 Good morning. Doing business the right way is our panel today, and probably the most important issue that business faces today is the issue of trust. Over the last five years we've seen a real change in trust, the lack of trust in terms of business. So this morning we've assembled a group of international business leaders to talk about how business can regain that trust. How leadership around the world can get the trust and confidence back of the people. Let me introduce Richard Gorder, Chief Executive Officer, Managing Director of West Farmers Australia, Co-Chair of the Consumer Community Government Meeting. Aaron Kramer is President and Chief Executive Officer, Business for Social Responsibility, BSR, and on the Global Agenda Council on the role of civil society. Faiki Shibeshma is the Chief Executive Officer and Chairman of the Board, Royal DSM of the Netherlands. Indra Nui is the CEO of PepsiCo and the Chairman of PepsiCo USA World Economic Foundation Board Member as well. And Dennis Nally is with us, the Chairman of PricewaterhouseCoopers International. Thank you all of you for joining us today and tackling this important subject. Dennis, let me kick this off with you. Pricewaterhouse came out with a study, a survey last night. Talking to 1,500 CEOs around the world. 1,300 CEOs around the world. What were the key findings in terms of trust? So interesting observations coming out of the survey. CEOs were asked to talk about how they feel about the trust equation that exists today. CEOs are actually saying that trust is at an all-time low. And I think we would say trust within most institutions is low today. Whether you think about governments, you think about other institutions, one of the real big issues that are out there. Interestingly though, when you ask specifically the relationships that exist between business and governments today, it is absolutely at the lowest point, which really is of concern. And when you think about some of the challenges that exist, the way things are really moving forward in this dynamic world, without that degree of trust, it's going to really have a significant implication to the recovery of this global economy. So I think business has got a real problem. Business has a challenge to really focus on, which is how do you begin to really regain that level of trust? And I think we have a very important role to play in that debate. Before we get to how to really move the needle on trust, I'd like to talk a bit about the ramifications. Indra, what are the ramifications? What is the impact of a lack of trust, of this zero confidence in our institutions in the world? Before I answer that, can I go back to Dennis? Dennis, when you ask the question about business, what do the people you're surveying mean when they say business? Is it everybody? Is it a small group of companies? Is it an industry? What do they mean by business? It's a good question, Indra. I would say in the broadest sense they're talking about business in general. It starts with what were the causes of the financial crisis, who's responsible for that. It goes to the issue of CEO compensation, the disparity of pay between workers and executives within an organization. So it's a very broad issue, but the lack of confidence in business today, the lack of trust in business today is of real concern. So Maria, to your question, I think today businesses are really the only functioning entities around the world. They create the jobs. They're the engines of efficiency. And if we don't have private enterprise and business, I'm not sure economies can be successful, especially at a time when governments are unable to enact policy within countries or on a coordinated basis around the world. So if you don't put your trust in business, who are you going to put your trust in? I mean NGOs, everybody trusts enormously, but NGOs don't create jobs. NGOs raise issues, which are all warranted, but they raise issues. Private enterprise creates the jobs. So I think it's high time we sat down and asked ourselves, what is business? If it's a small group of industries that created the financial crisis, let's isolate them because 90% of business is still doing things the right way. So I think it's important we really get down to a definition that's more specific. And I look at the Edelman Trust Survey, and it actually says trust in business is improving. I think it improved about 10 or 12 points over the last survey. So I'm going to look at this and say there are green shoots of recovery if you want to call it on this trust aspect. So I'm hopeful that people will realize that you need business to get economies going. And as long as governments start accepting that business is needed to keep the engines of economy going, I think we should be in an okay shape. You make a lot of good points, particularly the fact that 90% of business is doing business the right way. What is business the right way? The number of stakeholders has changed over the last several years, or the perception of the stakeholders has changed. But I want to get back to the implications here because, Aaron, around the world in the last several years, we've seen demonstrations. We've seen social unrest. We've seen the people get angry as a result of this lack of trust. Talk to us about those implications if we don't fix this or the perception of it. Well, and it's harder to fix it because we live in a hyper-transparent world as everyone knows. And the central challenge of the 21st century is to build prosperity for a planet with 9 billion people in a way that is consistent with the natural resources that we've got. And as Indra says, we can't do that without business being engaged. So people look around and they see all institutions, NGOs, business, government failing to come up with big solutions on these questions. So the answer for business, I think, is to look to tie strategy to the big challenges we face, whether it's climate change, whether it's building prosperity in the rising markets where life has improved so quickly and the promise to do more is even greater. And to try to be engaged in building the kinds of institutions that can make that possible because we currently have public markets that overemphasize short-term returns. And it's very hard to deal with these systemic questions if you've got that. And so I think business has a huge stake in advocating for a trading system that places more value on long-term decisions. But Erin, just to stay with that point, if business is here for the long-term, the sustainable program that you're really trying to create for an organization, if those investors in that company only want to think about immediate short-term financial returns, quarter to quarter, how does business really deliver that message about long-term sustainability? Well, I think the question is, and we talked about this a bit earlier, the question is do you want to be around for three years, for three quarters, or for three decades? And I think it's tough when we've had holdings in the United States that used to be kept for seven years or now kept for seven months. In that environment, it's very, very difficult, but I think value is value and the risks are so great. We've seen this over the last five years that failing to think longer-term actually ends up biting in the short-term. You're saying investors used to hold onto their stock for seven years, and now it's seven months, so it's become a short-term mentality. Feike, isn't it interesting that this is not just a U.S. issue? You're seeing this in your part of the world. I mean, this is a global issue. We've seen the lack of trust across the world as it relates to demonstrations and upset. True. Well, building on what's being said by Dennis and Indra, trust is down, but it is only maybe a few companies who've spoiled it also for the whole group. It's a hyper-transparent world. In what world are we operating? I would like to go back that we should realize that the role of business in society has been changed. A hundred years ago, it was mainly especially about running the economy, providing jobs. Today, businesses need to realize that this role has been changed. The boundaries between what is public interest and what is private interest has been blurred. Companies have a public responsibility as well, taking care of the environment, taking care of the social issues in the world as well. And that is a change. And if companies do not express that change and do not make clear that they see that they've brought a responsibility, what I mean, creating value on three axis, people, planet and profit, and not only profit, and taking up that responsibility. If we do not really show that off, then I think that this trust will remain. The distrust also, that what was the final idea about the economy? Is the economic growth in itself a goal? Or is it the means to something else, having a better life with seven later on, nine billion people? And I think the idea about economic growth is all focused on that. And in the last 30 years, I think we lost sight of that. Well, how much is this upset about the issues of the day? Youth unemployment at terribly high levels, unemployment for young people. The idea that you're looking at certain economies bump along the bottom, unable to really get into a sustained growth mode. How much is it about the issues of the day that we're dealing with these economic challenges and how much is it about business not operating in a way that they ought to? Richard? Well, I think that's why the breakdown in trust, Maria, is regrettable. Because in fact, I think business is a big part of the solution for youth unemployment and some of the economic issues that we've got. And I think what would be terrific would be for governments to be setting economic policies that sustain and support business and business growth, small and large, so that we can employ more people, invest the like. But at the moment, as Dennis said, there's distrust. And so we're not getting the economic policies that are promoting more lending from banks. In fact, the policies around financial services at the moment are creating a problem there. So I think that's the regrettable thing that we're not... Because of this breakdown in trust, policymakers are seeing it as their role to make it in a sense harder for business and put in more constraints. Whereas business, I think, and I agree with Fakir, I think business understands that our role is far greater now than just creating wealth for our shareholders. We need to create wealth for all our stakeholders, our employees, our suppliers, our customers, the environment, the communities in which we work and our shareholders. And I think if we can do that with good economic policies, and one of the reasons I'm in Davos this year is because Australia hosted the G20 this year. And we're really hoping to get some strong policy settings from the G20 governments this year that will foster the growth of business because then we can employ more people and we can invest. And I think that breakdown in trust will help. And if I can just go back to Dennis, your question, how do you get past this short-term thing? I've been CEO now for nearly nine years. So I'm well over the average as is Indra. And so I now don't meet with short-term investors. You've made a change. You will not meet with short-term investors. Because I'm not running the company, or we're not running the company for short-term. How do you know that they're necessarily short-term? Because you know a profile for investors. We know if they're short-term. And it's not worth their time meeting me because I'm not running the company for the short-term. Well, if we may add to that, of course, there are not many CEOs, by the way, who say, I've run it for the short-term. Most CEOs say I've run it for the long-term. You don't see it always in the actions they take, but they always say the right things. Our system, however, is very much focused on one of those contributions. Not so much to the contribution to society nor to the planet, mainly economic value. If you look to the valuation of our companies, it is mainly based on our economic performance. If you do it really bad on environmental, et cetera, then you can get a hit in your share price. But if you do it mediocre or better, you don't see it really in the value of your company. And I think that is wrong. If we say we need to create value along three axes as a company for several stakeholders, then the value of our company should represent that value creation. And that requires, at the end of the day, a system change. Otherwise, it will always depend on the goodwill of some CEOs or some companies or some boards or some shareholders' groups. But a system change in which the value creation on the social and environmental axis is really represented in the value the company provides and has. I'd argue that as a company, if you do those other things well, you'll become more attractive as an employer. And if you can attract better people, you'll get a performing business over time. I absolutely believe in that. I think we have some issues to address because what you both are talking about is how do you manage a company for level of returns and duration of returns? Because when we talk about the short-term oriented shareholder, it's a small vocal minority. But they're vocal. And so it feels like all the shareholders are short-term oriented. The truth is a large number of shareholders depend on this company to be here for decades. They want the gradual capital appreciation, a small vocal minority that seems to rule the roost, demands something very different from the company, and the company has to flex for that small vocal minority. The second is that vocal minority typically does not care about, quote, sustainability issues. Because I think we as companies have not done a very good job framing the sustainability issues. In the past, we've talked about sustainability issues as corporate social responsibility. So what we framed it as, you know, we make money and then we'll do a program in Africa or a program in India and that's corporate social responsibility. I think we've got to change the dialogue from what we do with the money we make versus how we make the money. And that's what drives shareholder value. So when you treat your employees right and therefore you can attract a great, you know, group of people into the company that can keep the top line and profitability going, that's a form of managing for duration and being a responsible company. When you do the right things to reduce the carbon footprint, reduce your water usage, your plastic usage, you're doing good things for the company and good things for society. So I think we have to redefine managing for duration as how we make money, not what we do with the money. And the vocal minority is still jaded by companies talking about corporate social responsibility which I think is a form of you commit the sin and then you confess after that. I think that's a bit wrong. And I think business schools have to reeducate people because business schools in the MBA program they say make money at all costs and if things don't go well, the law school will bail you out and go to the environmental school if you need help to handle all these green NGOs and if everything fails, the Divinity School will pray for you. It doesn't work that way anymore. I think we've got to bring everybody together and say there's an ethical, responsible way to run companies and make money, change the dialogue. And that will rebuild the trust. I think you make a good point in terms of the schooling and that shift is beginning to happen in business schools. And I think it's happening as a result of the students. That's where the motivation is coming from. So the good news here, this is not all doom and gloom, because notwithstanding the comments around corporate social responsibility reporting, we've seen a lot of progress on that front. And to me, that was a very important first step. But to take it to the next level, and maybe to where you are going, when companies actually start reporting critical metrics around what's really important to the sustainability of business for the long term, the impact of business on the environment, the impact of business in terms of job creation, the social types of issues that we're really talking about, when those metrics are clearly defined and companies are prepared to have a lot of transparency around the reporting of that so that you can begin to tell that story from a longer term standpoint, then you're going to really start to make some real progress in this process. As long as we all accept that business cannot solve all the problems of economies, I mean, we cannot address youth unemployment on our own. Governments have a role to play. So it's a partnership between business and government to make something happen. I want to drill down on a couple of these subjects because you made the point that government policies really need to encourage businesses. So the government-business relationship is important to mention. But another thing that you mentioned, Richard, you said, I'm not going to meet with short-term investors. Well, can you really say that, though? I mean, in an age of activism, in an age of activist investors coming and saying, we want change and motivating a new shift at the company, can you say I'm not going to meet with you? Yeah, we can. Really? Yeah, absolutely. Because if they're short-term investors, yeah, I mean... But they're going to say I'm not short-term investors. I want change because I want this company to be healthy in the long term. Well, if they are a significant shareholder, then I'll meet with them. Otherwise, I won't. But one of the things we did some years ago, Maria, is we actually moved from quarterly reporting to six-monthly reporting. Because we felt that quarterly reporting was just way too short-term. Can you do that in the U.S.? Move to six-month reporting? No. Yeah, I think that's a debate that's been had for as long as I can remember, and I don't see that happening in the near-term. But we are seeing change happen because there are more than 100 companies that are piloting the concept of integrated reporting, which says very explicitly that they're running companies, the company for long-term value creation, and that that's defined in terms of financial capital, but also natural capital and other things. The rules that we have right now on accounting are pretty young. They've only been around for less than 100 years. These are not things that were handed down on Mount Sinai 2,000 years ago, and they can change, and they are being changed, and I think it's reflective of all of this as CEOs understand that to be good leaders and good stewards, that they have to take this longer view. You need rules of the game that create incentives that allow that. We all feel that tension, of course, and we all feel it's not easy to escape. But you can do something. When I became CEO seven years ago, I went with investor relations to a lot of short-term shareholders, less than three months as an average, and I was telling with full enthusiasm as a new CEO all my strategy and plans, looking to the audience, I said, well, is there anybody interested? Because within three months, they were already in or out to share. That's very frustrating. Exactly, especially as a new CEO telling your long-term strategy. But I think what we did is mainly focused on more long-term shareholders, and I cannot influence what is happening exactly from one quarter to the other quarter. I have a bigger impact on what's happening from one year or three years to the other period. And what we especially did is said, well, we do one thing. We provide you a guaranteed dividend. We are not going to fluctuate with the dividend. We guarantee you a dividend over the years, above 3%. So you should be happy with that, I hope. And then we are going to make you the right, and at the end of today, you cash on top of your dividend. And that is a different approach, and especially when you work in a company with a lot of technology and a lot of longer-term development, I cannot change the company from one quarter to the other quarter. That would be impossible. There will be fluctuations from one quarter to the other quarter, but not real strategic change. Before we can really communicate business is doing the right thing, we should talk about what is doing the right thing. We've got big investors in the audience, and later on in the program, we want to hear from you. What is most important to you as an investor? What do you all think is most important? We know that shareholders want to make money and see value creation. What else is important in terms of running an international organization as you all are? Let me start with that. And this goes back to the trust question. I think the reason trust is so important today is that when you think about the world that we're trying to deal with, all the issues, all the challenges, the speed in which you need to be able to make decisions, if you don't have trust within your organization and you don't have trust with your various stakeholder groups, there's no way that you can move with speed, with agility. In other words, trust almost serves as a real break. If you have trust, you can go faster and you can deal with the issues and the challenges. If you don't have that trust bond built with your investors, your various stakeholders, your employees, et cetera, you're going to have turmoil. You're going to have the ability to not drive the kind of change and react to the environment that we're facing today. So I think that's one of the reasons why getting this trust equation is so important. Maria, I obviously worry a lot about financial performance as a corporation if you don't, over the long run, perform well financially, either you're gone as a CEO or your company gets taken over. So I worry a lot about financial performance and I think as a CEO you have to. But the thing I worry most about is reputation, which is just what Dennis was saying. So our reputation is the most important thing that we look at, because that then goes to our ability to attract and retain people, relationships with suppliers and with other businesses and it goes to our ability to expand and it goes to our license to operate in the countries in which we operate. So doing business the right way, financial performance, a good reputation, reputation as it relates to what? Employees, the community, what are we talking about? What is doing business right? All stakeholders. We run your business for several stakeholders. And of course, for the financial community who invests in you, you need to deliver. But also for your employees, otherwise you cannot show any performance. But also for the society at large, you cannot hide behind politicians who cannot agree on CO2 emissions and then continue CO2 emissions and saying later on, yeah, we contributed to the problem in the world but it's not our fault, it's the politicians fault because they couldn't agree. No, all of those you need to take into consideration. And let's be honest, we cannot do it alone as business. We need to do it together with governments. But let's also be honest, governments cannot do it alone anymore. 100 years ago, you had kingdoms or whatever and all the public matters could be decided by one boss being the king or being the government. And that is impossible. Part of the solutions are in hands of the private sector. And we need to collaborate to address the issues of the world. Maria, I hope we've all learned from corporate failures of the past. And if you look at big iconic companies, Kodak, the world comms, the end runs of the world, let's go through why they failed each one for a different reason. Kodak was an iconic, fabulous company. Didn't make the investments to shift its model from one to the other when technology was changing because they were too busy focusing on quarterly earnings. So if you come back and ask the question about what's doing business right, are you going to run the company for the duration of the CEO or the duration of the company? And if you think of the duration of the company, it's decades. If you think about the duration of the CEO, it's whatever the CEO decides is his or her duration. So if you're going to run it for the short term, the duration of the CEO, the day you take over, you just say everything that the previous CEO did was wrong. You take a huge charge from the CEO to the Alpha. And then when that Alpha is about dead, you say I'm retiring. The next CEO comes, crashes the earnings. Books have been written about that. So if you don't make the investments to transform the company over time as the world changes in the world is a very volatile place today, the company cannot sustain itself for decades. Or you end up doing accounting irregularities like certain companies did and they don't exist anymore. So I think doing business the right way is financial integrity, transforming with the changes in the market and thinking about duration of the corporation which is decades, not the duration of the CEO. And in this case, I'll toss it back to you and then give it to you, Aaron. The media has a role to play in it too because you all operate with sound bites. You're in a 24-7 environment. I am yet to see a thoughtful interview by media of a CEO, giving them time to talk about their strategy. You edit the thing down so it's all sound bites that doesn't mean anything. You all pick up comments that are random and then attack the CEO for heaven's sake. Everybody has a role to make business successful and the biggest role is media because you amplify the short-term investors' bully pulpit and don't ever talk about the long-term investor. In fact, when it comes to sustainability issues and doing business the right way, it's almost dismissive the way media talks about it. So at some point we're going to have to toss it back to you, Maria, and say, what's the role of media also? I agree with that. I think it's very important the media has an enormous responsibility to ensure that the public is getting the real story with regards to corporations today. I think one thing that was said on the panel, which is really quite stunning, you said 90% of the companies today are doing it the right way. Well, why aren't we seeing the perception really exemplify that? And I think it is that bully pulpit. It is the media. It is the news. It is really constant in your face of this is bad and that has been bad. So I do agree with that and it's one of the reasons I tend to do, I like to do longer interviews to give perspective to investors. But why do you think media aside, why do you think the public is so angry and 90% of businesses are doing the right thing and people aren't seeing it that way? People feel very vulnerable. The pace of change is intense and CEOs feel that and have some ability to steer the ship. The public feels it doesn't have much of an opportunity to steer the ship. So we've decoupled economic growth and profitability from labor to unemployment at this point. And so we have chronic unemployment and underemployment in many parts of the world and I think that leaves people feeling very, very vulnerable. I want to come back to one institution. But how do you move the needle on that? How do you move the needle on this chronic unemployment? Particularly as it relates to young people. This is really the tragedy because they're losing an enormous amount of time in terms of experience and then they get a job and they don't have the skill set required. Well, as I said earlier, I'm heading up the B20 which is the business 20 as part of the G20 this year, Maria. We're looking at forest trade infrastructure, financial flows and human capital people. And in talking to people in countries like Spain with chronic youth unemployment and highly educated people of that who are unemployed and no prospect of a job and yet there are companies in other parts of the world that would love to be employing these people even doing it online so that they can stay in Spain and help but the laws of our countries don't allow this to them. We've got to open this up so that's why I talk about government and business has to work together on this because there are opportunities for business to help solve this issue, not on our own and we need to do it with government but the need is there. The need within business for hiring good people is there. This point about why does the public believe that the focus is so much on financial performance, this is not a new topic this has been building for so many years now and I think the general public believes that business exists to drive financial returns and I think that's been an image that has been created for so many years now and I think that's why it gets back to the role of business in this debate to really define exactly why an institution exists what its purpose is for society which is much more than just delivering the financial performance, the financial metrics that we're all familiar with and I think companies can start to change this debate with much more transparency around why the organization exists, what it's trying to do from a longer term standpoint what are the right kind of metrics that you really want to have out in the public domain and hopefully maybe with the dialogue with the media that begins to shift this debate to say yeah business is here to have a financial return but it also exists for a lot of other reasons for the betterment of society to deal with some of these big societal types of issues and I think that's the role that we have to play to start to change the debate and get it focused on the right types of issues that are very important that are top of mind for a lot of people around the world. But as a leader, I mean as leaders of international businesses isn't the onus on all of you to really communicate that to the public and to your stakeholders I mean there are some businesses that people they understand I mean interest business is international beverage and food and snacks business that people can understand what they're doing there are other businesses that people it's not as obvious to really communicate what your goals are what you're trying to achieve. Maria tell you say our business is obvious absolutely it's obvious but I remember two years ago and you're well aware of this the media would write saying or investors would even ask saying why are you transforming your portfolio to become more healthy to reduce your salt, sugar and fat because we believe that's what the trends were and the right thing to do was to shift our portfolio the consumer was headed what did the media say your job is to sell more fat, sugar and salt what did some investors say we want short term returns of a level higher than what you're generating if you focus on the core today that same investor two years later saying why aren't you shifting the portfolio faster and the media say oh my god these trends are coming why isn't PepsiCo shifting you don't write a memo and say we're going to shift shift takes years you have to invest in R&D you've got to change the fundamental business model I'm going to ask the question who wrote a sensible article or conducted a sensible television interview saying this is the changes in the marketplace we are seeing it in our own habits I'm glad you're changing give us some tailwinds so when we come back and talk about what Dennis said I think where people interpret business actions is financial returns at all costs okay at all costs is the problem and when companies have to transform and they're doing the right things they face more headwinds than tailwinds and I think we have to shift that investors have to change the way they hold companies accountable media has to change hit me in the headwind we were talking to a bunch of investors from Hong Kong and they were representing Chinese sovereign funds and they opened the meeting investor meeting by saying we want to invest in big companies that give us a dividend for a long period of time with decent capital appreciation we're not looking for short term alphas they put it so the questions they asked us were about the long term are you investing to transform the portfolio are you investing to hold your people and build talent and the investor meeting right after that was so what's the quarter going to look like you see this is the short term long term that we CEOs have to deal with but we have to do both but the more people we can get into that first bucket I think you'll see more lasting institutions and you'll see the trust in business actually going up there's an ingredient here we haven't talked about yet because media are short term in their focus consumers are investors are boards are asked not to be and I think the role of boards in providing some space for companies to make these decisions is absolutely crucial and we have begun to see some change I think that needs to accelerate as well what kind of change have we seen on the board level well you now have many companies if you look at the S&P 500 a growing percentage each year has a committee that's dedicated to looking at either sustainability issues or some sort of interaction with the broader changes in society and I think that's hugely important because it means that the issues have a long term value because of the underlying changes taking place in the world those things are discussed in a way that's institutionalized within the board that can be very valuable we want to open it up to the audience so we have microphones around and I also have questions from Twitter we have a question right here gentlemen in the fourth row thank you so much my name is Renat Hoiberg I'm a business my question is regarding the concept of shared value which has been kind of a hype in the past two years what do panelists think about that is it possible to do basically good for sustainability while actually enhancing your own business for instance in your supply chain is this a real concept that you see working or is this just a hype there are conflicts inherent to what we're talking about as leaders you have to make the decision in terms of shared value who would like to take that there are many examples more and more because society is changing that there is a business model to make money which provides sustainable products which contribute to the environment this green growth is a real existing thing what we do is we take waste from agriculture and turn that into fuel materials where we now throw it away and burn it we develop new materials making cars lighter and less CO2 and less fuel but we make money with providing those products so due to the change of mentality in the world and due to the collective I think change that we need to address those issues that provides a business model as well so I'm a strong believer that this can be a clear direction even though there are conflicts sometimes there are conflicts we have also if we build a new factory in Europe it's always with wastewater treatment system in China it's not always needed with wastewater treatment system and our Chinese competitors are not doing that we say this is our norms, our values if we do it in Europe we do it in China also do we run sometimes that we need to really boost our technology because we are competing with competitors who do not do that because it's not our rights yes, is that sometimes a little bit a conflict or internal tension yes, but you need to believe in your values if you do it here, I do it there also this gets back to my mind there's always conflict in every single decision that you're making every single day and without having a clearly articulated purpose as to why the institution exists for the long term you're never going to have that compass to be able to make these kinds of decisions short term or longer term to balance off not just at the CEO level but throughout the whole of the organization it's really important to get that alignment that you're really looking for we're going to get to you in a moment in the back there but I want to just tackle this first twitter question from Mar Maistre Morales and he says how do you tackle extreme inequality is major global risk that keeps it's a major global risk that keeps widening is this an issue that business should have front and center inequality well I'd argue you tackle inequality is to create more wealth and create more jobs and so business has to succeed for that to happen just by focusing on a reduced pie isn't going to solve that issue and then businesses that are whether they're large or small that are growing and successful can employ more people can also I think ensure that they're doing the right things in the supply chain which is another one of the twitter questions and through that some of the inequality issues that are quite extreme in the world can be dealt with but business has to succeed business has to be able to grow it's a very important point it's connected to the trust we were talking about a lot of people do not see the benefits of globalization the benefits of industrialization the benefits of automation etc look to the United States how many people are unemployed how many people poverty level etc those people are lacking trust obviously because they say what this is all brought for me use and employment etc so if we do not reduce the inequality not only globally but also within the different areas of the world then of course I think that this trust will be there and then it's amplified by some examples of bad companies by the media and then the whole picture is there for people who do not have it you made an important point in terms of technology changing and automation that's killing jobs so that's creating a different shift in terms of jobs so do we have the right skill sets and education in place to ensure that that next generation has the skill sets required to actually compete to bring one of my hobbies in many western parts not in the developing countries but in many western countries labour is not cheap and we tax and 60% of our taxation incomes are coming from labour and only 30% of the raw materials we use and is that a logical system we have built to have a high taxation of labour and a low taxation of what we really scarce of scarce raw materials so a shift between taxation incomes for governance from labour to scarce raw materials is maybe not a bad idea to address your point about technology killing jobs yes and no it's killing jobs but it's creating jobs yes and I think that's the thing that's got to be well understood that there's a lot of opportunities out there and I think the role of business you can't do this on your own so there's a role for business to talk about what are the skills that are really required for the future with governments policies in place with institutions of higher education to make sure that the training that's being provided the curriculum is relevant for the skills that are going to be necessary for the longer term so I think the role of business is right in the centre of this I don't think one institution can tackle that issue on its own the question you're also saying is governments need to think long term too I think that's also changed I think governments are thinking for short term election cycles this is a very important point that keeps coming up in the panel government and business need to understand priorities and work together whether it relates to taxation or labour reform there was a question in the back there yes sir I'm Jeremy Balkan from Australia in terms of doing the business the right way there's been a lot of focus on finances and industry and doing things the wrong way I guess if you're a young man in finance who do you look up to what's the role model because all you ever see is the Wolf of Wall Street all you ever see is Madoff who is the person to look up to and why aren't they given the platform to tell a positive story about the importance of finance in the world and doing business the right way well Jeremy as an Australian I can tell you that Gayle Kelly is someone you could look up to who's the CEO of Westbac and she's an outstanding CEO in fact we're very fortunate that the CEOs of our four major banks in Australia I think are all outstanding and actually it raises an interesting point which goes back to one of your earlier comments Jeremy about how you get this trust because it is so hard one of the reasons Australia came through the global financial crisis in good shape was because our banks were in very good shape every time our banks report their earnings they are slammed by the media for making too much money they make a decent return on equity not a great return on equity and we should be celebrating the fact that we have strong banks that have supported industry and business large and small through a really difficult time But was it always like that or is the pressure from the people such that the media is focused on okay this is an enormous amount of money that I'm just wondering if the last decade or the last certainly five or six years as home prices have plummeted and employment has risen the people have been so vocal and that has triggered the media to focus on or do you think that the media has always been doing that I think it's probably got worse I think it's been around for a while but I think it's got worse I'm sorry I didn't mean to interrupt you please finish it but I think Gallo Kelly is a great writer What's really interesting is when you look at let's just take Wall Street as the proxy for it people get very upset when Wall Street fails the financial crisis people also get very upset when it's succeeding that tells you that something is fundamentally wrong and so I think the notion of what the purpose of the financial sector is financial services sector is has to be redefined some people including people who are here Anthony Jenkins from Barclays Peter Sands are talking about these questions and the purpose of the financial services industry is to enable the rest of the economy to grow and thrive and so you talked about this Dennis and Indra you talked about this all the time we talk about people, planet and profit the fourth P word is actually a lot more important what is the purpose and I think to your question I think the world needs to understand what the purpose of this sector is and then there will be leaders who will be looked up to a bit more has the leader it's a question here that we're going to get to in a moment has the leader today doesn't need to be someone different than it was ten years ago this is a twitter question does a stronger business government partnership to long term sustainability require a new breed of public sector leader a new breed of leader in charge absolutely I would say so I think to run public companies to run government I think you need a different breed of leader all the stuff we've been talking about if that doesn't get completely embedded in a company and all this conversation only lasts for the duration of the CEO running the company so it's critically important that we develop leaders who think like some of us do because if you don't the next leader that comes up says I'm going to run for the duration of my CEO ship as opposed to running a lasting enterprise it's not easy because a lot of the senior people who grew up in companies grew up in this short-term at all cost mentality so there's a whole retraining of senior leaders that needs to happen and I think the pipeline of people needs to be trained to the young people are coming up the business school grads I think we have hell of a job to do to reprogram a lot of people to talking about what's the purpose of business what is making money the right way going back and looking at the lessons of the past the failures of the past and talking about what could happen to companies if you don't do the right things at the right time I think it's critically important we retool business education and use some of those cases to retool the employee mindset in many companies we have hell of a job to do in front of us and I would also add great points Indra I would also say the role of boards has changed in a very dramatic way today five to ten years ago because quite frankly even if you have a CEO who's really turned on and gets it and is driving the balance if you will between short term and long term if you don't have a board that is very supportive of that strategy and providing the cover to deal with potentially the ups and downs of how you carry out or execute that strategy that CEO is going to fail so I think the role of the board the composition of the board how the board thinks about many of these issues but what we're talking about requires that you think about it in your emotion and your heart it's not an intellectual exercise if you think about it as I just got to do it to punch a ticket I think it won't last if you really feel the issue and feel that you've got to make a difference fundamentally and it's embedded in your psyche I think you'll make the change so you've got to pick people who feel that way not people who just mouth those words critically important first row thank you thank you I'm Catherine Garrett Cox Chief Executive of Alliance Trust we are one of the UK's leading and responsible investment companies we are long term actually we've been doing it for 125 years so I think we have a degree of authenticity in that space but the question I'm interested to ask you is really coming back to a point you made at the beginning about natural capital considerations so I think part of being a successful leader and I agree with a lot of what you said is about doing the right thing and doing it right and embedding it for future generations so to what degree are you in the way you run your businesses fully integrating natural capital considerations in your quarterly or half yearly reporting can you explain a little bit more natural capital constraints the world that exists around us not just in terms of water usage but how you're actually valuing the natural capital that exists around us the land, the water, the environment not just financial considerations we do it a lot we have developed a system which called eco-minus eco-neutral, eco-plus and we have evaluated our whole portfolio what kind of products are eco-plus that they provide a lesser environmental impact than competing products for the same purpose when we started with that 2010 we had 30 percent of the company being eco-plus today 40 and we want to have 2015-50 percent of the turnoff of the company is products which have a lesser environmental impact than competing products we have developed now the same system for what we call people-plus the impact on society it's more complicated we evaluated 5 percent of the company so I cannot give a total view on that one yet but it need to be a consideration and it is strongly we report about that come back to my point made earlier at the end of today is all of this although reported set in our integrated report is this also represented in the share price at the end of today I many days that I think I hope so I think so I say so but if I'm honest I think our economic performance is the main driver of it but these things are quite relevant one of the mining companies that we work with presented the challenge to us by saying when we decide to invest in a new mine we rank it from 1 to 5 and we think that we're ranking projects as a 4 when they should really be a 3 and things that are 3 or 4 based precisely on this because the question of natural capital as well as the relationships of the communities around for that industry are as fundamentally important as the technological challenges of getting the ore out of the ground and so that shows that at board level these questions are beginning to be asked because of an understanding not that we want to be seen as good stewards of the environment but because we won't succeed with these projects if we're not going to bring a microphone here we're going to get here next but there's a question Indra and specifically including PepsiCo they're saying how are Pepsi and others creating social value by buying locally in countries of operation clearly you're creating jobs in local locals? Absolutely I mean all of our businesses are local in every country we're a food and beverage company so in every country we're local we hire people locally we hire fats and as much as possible we source locally because at the end of the day the more jobs we create the more consumers we create so it's again a mutually reinforcing model so I think it's critically important that big multinational companies who do business the right way worry about standards of operation around the world are local in every country because we can actually be engines of growth in every country but just going back to something Aaron said earlier Maria we talked about retraining employees retraining people to think differently we have to talk about retraining boards also because many boards have been around for a while and many of them are still steeped in the old shareholder value measured only in terms of financials at all costs only few boards have become progressive so I think we also have to start thinking about board memberships to make sure board members have the same spirit of purpose and consciousness that we're talking about otherwise CEOs are going to have a hell of a job trying to convince their boards that this is the right strategy Is there still a coziness between boards and executives? I think less so I think in the past CEOs used to stack the boards today CEOs are shaping the boards which is really a big difference and I think that has to happen because you've got to shape the board for the future and in most companies at least those that I've observed it's not it's not a stacking process anymore Question here Yes, Stuart Wallace from the New Economics Foundation a think and do tank in London it's really a follow on to Catherine's question we've worked for many years on social responsibility triple bottom line social environmental reporting etc but when we talk to long term investors increasingly they're saying actually these things don't add up too much they're nice to see but they don't change the valuation of the company so does the panel think we actually need to move towards a single bottom line that actually incorporates the environment and the social or at least some of the bigger factors we're working with a number of people at the Institute of Chartered Accountants on this issue but I'd be pleased to hear the panel's for you Thanks I will say shortly yes How do you do that? You can do it in many different ways unpopular thing which sometimes being proposed is to have differentiated taxation and via differentiated taxation you can push automatically your performance in environmental and social issues into money and then into a single bottom line but there are different measures also which you can do I'm sorry different Maria I mean in a sense Dennis I'd argue that the only thing in the financial statements you can believe these days is the cash flow anyway because the P&L statement of companies can be changed by depreciation policies and a whole bunch of things so the only thing you can look at is the cash flow statement and believe me that is the most important thing in a business because if you're not generating cash you'll go broke so I think you always have to have the cash flow statement and that has to be audited and then I think you can have a whole bunch of other things which Dennis has alluded to which can go to your sustainability reporting and how you best measure that and how that is portrayed not only to your investors but to all your stakeholders and I think that's incredibly important but cash flow is without cash flow none of us are going to be in business and those things cease to become important I think there's a lot of work that's being done around the world to get at this question it's not going to happen overnight I mean as you really start to drill down on some of these complex issues you can begin to see reporting really going in the direction of sector type of comparisons having clear rules procedures that can get the kind of comparability that you really want to see as an investor from one company to another it's evolving it's going to take time it's really really different but over time and I don't know what that time period is going to be I do think you're going to get to that end result Isn't it ironic that we business executives and business in general are supposed to be engines of efficiency but when it comes to getting together and deciding an integrated scorecard or deciding certain ways that we all have companies looked at we cannot seem to make progress at all we've been going at this for years in the interim you know we get beaten up we get criticized but you know I'm really pointing a finger at ourselves and saying for some for some reason when it comes to really figuring out common ways that we can talk about ourselves we struggle with it big time I agree with that There's one angle we didn't talk about yet and that is the Main Street Wall Street discussion and attention and the pressure of the financial market and all what they want to us where is that money coming from from our own employees from the people in Main Street I mean the pension funds are the investors but Main Street doesn't connect those dots coming from ordinary people so it is an angle we didn't touch yet that most of the money is coming from the ordinary people who do not have that trust and their voice because their money, their voice is not really hard is not really strong So would you rather have a pension return that's high or a job it really comes down to that reasonable pension return and a job or a very high pension return and no job so it's a trade-off Indra one of the reasons though we haven't been able to agree on that reporting we all do it we're all seeking some competitive advantage which says in itself why these other non-profit measures non-cash measures are important because we're all trying to in our own way have a narrative which says as a company we're doing some good stuff and that's why you should come and work for us that's why you should come and do business with us so that I think actually is a good thing How many people in the room show of hands think business is doing the right thing operating in a good way How many people do not think business is doing a good job Oh goodness What's your main gripe One comment You want to take it I'll come back to you In the United States we have problems of massive flow of money into politics where businesses are working very hard to undermine regulations undermine taxation undermine the multi-stakeholder initiatives that are needed to solve our biggest problems and businesses that are at the table undermining those efforts Think about that panel Because I think that business haven't got an internal conscience they don't follow an internal conscience they are we have to develop a framework a political framework in order to bring the conscience to business Two comments If we went out on the street maybe not in Davos maybe somewhere else and asked the question my guess is you would get precisely the opposite and that's the challenge what is it that the public doesn't know see, understand Actually this is the world economic forum audience this is not main street So I'm actually these are informed, global minded I agree with that and then the question becomes if there is that disconnect what is it that people on main street don't see, don't understand don't know, don't believe that people in this room do because bridging that gap you may have just hit the nail on the head it's bridging that gap that's crucial Let's talk about this money in politics this is a real concern one of our participants is voicing it that business is dictating policy by paying for it we should be very careful not to demonize business because everybody who works in business are also citizens of the community their moms, dads, aunts, uncles fathers, mothers, whatever when they go home so we want to be great citizens of the community we want our communities to do well too so when we come into work we don't suddenly become a monster and lose our conscience so I'd be very careful to say that business doesn't have a conscience it's not a government object it's a bunch of us in business people like all of you here and in terms of the US and the fact that business may be thwarting good regulation I think business works with government to say let's have sensible regulation and let's understand why the regulation is going into place very often what you have is regulation or legislation that's being proposed where you don't understand why it's going into place you don't understand whether it's for sensible policy and when that happens it behooves us to make our point and our voice heard and that's what we do I think it's important that people who think that business stops regulation unnecessarily or without a good reason actually goes in and understands why business is behaving the way it does I honestly believe in most cases may not be all in most cases business is just trying to understand the logic, the rationale the downstream consequences of the regulation because ultimately a regulation is passed we have to live with the consequences of just the cost of this for years and it's not just in the US whatever's passed in the US is going to go global so we have to think about this issue in a much broader terms than perhaps the lawmaker in the United States so I think that's why we push back and ask a lot of questions we've made a full circle because we come back to the trust we talked in the beginning and life is more complicated that the people without a heart went after high school to business and people with a heart went to NGOs or government life is more complicated than that and I think that people with conscience and without conscience you find them in all parts of society and it comes back that we governments and companies need to convince the public at large about the trust they can have in their institutions if we cannot have trust anymore in institutions our main system collapses so we need to trust the jobs go with it Dennis to respond specifically to the comment about US engagement business and regulations etc the role of government today coming out of the financial crisis has never been more significant in terms of its impact in the economy and when you think about politicians their need desire to get re-elected every couple years how much knowledge and expertise do they have in terms of how and what policies are going to be put in place to really think about the longer term to grow an economy to really encourage jobs etc versus reacting to maybe some of the pushback coming out of the financial crisis all the bad things happened and the need to demonstrate that you're making progress that's why I think you're seeing so many new regulations come into play regulations that most people would say are holding back growth that are adding costs of compliance, complexity to the economy itself therefore I think business has an important role to play to try to influence to get the right conversations the right debates on the table so that as these new regulations policies really get enacted there's a mutual understanding of the benefits, the costs and maybe the unintended consequences of some of the things that are being talked about this is a very important conversation I'm very happy that we were able to hear from some of the people out there who have specific issues in terms of why this trust issue is where it is we've come out with a couple of headlines here there is too much short termism and pressure on business to do business the right way there needs to be a better partnership between government and business to better understand how to create jobs on the business level the media needs to better encourage this long term holding and long term sustain ability of business and not have knee jerk reactions short termism boards need to be modernized today it is a new normal and there are many more stakeholders today that business is focused on more so than just profitability and financial performance even though that seems to be still the number one certainly priority I want to thank our panel thank you all for joining us thank you so much