ever, can make that demand stick. Thanks to the Internet, activists can sully a famous brand name almost overnight. With 24-hour news transmitted by cable and satellite, images of a local protest can carom around the world just as quickly.
Of those to whom much wealth is given, much is now expected. One by one, companies have experienced their own private epiphanies about this new public role - and the bottom-line backlash that can ensue if they ignore it. After the spate of bad headlines, for example, Shell’s Herkstroter quickly adopted a code of ethical principles, began opening Shell’s doors to activist groups and began publishing an environmental annex to its annual report. Now, only a few years later, shareholder activists rate Shell, along with BP-Amoco, as one of the most ethical oil companies. Nike, defending its valuable brand against charges it uses sweatshop labor, last October released the names of the factories where its college-licensed products are made. Monsanto set out to be the dominant force in genetically modified crops, but it misjudged public reaction especially in Europe - so badly that today it’s limping into a merger with Pharmacia. Meanwhile newer companies, like Cisco Systems, a $395 billion giant that makes Internet pipelines, are pre-emptively trying to build good reps. Cisco’s chairman, ex-professor John Chambers, has donated computer systems to schools, given $50 million to Netaid for Africa and pushed for Third World debt relief.
Even mighty Coca-Cola had its own encounter with the new reality. Last summer the soft-drink giant found its reputation on trial globally from what once would have seemed a minor local incident: a slow and highhanded reaction to reports of contaminated soda in Belgium. The fallout contributed to the resignation of chairman Douglas Ivester in December. This week new chairman Doug Daft plans to call his top managers together for the first time to discuss the company’s new decentralized corporate structure and more caring posture. “We’re moving from globalization to ‘multi-localization’,” says spokesman Paul Pendergrass. “The summer of 1999 was a wakeup call for us.”
A rude awakening has hit governments as well. For the Clinton administration, it came last month in the form of hundreds of tear gas canisters in Seattle, Washington, where the president’s hopes for a new “round” of free-trade talks collapsed amid mutual recrimination and angry protests by environmentalists and labor and human-rights activists. While the 35,000 demonstrators seemed to espouse almost as many causes, one thing that many had in common was a sense of helplessness over rapid globalization. Administration officials now admit they underestimated the public anger that was building through the ’90s, though they remain puzzled by it. “It would have been hard, indeed counterintuitive, for anyone to predict that as the economy strengthened, and unemployment rates fell, there would be more anxiety about free trade and globalization,” says Gene Sperling, Clinton’s chief economic advisor. What wasn’t hard to predict is that this sentiment would be directed against major corporations, which only a year ago were still fighting the idea of labor rights being on the agenda of the president’s Export Council (they are on it now). “I think their level of consciousness has been raised by Seattle,” says U.S. Trade Representative Charlene Barshefsky.
True, full-blown protectionism is unlikely. Even the protesters in Seattle, most of them anyway,concede the economic wisdom of open trade. It’s just that for the corporations that conduct most of this trade, the stakes of ignoring public sentiment are getting higher all the time. Consider the hot new field of biotechnology. If you thought last year’s European protests over U.S. exports of genetically modified foods were alarming, just wait. Researchers are now delving into the very stuff of humanity, the human genome, which will allow them to literally re-engineer people.
Public-minded corporations were once a scruffy few, a handful of righteous companies like Ben and Jerry’s, the Body Shop and Levi Strauss. And there used to be, typically, a gulf of perception between a company’s profile in the business press and its reputation in the social-activist subculture. But today a bad image can cross over into the headlines with the click of a mouse. Mark Malloch Brown, head of the U.N. Development Program, says there are “two powerful dynamics at play.” In Europe, thanks to the fair-trade movement, “people really are looking at labels to make sure garments aren’t made with sweat labor,” he says. In the United States, however, shareholder activism has become the favored tool of leverage. According to a December report from the Social Investment Forum, a trade group of investment funds, $2 trillion, or one out of every eight investment dollars is now part of some kind of “socially responsible portfolio” in the United States. That’s a rise of 82 percent since 1997, a period when the broader market grew by just half that amount.
And the broader market, too, is meting out harsh punishment to companies that find themselves on the wrong side of public opinion. It isn’t just Monsanto that wants to bail out of genetically modified seeds. Novartis and AstraZeneca, two lower-profile rivals in the business, last month said they’d spin off and merge their own agricultural businesses. Nobody, it seems, wants a genetically modified stock price.
Companies are also learning that the great scale they seek for their world-class projects, cabling a continent, curing a cancer, can work against them. The bigger a company is, the harder it can fall in the public eye, especially when a brand name is trashed in the media echo chamber. “In the world we live in,” admits Coke spokesman Pendergrass, “there’s no such thing as a local story any more.”
The real question is whether megacorporations and a newly empowered public are headed for a kind of moral equipoise. In the aftermath of Seattle, can public activism become a fair and effective check on corporate behavior? That’s now being sorted out. So don’t log off. Since the cold war, most of the social debate has been about the privatization of the public sector. The new agenda seems to be the reverse: public-ization of the private sector.
