Michael Posner, Conscience Incorporated: The Role of Business and Investment in Protecting Human Rights

(upbeat music) Can business be a force for good? What are the roles of markets in light and policy and philanthropy and inclusive growth? How can public-private partnerships help bring all of our resources and ingenuity to bear? Welcome to Capital for Good. I'm Georgia Levinson-Kohan, host of the Capital for Good podcast at the Tamer Institute for Social Enterprise and Climate Change at Columbia Business School. Capital for Good provides a chance to hear from business and civic leaders about their visions, plans, and hard work to build a vibrant, inclusive, and sustainable society. Through in-depth and candid conversations, we explore solutions to some of our most urgent challenges. Learn more and subscribe today at the Tamer Institute for Social Enterprise and Climate Change at Columbia Business School. In this episode of Capital for Good, which was taped in front of a live audience at Columbia Business School during social impact week in late February, we speak with Michael Posner, the Jerome Colbert Professor of Ethics and Finance at NYU Stern School of Business, Director of the School Center for Business and Human Rights, and the author of the new book Conscience Incorporated. Posner is a luminary thinker, doer, advocate, and long-time leader in the field of business and human rights. Prior to Stern, he served in the Obama administration as Assistant Secretary of State for the Bureau of Democracy, Human Rights, and Labor, and was the founding director of the advocacy organization, Human Rights First. Over the course of this wide-ranging conversation, we discuss Posner's early interest in human rights, sparked in law school when he was tasked with investigating atrocities in Uganda under Idiamine, and later focused on the role of business when he saw how many large multinational corporations operated in weak states that could or would not enforce human rights laws. We discuss why companies should care about human rights on ethical and commercial dimensions. The inadequacies of frameworks put forth by the likes of both Milton Friedman and ESG advocates that sometimes complex tensions between climate change and human rights concerns and the evolution and urgency of technology and human rights issues. (upbeat music) Perhaps before we get to the meat of the book and a whole number of topics we have teed up, I'd like to know a little bit about the arc of a very storied career as Tadishman and I won't go through all of it, but trained as a lawyer and served as an advocate for a long time at senior roles in government, including at the State Department under Secretary Clinton focused on business and human rights. An academic founded the center at Stern, which is I believe the first academic center, the first business school center for sure focused on business and human rights. What motivated the beginning of this career in human rights and talk a little bit about the broader arc and journey that probably here? - Well, first of all, Georgia, thank you for having me here and I'm delighted to be here. I should also say I'm not a stranger to Columbia. I taught at the law school and at SEPA for more than two decades. So this is a familiar part of town for me and it's really great to be back. I guess I would say a couple of things. My own personal journey as a lawyer is a law student, I was in Berkeley in California and I really was very domestically oriented focused. I grew up in Chicago and hadn't really traveled that much. And I wound up spending eight months writing a book about EDM, Means, Uganda. This is in the 1970s. I was working as a clinical semester from my law school and when they told me I was gonna work on Uganda, I literally had to go to what was then called an Atlas and I had found Uganda on the map. And so I was so fresh to this and then over eight months, I interviewed about a hundred people, the Ugandans in exile in East African Europe. Every one of them had lost family members. And I realized I didn't know the first thing about this and here's a country far away where three, 400,000 people have been killed by a maniacal leader and the world wasn't paying attention. And so to me that was a wake up call and a recognition. We are so privileged here and I thought myself, this is an area I should if I can find a way to get into the subject of international human rights. I really wanna try to figure out how to do that and play some role in the subject. So I did practice law for three years and then I would give them the great opportunity to come to New York and really be the first employee of what's now human rights first. So that's my start of to this and human rights movement, what I taught at Columbia Law School is mostly about how governments behave. So the genesis of the human rights movement is World War II, the Holocaust, creation of the UN and the UN for the first time creating a framework for governments to talk about human rights. Elena Roosevelt, Universal Declaration of Human Rights, 1948. Basically did two incredible things. It said human rights are universal. We all have them by virtue of our humanity. We're born with them. No government bestows them on us. We're entitled to them. And the second thing is that it said, it internationalized rights. So it said that governments have an obligation to hold each other accountable. We haven't done a very good job with that, but that was at least a premise from 1948. And it's born itself out in lots of treaties and various UN and other efforts. Nobody was at that point really thinking about the corporate sector. And that didn't occur to me until I began to realize how many people, majority people in the world, live in countries where their own government is either weak or disinterested in protecting their own people. So I write about this in the book, but there's a giant governance gap. And as we've had a globalized economy, you realize in many, many places, the government's not doing its job. The UN has no ability to police and monitor what's going on and really provide an effective remedy. So you get these giant companies coming into these weak states where there's a governance gap. And inevitably, they're going to be called on to play some role, both not making it worse, but also in some cases trying to figure out how to be part of the solution. So that's majoring. - We'll get into some of the more particulars on certain issues. We'll talk about ESG and DEI and the pushback. And we'll talk about tech and even freedmen's view on all of this, but just at a very high level, you mentioned you even initially thought of these issues as really legal issues of pertaining to government. So just at high level, why should businesses operating in these countries? Why should they even care about human rights beyond basic compliance or if there are laws? How do you get the attention of business and why should they be paying attention? - It's a really important question. And the answer is it's some combination of doing the right thing, being ethical, inevitably. In the 1990s, when I started venturing out a little bit to talk to global businesses, let's say in a manufacturing supply chain, the line was, well, we outsource this work. We follow local law. We don't own the factory. We don't own the farm. That's all that can be expected of us. And so there's been a period, I'd say, over the last 20, 25 years where people like me have been pushing back and saying, you can't outsource responsibility. If you're the main economic beneficiary. So at the end of the day, 95% of people who work for Nike are not in Beaverton, Oregon. There's some place in Asia making shoes and shirts. I don't think companies can rightfully say, that's not my problem, that's not my business, because I don't own the factory. So that one thing is just trying to get people to be a bit more self-aware and recognize that, well, outsourcing may be a smart business strategy. It shouldn't come with a notion that you've outsourced responsibility. The other thing that's driving companies, well, two other things. One is companies get in trouble. They get caught up in a public outrage. I'll give you one example. Coca-Cola in the '90s was caught up in a labor dispute in South American Columbia. And I write about this in the book. And basically, the bottling plant was owned by local Colombian entrepreneurs. They had a union fight, and they brought in some vigilantes who killed two union activists on the floor of the Coke bottling plant. And Coke is sued. There's a campaign, 100 universities stop selling Coca-Cola products. And the killer Coke campaign started to affect the bottom line. And DeVal Patrick came in as general counsel, a really decent thoughtful guy. And he said, we've got to actually own responsibility that came to my office at one point with a couple of his lawyer colleagues. They brought their bags full of briefs. They were being sued in federal court in Atlanta. And I said, I wouldn't worry about the law. So you're going to win the lawsuit. The real issue is whose name is on the bottle. And to his credit, and then to the company's credit, they made a judgment. We actually have to figure out what's going on in those bottling plants. So the second thing that gets companies motivated is a reputational crisis. And then the third thing, which we're just beginning to see is that governments outside of governments in Europe in particular are really starting to look at regulation. We've done it in some areas like the Foreign Corrupt Practices Act from the 1970s, but we're seeing the European Union driven by European consumers and investors to say, we actually have to pay attention. Companies doing business in Germany and France need to be aware of their global supply chains. So that's, I think, the-- piece that's really come into focus, and it's really going to change this. In the second two examples, the reputational risk and headline risk that Coke was encountering or some of the others where there might be other supply chain issues that are eventually regulated, there's costs there that companies either buy virtue of regulation or buy consumer backlash. There's externalities that they start to feel they are incorporated. You also talk in the book, and I think folks that come to business school and also talk a lot about the shareholder versus stakeholder capitalism, and the legacy of some of Milton Friedman's writing and work on this and shareholder primacy, where Friedman wrote in 1970 that social responsibility of business is to increase its profits, and therefore we've all become comfortable. The chibalit in the US and elsewhere have lived with is that we therefore don't really need to think about the environmental or social externalities, and in fact, business might be abrogating their fiduciary responsibility if they do start to think about these. You've critiqued a number of people who have had this framework, and cited a number of shortcomings. Who talk about those shortcomings and the shift to a more of a stakeholder view? So when I first got to Stern, I was amazed at how many different courses assigned the Milton Friedman article from 1970 as it was like the gospel, and I thought to myself, you know, that was 50 years ago, and it reflects a different world. I'm not the only one to have come to that conclusion, I must say. But it was often thrown up at me, what you're talking about is an externality. It doesn't really look at short-term returns on investment, et cetera. And my answer to that was, and is, we now live in a world where there are other constituencies that matter to companies that need to matter to companies, not least their own employees. I talk to corporate leaders all the time who say to me, the thing that I most care about, the thing I most worry about is I want to have the best people coming to work for my company. I want them to come here. I want them to feel proud that they're here, and I want them to stay. And I'm asked more and more, are people asked, what are you doing about climate change? What are you doing about human rights? And so I think that's just one constituency. And then you look at where, again, in a globalized economy where so much stuff is being produced, either manufactured or mined or farmed all over the world, there are communities that are affected by that. That's not general motors, maybe going beyond Michigan to Ohio. Now all of a sudden, you're in 35 countries or 50 countries. And there are local communities that are going to affect your ability to do your business. If you take people off their land, you're running a mining operation. If you're operating in a place where you're not mindful of the community that's in the area where you're working, that's going to come back and buy you. So we are at a place, and even four or five years ago, the business round table, which is not exactly, I wouldn't call it a human rights exemplar, and it's the 198 biggest companies, CEOs, made the judgment after a lot of soul searching, a lot of conversation, but we need to look more at this notion of a shareholder, set of different communities that really do matter, consumers, employees, the communities, et cetera. So I think we're moving in that direction, not gracefully, not linear, but I think we're moving also in the direction, and I say to companies, I can't give you the answer. If you do what I say, I'm not going to give you improved quarterly returns, but we have to take a longer view. If you want to be a sustainable company, you need to take a longer view towards what are you doing? What's it going to mean in three, five, ten years? It's hard to do that. I'm down there at NYU, two miles from Wall Street, and there's certainly plenty of people in Wall Street that will tell me, "Yeah, that's nice, but go back to your university." I think at the end of the day, we are moving in a direction where smart companies, successful companies, are recognizing that they have to be taking this longer term view and taking more holistic view of what they're doing. Just a brief follow up on that. They might joke that you go back to the university. I do think it was when I was in business school, so it won't carbon date us to what that was, but the thinking at university or business school that universities then was actually the best way to align incentives, and you touch on this in the book, was significant stock compensation for executives, and in fact, as we think about the stakeholder capitalism and the long-term view, that's the pillar of one of your critiques is that now business executive incentives, both the fact that they're not serving very long tenures in these companies, and the fact that so much of the comp is tied up in stock, and you'd look to, I won't say juice earnings every quarter, but you certainly have a mix set of incentives there. Absolutely, and the differential between the typical employee and the CEO is dramatically out of whack now. 50 years ago was 20 to one. Now it's 350 to one, something like that. Yeah, the incentives are all wrong. If you're a CEO, getting stock, you know you're going to be in your job for years or five years. Your interests are not the long-term interests of the company. You want to do the buybacks of shares, you want to do everything to raise the price in the short term. I'm interested in companies succeeding. I want companies to succeed, but I want them to be stable and sustainable, and they should do their job with a thought that we're going to be around here in ten years, and a lot of companies aren't thinking that way. Another framework that we will discuss, and then discuss what you call the conceptual error at the heart, is ESG. I want to talk about in your mind what ESG is at least meant to include the environmental social governance factors, so it's an amalgamation of a bunch of things that often aren't related. What you call an ESG bubble, at this point, 50 trillion or so, maybe more of AUM that are invested and managed with some kind of ESG lens, talk through some of the complexities of this lens and this framework, and particularly the distinction that you make between values-driven investment and financial value. I'm a bit cynical about the origin of ESG, but I think the underlying purpose of it makes a lot of sense. It needs to be rethought and re-evaluated and maybe taken apart. This is an example to me of what the Biden administration called "Build Back Better." ESG's 20-years-old, it was really created by the UN and the World Economic Forum and a bunch of banks, and it was largely, I think, a reaction to the fact that a new generation of investors, women, millennials, the younger people are really concerned about the environment. They're concerned about climate. They're concerned about how workers are being treated in a global supply chain. They're concerned about the lack of diversity and the upper reaches of the corporate sector. The idea was we're going to create some funds. We're going to call them ESG environmental social governance, and we're going to give those types of investors someplace to park their money. It was always half done in my judgment, and with a thought that it really wasn't, if you look at the small print, the fine print for, let's say, a black rock or a fan garden state street, they're really evaluating risks to investors. They're not really evaluating which companies are doing the best on carbon footprint or on treatment of workers globally. They don't have the metrics, and they say in the fine print, that's not really what we're doing. We're protecting investors. To me, that's two things. It's still conceived because it's not ambitious enough. Secondly, it's still conceived in another way, putting the environmental and social issues together, I think, creates some confusion. You can have some activities that are good for the climate, but bad for human rights and vice versa. We basically have been advocating, and this is a long-term effort, that there really ought to be, and I think will be, should be, investment funds. They're really do cater to people who care enough about climate or care enough about global labor, that they're willing to take a lesser return. Now, that's heresy. Again, people in the finance world say, "Oh, my God, I would exempt pension funds. I understand entirely that if you're managing people's retirement, you have to maximize returns." I think there's a slice of our population. It may not be a huge slice, but it's significant that care enough about these issues, that they're willing to make a significant profit, but not maximize the profit. I think we need to give them an alternative that's real, where you are actually evaluating who are the ten best companies on carbon emissions in a particular industry, which companies really are paying attention to labor and supply chains, and they ought to be rewarded with investors' dollars. We're not there yet, and adding to the confusion here, we also have a broadside attack. It didn't just start five weeks ago, Governor DeSantis, Governor Abbott in Florida in Texas. About a year and a half ago, two years ago, started a broadside effort to treat ESG as woke capitalism. They call Larry Fink a woke capitalist. I know Larry Fink. He's a capitalist, but he's not woke. So, what they did basically was to demonize the whole enterprise in a way that really reflects the fact they don't like environmental regulations. They don't really believe in diversity. We're seeing that now, even done as well as it can be done to create a more diverse workplace. believe in really protecting workers, and they're using this attack on ESG as woke capitalism as a way to take that broader approach. Just to pick up on this backlash point, sometimes you think if the critique from people like you is that it's not quite greenwashing, but there's a concern that actually this ESG mantle isn't really going far enough or deep enough, and then you have the critique from this side that says in fact it's overreach, and you guys have gone way well, so you'd like to think sometimes if you do those critiques from both sides, you must be doing something right. Are you concerned that the pushback that's become politicized and taken on a life of its own will really overshadow fundamental good, important work about material issues or other on the human rights issues? I'm concerned about that, and I have no doubt that a number of companies have hired people to be part of an ESG team, some of the investment firms have as well, well-meaning people who are trying to do the right thing and making some difference. So I don't want to denigrate the industry of people doing this. I'm making, I think, a broader point, which is we can do better, and I would like to see us use this time when everything is so crazy, swirling around every day. There's a new headline that at least makes me a little crazy. It's a time for us to reflect on how do we do this better? How do we think at the moment where there's an opening? What should it look like? I do think the E and the S ought to be separated. I do think we need better metrics. Anything companies really treat as a priority? They measure its person's law. It's measured, improves what's measured, and made public improves exponentially. Companies are not doing enough to monitor and to measure and to create those metrics for evaluating their carbon footprint. The SEC in the last administration tried to get disclosure requirements looking at carbon emissions and industry in the United States rejected that. We need better data. Anything a company treats as a business priority, quality, productivity, revenue, expenses. Those things are measured up the wazoo and people's jobs depend on how the numbers pan out. We need to treat these issues the same way and it will take some energy. I think it'll take government to force some of that reporting. But once we have better metrics, I think we can then look at what we're calling values funds and have a basis for making those judgments who's actually doing better and how do we make sure that those companies are rewarded in the marketplace, investors that really care coming to them and say, "I want to invest in the top 20 companies on carbon and I'm willing to put my dollars behind that." You had reference that there are sometimes tensions between concerns about human rights issues and concerns about environment issues or climate issues. I'm going to try to shoehorn about six different questions into one because we're going to touch on sustainability and human rights and throw China in the mix as well until we'll lead in and unpack it. We're sitting at Columbia Business School. We focus a lot here on climate change and the Tamer Institute focused on social enterprise and climate change. I think we can all agree that even make a dent in the climate crisis, which is this existential crisis of our lifetime, we will need to transition to a lower carbon economy and that will involve scaling up all sorts of things including renewables and new technologies, whether they're electric fields or others that involve batteries and those batteries, at least to date rely on things like critical minerals, cobalt and other. Those critical minerals for years, I mean, even before we thought about EV is where our mind in places and in ways that have long histories of conflict minerals and others of real labor and other child and human rights abuses. So that's one piece of it. It also happens to be that some of these minerals now are in places like the DRC where 80% of the extraction and also the processing is China owned and controlled. Relatedly-ish, but different, we also know that a lot of the solar industry and the panels are cheapest to produce in China and often some of that production occurs with forced labor in Xinjiang and regions that we know that there's some degree of forced labor. So that is also an issue about the human rights one and increasingly geopolitical. Help us think about all of those issues, the critical mineral piece that solar and other renewables, how they do and don't intersect with human rights and is there a way to comfortably integrate the two? It's a great question. You did pack a number of things into that question and I'm going to add even another one. We live in a complicated world and when I teach these subjects, I will routinely say to my students, I don't have the easy answer for these things. By the time you're done with this course, you're going to be more confused than when you got here and that's okay because at least you're going to be thinking about these issues. I also tell them I'm teaching you for your seventh job because when you go to work for Goldman Sachs or McKinsey on the first day if you want to tell somebody what you think about human rights, then I could be really interested in that. But if you're running a big company, these issues are going to come to your desk and you're going to try to figure out what they have to do about them. So let's take the mining industry. One of the features, I mean you mentioned Cobalt, I could use that as the example, but it goes much beyond that. All of these critical minerals, you go find them where they are. 80% of the world's Cobalt is in the Democratic Republic of Congo. I talked about governance gap. Congo is pretty dysfunctional government, corrupt, defuse, very weak central government. And in the copper belt where the Cobalt is mined, about 75 or 80% are machines coming in and digging it out of the ground. But these are giant mining sites, miles long, miles wide. It's such a poor area that people wander into the site with a shovel and their kids, and they dig a hole in the ground, maybe 100 feet deep, and they send their annual kids down the mineshaft. And it collapses. Happens every day. There are 25,000 kids working in the Cobalt mining area of the Congo, 25,000 kids. And it's an example, but there are many examples of this informal or what's called ASM, artisanal mining sector. It can be gold, it can be lithium, any of these minerals. There's a formal site and there's an informal site. And this is a place where I think companies can make a difference. We traced and we did some reporting in 2019, a big Swiss trading company called Trafigura. I never heard of it, but it's $240 billion a year in revenue. They trade minerals and oil and everything. They move stuff around. They made a judgment. We can try to formalize this one mine site. And we think we can get a good result. Even though we realize it's a risk, we realize we're sticking our necks out. We realize it's going to be spending a bit more money, but in the scheme of things, it's inconsequential. So they put a fence around an area, they brought in guards, they gave protective equipment. Interestingly, they also allowed, in fact, encouraged women to come in and be miners. It turns out that in the DRC, there's a suspicion or a prejudice, the women are bad luck. And so there are almost no women in the mine sites. When they brought them in the mine sites, family had twice the income. And that meant they could send several more kids to school. So it solved two different issues. COVID came, the mine shut down, and they haven't been able for a variety of reasons to rebuild it. But it's an interesting model. The idea of formalizing these ASM mine sites in any industry around the world is a way forward. It really is a way forward. It doesn't mean you solve the problem, but you deal with both mine safety and the issue of children. Now, why don't companies do it? Well, if you're Tesla or your general motors or your Volkswagen, and it's the car companies that are the biggest buyers of cobalt for their batteries, it's so far away. It's so far away and it's really out of sight out of mine. And so they go, you mentioned in the Chinese. First of all, they go to Glencore, which is another big trading company. And Glencore, this is the inconvenient truth that Al Gore talked about. Glencore says, we will promise you that we will deliver cobalt for your batteries and there won't be any ASM, no children, no risks. Of course, they have no way of making that real. It's the same mine site. The kids that are digging the cobalt out of the ground, parents put it in a burlap bag, and they walk 100 yards to a trader buys it for $8 and then walks over to the mechanized site and sells it to them. So it's co-mingled from the get go. And then as you mentioned, the Chinese are also doing the processing, the smelting, 80% of the world's cobalt is processed in China. So even if miraculously you could separate it by the time it gets to China into a battery manufacturer, it's all part of the same. So I share your view. The climate crisis is existential. We need electric vehicles. For the long term, for the vehicles that go 200, 300 miles, you need a battery that has cobalt to keep it from burning. But we can do both the right thing on climate and the right thing on human rights by recognizing that there is a cost in mining cobalt when you take into account the informal mining. So that's one example. The China example with solar panels a little more complicated, because 98% of the wafers and ingots in those panels that are produced globally, come out of cinemas. And Xinjiang, it's not occasionally, it's all the time that forced labor is basically the way in which the Chinese government is treating the weaker, religious, ethnic minority, 11 million of them in Xinjiang. So you can't exactly get around that fact. By the way, it's US and German technology. The Chinese 15, 20 years ago said, "We can produce it and do it cheaper and efficiently." And they do. We now have to look at alternatives. If the Chinese are insistent on forced labor in Xinjiang, there have to be alternatives to being produced in that place. Interestingly, this is an area where the US government took a old move by partisan, passed a bill two years ago called the Weeger Force Labor Prevention Act. The author of that bill was a guy named Marco Rubio, and it basically says, "No product that's produced or component parts in Xinjiang can come into the United States." It's basically an absolute ban. I'll be more precise. It says, "If you produce something that had the touch of Xinjiang, you the company have to prove that there's no forced labor." In effect, the burden is on the producer, and you can't do it because there's no independent monitoring. So I went to people in the White House in the Biden years. Actually, they came to me and said, "We want to figure out a way to do this in a way that's human rights ethical." And I said, "You really can't do that." And I said, "What you should do is have a waver for three years, so we're not going to stop importing solar panels." But then put the pressure on both US manufacturers, Korean Vietnamese and others to gear up to make this production, to find alternatives to China. They said to me, "We can't do that because Congress would yell at us." Well, that's not really the answer. So these are hard issues. You have to both walk and chew gum. The environmental imperatives are real, but you can't ignore human rights. I'm going to give you one other example. We're doing a report now looking at heat, at the effect of climate on workers, and we're starting out by looking at manufacturing. And so it turns out that there are a number of, we know apparel, so we're looking there. It turns out that there are peril factories in Sri Lanka and Pakistan, where it's really hot, that have air conditioning. And their American and European buyers are now saying, "Turn off the air conditioning because it's affecting our global carbon footprint." And so there we are talking to a local factory owner in Pakistan and Karachi, where it gets up to 129 degrees. And they're saying people are fainting. Productivity is terrible. And our global buyers are telling us to shut off the air conditioning. So again, this is complicated. The answer is not to turn on or off the air conditioner. It's really to figure out how do you balance, how do you have better design of factories? What's the right way to do air conditioning? It's a technical issue, but it's a human rights issue and it's an environmental issue. Sorry to go on. I packed six questions into one. I want to take on one more industry before we open it up for a broader set of questions. We will also return to the test of Marco Rubio's human rights bonafives and where they're headed. But before we do, let's talk about the technology industry. You had in 2010 through 12 or so when you were at the State Department, you had a front row seat in Egypt and elsewhere to the events of the Arab Spring. And watched activists use early social media and use Facebook, for example, to really take on authoritarianism and help to pose bubara and others. And we fast forward now just a bit more than a decade, not much more. And I think there's a lot more to be worried about social media, but not just social media. AI cloud computing gaming set on a whole bunch of human rights, concerns, privacy, security, surveillance, thinking about harmful content of all kinds, basic issues of truth and information and disinformation. Could you talk about some of those challenges as you see them and potentially some solutions? Absolutely. So just two senses, or am I getting into this as you say, I was in the State Department when the Arab Spring happened and they called it the Facebook revolution and through a square, all of a sudden people were able to organize, go online, Hillary Clinton gave three speeches on internet freedom. I helped write those speeches and we were really, I would say evangelists for the notion that social media is the town square of the 21st century, it provides credible opportunities for business, for learning, for education, for health, and it also opens up political discourse. So I still believe those things, but with some qualification, when I got to Stern and we started talking to the companies, it became increasingly clear that people that I would call the no good nicks also had gotten wind of the fact that this is powerful technology. In 2016-17, we started to look at the Russian interference in the United States in our election. We looked at ISIS. At one point, ISIS was producing 70 Hollywood quality videos a day recruiting people from all over the world to come. They had a Brazilian guy who was like a genius and they were producing these very slick videos that were going online. They had a massive online following. So we started to look at this and we went to talk to the companies. I knew the companies. We had been partners in the internet freedom moment. And what we said to them is, you know, it's not good to have harmful content, whether it's political disinformation or disinformation about healthy issues or bullying or extremism on your site. And they said, you know, we don't want to be the arbiters of the truth. We want to give people what they want. And we started to study this and we realized people go online and stay online because there's an emotional connection. And negative emotions, trump positive emotions, hate and fear at the top of the list. So if the companies are saying we give people what they want, they're giving us hate and fear and the algorithms are driving us to be more polarized, more at each other's throat and not have a common set of facts. So that's the challenge. We thought for a while that the companies would come along with us because we're saying, this is not good for you. It's putting this stuff online that everybody's getting more and more upset about. At the end of the day, we haven't prevailed on that. And I'll give you one story from 2014. I did a lot of work in Burma and Myanmar when I was in government. And in 2014, I started to get calls from my Burmese friends saying the Burmese Army has weaponized Facebook. People in Burma call the Internet Facebook, 93% get on to the Internet through Facebook. And the Internet, the Army was basically saying the Rohingya minority is disloyal and their raping women and their attacking police stations go get them. And this led to what became a genocide. I called my friend at Facebook who was in charge of public policy. And I said, what are you doing about what's going on in Burma? In Myanmar. And he said, what's going on in Myanmar? And I said, well, there's this weaponization of your site. He said, give me two days. I'm going to go check on it. I called him back two days later. He said, you know, I've been walked around talk to people here. Nobody knows anything about this. How do you know? I said, well, how do you not know? He said, we have nobody here who speaks Burmese. So this is a company that's making $100 billion a year on ads. And they're operating in a place. Myanmar with 50 million people. And they have nobody who speaks Burmese. So that was the wake up call for me like, oh my God, we think about this in the US context. A whole wide world is now dealing with the same issues. And the companies have not made the judgment of what to do. So I think at this point, it's not going to happen in this administration. But I have no doubt that we need to begin to regulate not content. I'm a free speech believer government shouldn't be telling companies what to take down, what to keep up. But they need to be opening up the space. What are the algorithms? We need more transparency. We need government oversight of these companies are operating. Just for clarification, the companies themselves are not bound by the first member. That's right. They are not public utilities and government entities. So in fact, they can engage in content moderation. Should they choose to? Absolutely. If you own a restaurant and some creepy person comes in and start screaming racial epithets, you throw them out of your restaurant. This is the equivalent. If you own the platform, you get to decide who's on it. First amendment doesn't tell you not to do it. All right. So this question of business leadership. And then we will open it up. You write a lot about government and government regulation, but we've really talked about business and business leadership. The compliance regulatory piece, but also voluntary. Say a couple of corporate leaders in the book who for a number of years have been terrific, particularly on issues like Kenshinote and Ken Frazier on voting rights. It's probably fair to say in the last few months, corporate outspokenness on a whole bunch of issues has been muted. Certainly on some issues in certain sectors. Certainly we've seen this recently in the tech sector. So where should business leadership come from boards that see sweet business schools would love your last thoughts on that? I'm quite cautious or conservative when companies ask, should we be speaking about this set or the other thing? I understand if you're running a giant company, your employees use Spana broad spectrum. I do think business leaders need to be attentive and to be active. If there's fundamental threats to a democracy, to our instrument. institutions, rule of law, stability, predictability. I mean, the book was written six, seven months ago. I wasn't commenting on what's going on now. But I did say that it's important that the electoral process be fair and open that people have a right to vote. And that's where Ken Chinalk and Fraser and others were leaders. I think I would say a couple of things right now. I think it's important for business leaders to think of acting collectively. Is it a very challenging moment? And I think it's a very real threat to a company to be out there all by themselves. You're beginning to see-- we haven't talked about the diversity discussion. It's all other subject we could take on. But there are some companies, Costco, Microsoft, Apple, that have said it's in our interest to have a more diverse workforce and more resembles our society. I think it's great that they're doing it. I think it will be better and stronger if corporate leaders come together and they say, this is something that's in our interest collectively. There's chapter in the book about the Fair Labor Association. We've got 60 apparel companies now in some on the side working together. It's easier for them. We've seen it. Even in the context going back to China, we've issued a couple of statements about cotton, 80% of the cotton in China comes from Xinjiang. The Fair Labor Association has spoken out about that. And we have a bunch of companies that probably don't want to say anything individually. And it's Nike and Adidas and Lululemon companies you've heard of. If they're part of a collective, they can say what we're just part of a group. So I think it's important to preserve our democracy. Secondly, I think it's really important for companies and corporate leaders to be thinking, how do we band together and have a united front with respect? I'd like to say thank you. And then we can open that for questions. I have a question. So I'm from Europe. I think the EU regulated AI before they had AI. But now here in the US, I also see the more optimistic spirit and innovation and how that drives the economy. But then in the beginning of the talk, you said a part of human rights is also a EU regulation. So where do you see some sort of balancing act there? And also now, I think you see all the political turbulence that is happening. In the end, money is power. And we live in a capitalist society. So the more money you generate, the more you have to say. And I think Europe is really struggling there. So I have a bit of a hard time uniting the two. And I'm very curious to hear your thoughts on it. And I would say, as you've just said, there's a range of regulatory initiatives now in the EU. You mentioned AI. There's the Digital Services Act. There's the corporate sustainability due diligence initiative. There's a long list of them now. And I think Europe is struggling, honestly, to get it right. To me, it's the right instinct to say, government needs to be involved in some way. But right now, it's a mess. Because there are too many regulations. There's a lot of reporting requirements that become form over substance, a box ticking. Companies clearly don't like being regulated, so they're throwing gum into the works. But I think it's the right thing to look at what smart regulation look like, and I would say in that regard, it's got to be industry specific. You can't just say human rights or due diligence. God knows what that means. You've got to have standards and metrics that the industry itself is part of defining. They shouldn't do it on their own, because they'll always dumb it down. But others have to be involved, but they need to be involved. They need to own it. And then you have to have some means of evaluation. And again, back to data. I'm big on data. You've got to have a way. You're actually evaluating not just company promises and procedures, which is where the debate often is. You have to look at performance. At the end of the day, if you're looking at workers on a farm or in a factory or on a mindset, are they being treated any differently than they were 10 years ago because you've done all this regulating? So I think there is a way for it. We're nowhere close. It's going to take 10 years or more. But I think the instinct of saying companies left to their own devices aren't going to do enough. But I would also say government alone can't do it. Companies need to embrace this acknowledges. They need to become business priorities again to the extent that they really are putting the resources into figure out how do we do a better job of this and treat it as an area like all these other things. Profits and quality assurance and worker retention. Human rights ought to be among those things. So we're going to get there. It's just going to be a bumpy ride. And I think it may get worse before it gets better. - Hi, thank you for an amazing conversation. I'm Sally Schuster. I am from Colombia. So I'm very looking forward to that chapter on the FEMSA Coca-Cola situation there, graduated from CPAL last year. And now I'm in the venture philanthropy world with the Latin American impact investing work. And I used to be at the Ford Foundation part of the work. We supported was these transparency initiatives. So the EITI, the extractive industries, transparency initiatives, the publish what you pay. Those were very focused on the mining sector. I'm wondering if you know of similar initiatives that are working on different types of sectors. If there is an uptake on more companies pursuing these types of metrics and initiatives, is there a reaction or an aversion from some others? Anything that you know about what do you think will happen? And I don't want to talk about the current political state, but we can't not address the elephant in the room. Do you see that also being highly impacted as we progress in this cycle? - Let me take the last point first and I'll come to the EITI. The Atlantic Ocean just got a lot wider, wider and deeper. Europe begins struggling to do it but is more in a mode of saying, let's figure out how to regulate supply chains. Not only of European companies, but companies doing business in Europe and the US is clearly moving in an anti-regulatory or a less safe fair direction. So we're gonna see, I think that Gulf is wider and wider. EITI really deals with corruption and I think it's done a reasonably good job of that, although again, not perfect. I mentioned the Apparel Industry and the Fair Labor Association, which is now 25 years old. I think it's the most serious of the multi-stakeholder initiatives. The Apparel Industry got caught up in the '90s and a lot of commotion on campuses and elsewhere about sweatshop labor. And so those companies came to the table during the Clinton administration and said, we can't afford not to be talking about it. They didn't quite know what to do about it, but they did create an organization which does follow what I talked about a few minutes ago. There are industry standards, there are metrics. There's a means of evaluation every company. It's evaluated every three to five years and there's accountability. At the end of the day, some companies have been put on suspension or even kicked out because they're not doing the job. So that's the model and I'm hoping and I'm actually going to be in Europe in a few months talking to people at the EU and in Germany about France, about how you take that model and streamline all the things they're doing but be very specific what's really going to get a better outcome. I want to just say one last thing about corruption. The Foreign Corrupt Practices Act was passed in 1977 and he just wrote something about it. So I went back and dug in, how did that happen? There was scandals involving American companies going to Central America, the president of Honduras demanded a $2.5 million bribe from Chiquita Banana. It was called Banana Gate. The SEC found it out. The head of the company jumped out of a 44th floor window in the Pan Am building. What's more interesting is the SEC found 200 American companies had paid $300 million in bribe and a bunch of those companies came to a congressional hearing chaired by Frank Church Senator from Idaho and they begged the US government to impose a law that says you can't bribe somebody. The head of Gulf oil testified. So it was a sense, this is not in our interest. We don't want to be walking all over the world with people having their hand up. Now I mentioned that because a week 10 days ago the current administration said we're going to suspend application of the foreign corrupt practices and say, and there are plenty of American businesses now say it's burdened some, it's expensive. We have to get all these do training whatever else. Nobody alive today was a CEO of a Fortune 500 company in 1975. Nobody understands what a mess that was. And so the law, urged by companies, has actually created a place where there is, and I've seen there's no bribery, but there's a lot less. Because companies know US and European companies doing business here, there is a law. And we are going to be fined. There's even criminal penalties. If our employees take a bribe or give a bribe. So that's to me an example. Business should do what's best for business and sometimes government intervening can actually help protect business against unethical practices around the world. - Thank you so much. I'd love to hear a little bit more about the value funds that you mentioned earlier. If I was to think about at least one potential positive to ESG, as it has existed, it's an extremely big tent. I mean, a big tent maybe to the point where it doesn't mean anything. But when you think about funds that are going to be concessionary in nature going forward, can you talk a little bit about how you think about by bigger the markets, how meaningful are the markets in those areas? And ultimately, if part of what we have to look at in the future is. people living out their values and their investments in that way, it seems like it's a culture change or a mindset change thing that we also need to be working on over time. Getting more people to internalize that and be willing to take that on. So, can you talk about the culture change piece, how you think about where the levers for culture change, maybe what role business should play in trying to encourage people to think about, incorporate, internalizing the externality of human rights and their own investments? So, we do a lot of things to meet our values and I'll give you a couple of examples. Organic foods. I went to law school in the 70s in Berkeley and there was the Berkeley Co-op and these scruffy organic farmers would come in and it was twice as expensive to buy an organic tomato. But people in Berkeley didn't, but it was a teeny tiny industry, but it caught on and at some point Walmart became an organic farmer. They were buying stuff. It changed the industry now. Undoubtedly, their standards were less, but what they recognized over time, our society recognized, it's healthier, it's better for the environment. There's a range of reasons. There was a change of values. Same thing with, we talked about electric cars in the neck to have to plug in and sit in a space when you're going to Boston. But some people, I would say it'll be growing. It's not happening. Again, it's not linear. It's not going to happen overnight, but we're going to recognize a variety of people in the society are going to say it's worth it to us to make that investment because I really don't want to see the planet burning up. So I think we ought to be looking at the investment sector in the same way. And is it going to be a majority? No. Is it going to be $50 trillion? No. That's a number. 50 billion. The numbers are ridiculous. But again, and I don't mean to denigrate BlackRock, but I don't think they're seriously looking at which companies are doing the most to address climate change. And so let's start small like my scruffy organic farmers in Berkeley. Let's start out by testing the premise. I would bet that there is a percentage of Americans, family offices, wealthy individuals, maybe some foundations, maybe some universities that say we care enough about climate. If you show us these are the 50 best companies on carbon emissions, we'll take a penny less in a quarter. And so maybe that's 3% of the population, but that's $3 trillion. And then it starts to build momentum. And others say I want to be on that list. Let's have an affirmative incentive for companies that actually do care and are doing the right thing. They had to be rewarded in the investment marketplace. So that's my theory. I don't promise it's ever going to work, and if it does, it's going to take time. But the fact that there is none of that is crazy to me. And part of the reason is I talked to one of these big three investment houses, and I pleaded with them. I said, "Why don't you just try this out?" And the head of ESG said to me, "We won't do that." And I said, "Why not?" And they said, "Because if we did that, people would realize all the other ESG funds are bullshit." And there was a comms guy on the line, and he said, "This is overstop." And I said, "I'll never say that publicly." Who said that? But basically, we have to be honest with ourselves. Let's find a way to reward the best companies, evaluate their actual performance, and look out in the marketplace and say, "Are there people with means that are willing to invest in the companies that are doing the best?" That's where we ought to be going. That will say, "Instead of buying the book or spread the word, and please join me in thinking, Michael Posner for this great home. We hope you enjoyed this episode of Capital For Good. Learn more and subscribe today at the Tamer Institute for Social Enterprise and Climate Change at Columbia Business School.