WASHINGTON (TrustLaw) – Stemming corruption in a globalised world economy where income inequality is rising requires ethical leadership, business executives and academics said at a conference on Monday.
Accumulating money and profit has become a driving force in many societies and ethical training has fallen by the wayside, Evelyn de Rothschild, chairman of the private investment company E.L. Rothschild told TrustLaw at the event organised by the Peterson Institute of International Economics.
“It starts with the individual, and ethical training is key,” he said.
Barometers of corruption globally have shown little sign that the scourge has lessened over the past decade. World trade grew five-fold between 1980 and 2007, while the richest citizens grew richer and income inequality worsened in all but the world’s poorest countries, according to research by the International Monetary Fund.
This income disparity is raising an increasing number of questions about the sustainability of globalisation and the ethical responsibilities of businesses and governments to spread the wealth more evenly within their societies.
Rothschild said the private sector has a clear responsibility. “If you don’t set an example at the top, how can you expect others to behave ethically?” he said during a panel discussion.
He called not only for strengthened ethics in business dealings but also for U.S. politicians to break their “dangerous” dependence on corporate financing to win re-elections, which he said threatens its democracy.
Stelios Vasilakis, senior programme officer for strategy at the Stavros Niarchos Foundation, a $1.3 billion charitable foundation which makes half of its grants in Greece, said that responsible leadership is crucial. In Greece, poverty is escalating as it grapples with a sovereign debt crisis and yet it is hard to address when corruption is so deeply embedded through three generations of political and business leaders, he said. “It will take a new generation, untainted, to break the system,” Vasilakis told TrustLaw.
George David, a former chairman of United Technologies Corp between 1997 and 2009, advocated governments setting regulatory parameters for corporate behaviour and then allowing companies to self-regulate.
United Technologies adheres to either U.S. laws or local laws, whichever are the strictest, and it takes ethical decisions because doing so often makes sense, he said in a panel discussion. David cited how the aerospace and building technology company has reduced its energy consumption by 30 percent in 15 years, its water consumption by 50 percent and improved its safety procedures to cut lost workdays from three days per 100 employees each year to less than a third of a day as examples of successful self-regulation.
“If you look for goodness, it often will pay for itself,” said David.
But Charles Sabel, a law professor at Columbia University in New York who specialises in economics and social organisations, argued for collaborative solutions to the ethical challenges posed by globalisation. It will takes corporations, governments and civil society groups working together to improve ethics, strengthen governance and spread the wealth, he said.
“You cannot rely on people to self regulate, even if you think that because they are the local actors they will know where the shoe pinches. No single corporation, no single government regulator can do it his or herself, so you have to organise collaboratively,” he said.