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Davos in the desert: businesses are right to put principles before profit and pull out of Saudi investment conference

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Siemens chief, Joe Kaeser has pulled out of the Future Investment Initiative conference in Riyadh, dubbed “Davos in the Desert”, amid outrage at the murder of Saudi journalist Jamal Khashoggi. Speaking on CNN, he said: “We are the ones who need to fix the issues … We are the ones who have the responsibility to show our people the way and find a win-win solution.”

It was a tough decision. Siemens employs more than 2,000 people in Saudi Arabia and has significant business interests in the country. You do not easily break away from important clients. Yet, like others including the chief executives of big investment companies such as JP Morgan, Blackstone and Blackrock, as well as tech companies such as Uber and ABB, and many others, Kaeser decided that the taint of association with Saudi Arabia, following Khashoggi’s murder, would be worse.

Although this sort of thing is not very common, similar incidents have happened before. Several heads of US businesses protested against the travel ban that was levelled against many majority Muslim countries by the US president, Donald Trump, in January 2017. In August 2017, several resigned from Trump’s American Manufacturing Council in protest at the president’s morally inadequate response to the deadly violence by white supremacists at Charlottesville. Merck CEO Kenneth Frazier put it best at the time when he said: “As CEO of Merck and as a matter of personal conscience, I feel a responsibility to take a stand against intolerance and extremism.”

Taking a stand

In the years to come expect to see more business leaders compelled to take a moral stance, whether it’s about the murder of a foreign dissident, the insensitive behaviour of a sitting president, or the persecution of religious or ethnic minorities. It will be increasingly difficult to avoid.

There are two main reasons for this: moral and social.

First, it is often assumed that business transactions are separate from the rest of our daily lives. For example, I do not need to approve of my greengrocer’s lifestyle in order to buy from him. As long as he serves me what I want, at prices I find reasonable, the rest of his life is not my concern.

Much of the time this may be true. But if I learn that he has, say, racist views or he mistreats his staff, I do not want to condone his behaviour, even indirectly, by giving him my money. As a consumer I have not stopped being a moral being. My sense of responsibility does not stop when I spend my money – on the contrary, it is magnified by having a choice in how I spend my money.

 

It is not very different for companies. Most of the time you may not care, or even stop to think about, the values or morality of those you deal with. At some critical point, however, you may well. A president who fails to unequivocally condemn a racist killing makes you wonder whether you want to sit on his business advisory board. A crown prince who throws his critics in jail or is suspected to have ordered the mafia-style killing of a dissident is not one whose hand you may want to shake. Your intuitive morality does not allow you to stomach it. How would you explain your actions to your children, your employees and your customers? Your own moral reputation is at stake.

Secondly, society’s expectations of corporate behaviour have changed. A survey by large public relations firm Edelman found that more than half of consumers said they chose to buy from brands whose beliefs they shared (and nearly a quarter are willing to pay more for this). To add value you need to show you have values. A company that does not appear to distance itself from inappropriate behaviour risks tarnishing its reputation.

Moral compass

The rise of 24/7 communications has created a global public forum in which events in distant places are beamed into everyone’s living room. Business leaders cannot pretend they don’t know about the barbaric murder of a journalist or the racist killing of a protester – and that knowledge creates a sense of responsibility.

Does this mean that business leaders will always need to take a stance in response to all the world’s problems? Not at all. Morally principled pragmatism is required – not utopian idealism. A CEO need not be a moral crusader with a mission to save the world in order to act as a moral leader.

Companies can decide which issues on which to take a stance. Human affairs, as Aristotle noted, are inherently variable – so much so that there cannot be general rules for how a leader should act. Details, history and context matter. The important thing is to have good judgment – to want to do the right thing in a way that is most effective in the circumstances you face. For that you need a moral compass, not a moral manual.

Haridimos Tsoukas, Professor of Organisation Behaviour, Warwick Business School, University of Warwick

This article is republished from The Conversation under a Creative Commons license. Read the original article.

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