Corporate Responsibility in the Age of Inequality
- Ricardo Fuentes-Nieva, Head of Research, Oxfam GB
- Lauren Moore, Head of Global Social Innovation, eBay Inc.
- Audrey Choi, CEO, Institute for Sustainable Investing, Morgan Stanley
- Lata Reddy, Vice President, Corporate Social Responsibility, Prudential Financial, Inc., President, The Prudential Foundation
- Peder Michael Pruzan-Jorgensen, Vice President, Europe, Middle East, and Africa, BSR (Moderator)
Inequality extends beyond economic disparity to encompass political and social inequality. Economic inequality is strongly linked to a corrosive effect on political inequality; economic affluence often translates into political influence.
Inequality can have drastic effects upon society, including reducing social mobility, innovation, and entrepreneurship and limiting access to education. These shifting circumstances are slowly killing the American dream and wasting human capital, as more and more people struggle to access education and the other opportunities they need to succeed.
Economic inequality not only affects consumers’ purchasing power but can drain the talent pool and reduce human capital. Business can benefit from addressing inequality by contributing to holistic economic growth and investing in communities.
“Massive concentration of wealth comes with massive concentration of influence and power.” —Ricardo Fuentes-Nieva, Oxfam GB
“The single most important determinant of your health is not your genetic code, it is your ZIP code.” —Audrey Choi, Morgan Stanley
“There is significant opportunity in inequality.” —Lata Reddy, Prudential
“Every single company that sells stuff needs to be worried about inequality.” —Audrey Choi, Morgan Stanley
Moderator Peder Michael Pruzan-Jorgensen began by explaining that the session would explore the nature of the problem of inequality and the private sector’s role in addressing it. He introduced the first panelist, Audrey Choi of Morgan Stanley, and asked her why inequality has risen to the top of the corporate agenda. Choi responded that while inequality is not the foremost concern of every single CEO, it has become recognized as a prominent issue within the private sector, as evidenced by the federal chairwoman’s recent highlighting of inequality as an economic concern. She mentioned that the issue needs to be effectively addressed by a confluence of sectors and emphasized that inequality has not only contributed to a loss of purchasing power, but also losses of human capital, entrepreneurship, and productivity. She stated that CEOs and investors can no longer ignore inequality because it will affect business; in the near future, for instance, the demand for energy, food, and water will require 4.5 percent of the global GDP.
Pruzan-Jorgensen then introduced Ricardo Fuentes-Nieva of Oxfam GB and asked him about the reports Oxfam recently published on this issue and its recommendations for civil society and the corporate sector. Fuentes-Nieva emphasized that inequality has been accelerating and that this trend has been present over the past three and a half decades. He highlighted the fact that since 2008 in the United States, 95 percent of all economic growth has gone to the richest 5 percent, while 95 percent of the population, including the upper-middle class, has gotten relatively poorer. Fuentes-Nieva stressed how economic inequality poses a significant threat to political institutions and noted that the top 1 percent’s policy preferences carry more weight in the political process because money translates into influence.
Pruzan-Jorgensen then introduced Lata Reddy of Prudential Financial, Inc. and asked her how Prudential encounters inequality in its business. Reddy explained that Prudential was founded after they identified an opportunity related to inequality: insurance for the working class. She also noted that there are fundamental disparities in the realm of retirement savings, as higher wage earners can typically weather the stock market’s volatility better, which in turn affects their business.
The panel then addressed the question of when and how a CEO embraces inequality as a priority for their company. Choi stated that Morgan Stanley views it as a multilevel problem and that inequality should be prioritized because it can reduce talent; companies need engaged, educated employees at all levels. Reddy noted that because Prudential is located in Newark, New Jersey, a lower-income neighborhood, it is affected by issues facing the community and has an obligation to address them. Fuentes-Nieva added that there is a need for strong institutions with a rule of law that allows innovators to thrive and supports social mobility.
Pruzan-Jorgensen then asked the panel whether bottom of the pyramid (BoP) initiatives are effectively addressing the sources of inequality and what the private sector can do to help the poorest of the poor. Reddy stated that assisting people in the BoP is necessary but insufficient. She explained that the most influential percentage of the population must also be engaged, as partnerships and collaboration are necessary to reduce inequality. Fuentes-Nieva stated that helping the BoP should not be the private sector’s sole focus, and he cited measures aimed at limiting the power of lobbyists in the corporate sector in poor and rich countries alike through campaign financing regulations.
In the Q&A wrap-up, an audience member from the United Nations Foundation asked the panel how the UN should convince the privileged to act on inequality through the Sustainable Development Goals. Reddy responded that businesses see incentives for addressing inequality as more people recognize that social mobility is decreasing, and he added that business can benefit from holistic economic growth. Choi noted that living in an inequitable society presents costs to rich people and that the benefits of reducing inequality have been demonstrated within companies and capital markets through better financial performance, reduced turnover, higher productivity, etc. She also noted that Millennials invest in ways that are fundamentally different from previous generations and want to create equitable societies. Allan Lerberg Jorgensen from the Danish Institute for Human Rights asked the panel about their views on the role of taxes in addressing inequality. Fuentes-Nieva responded that governments should be held accountable for how they spend taxes and that accountability of public expenditure is one of the biggest equalizing forces in the economy.
November 4, 2014