Chancellor's Speeches

Remarks of USM Chancellor William E. "Brit" Kirwan "Ethics and Internationalization" Inn and Conference Center, UMUC Thursday, April 1, 2004

Thank you Jerry, both for that introduction and for the outstanding work you do as President of the University of Maryland University College. UMUC is without doubt one of the most dynamic institutions of higher education in the world. Everyone knows of UMUC's extraordinary record in delivering degree programs to diplomatic and military personnel and their families wherever they are stationed around the world. The participants in this conference will be interested to know that, in recent years, UMUC's stateside program has also experienced tremendous growth. UMUC is now the second largest university in Maryland. And with over 85,000 online course enrollments, it is the nation's top provider of online education. With UMUC's international and domestic reach, it is entirely fitting that the inaugural event in a series on the global economy takes place in the world's most global university.

To the organizers, let me say, I do hope it is merely a coincidence that an event focusing on business ethics in the international arena is taking place on April Fools Day! I am sure there is no subliminal message in the scheduling.

I want to commend and congratulate Dr. Jain, the driving force behind this "Ethics and Internationalization" discussion. As globalization and internationalization become an ever more important part of our daily lives, it is imperative that we consider its impact in terms of ethical business practices.

Over the past decade, the global economy and international marketplace that had long been discussed and envisioned have indeed begun to fully assert themselves. The spread of Democracy to the former Soviet Union and throughout much of the world, market reforms in China, and the lowering of trade barriers through governmental agreements such as NAFTA, have combined to create a global economic environment that is producing a freer flow of capital, information, ideas, and workers.

In addition, advances in technology and telecommunication that were almost unimaginable a few decades ago have become common place today. The technological revolution has served to accelerate growth in the global economy, pushing its development along at an even faster pace. The world has shrunk, communication is unfettered, news reports are instantaneous, and information is omnipresent.

In many ways, the United States had a significant advantage over other nations in terms of the ability to prosper in this new global economy. And there can be no doubt that the excellence of our system of higher education has been the driving force in securing this advantage.

Indeed, the expansion of access to higher education is one of the greatest achievements of post-WW II America. In the first half of the twentieth century, college was considered the private domain of an elite minority. Since then, with financial aid and greater public support, the doors of higher education have been opened to greater and greater numbers of people. America was the first nation in the world to "democratize" higher education. In doing so, we laid the groundwork that made us the world's economic superpower in the 20th century.

As we examine America's place in the global economy of the 21st Century and as a standard bearer for ethical business practices, four areas stand out for me as especially important for us to consider. First and foremost has been the string of corporate scandals. Enron, Tyco, and WorldCom are just a few of the examples of corporations that were exposed as engaging in serious malfeasance. To some extent, their malfeasance was facilitated by the global nature of their enterprises. Their actions contributed to an economic decline in the U.S. and the loss of investor confidence. As a result, corporate boards have been forced to revisit the entire issue of ethics. Time will tell but it is my belief that the public outrage and the swift Congressional actions have gone a long way toward resolving this issue. The Sabanes-Oxley Act and other steps have imposed stringent new corporate regulations that I'm convinced will address many, if not most, of the ethics concerns at the corporate level.

A second issue is the phenomenon of job outsourcing. The first phase of outsourcing was the "exportation" of what were essentially manual labor jobs - - manufacturing and the like. From a strictly economic/competitive advantage perspective, it made perfect sense to see these jobs go where labor costs were cheaper. The idea was that America's economic future rested in "knowledge" jobs. And our leadership in this realm was significant, thanks in large part to the reach of higher education.

We have now entered the point at which the high end jobs—white-collar, high-tech jobs—are also being outsourced. I am sure you have all read the fascinating series of articles by Tom Friedman of the New York Times as he examined this phenomenon first-hand in India. One of the most salient points he made was that even though this new era of "knowledge job" outsourcing will undoubtedly require major adjustments by our work force and our government, it is not cause for gloom and doom. The fact is, innovation and creativity remain uniquely American strengths. As Mr. Freidman put it, our creativity and innovation is the "reason that the 'next big thing' almost always comes out of America." In my view, outsourcing of jobs across international boundaries is an irreversible economic force. As Freidman says, let's not fight the inevitable. Rather, let's focus on our strengths: R&D, innovation, and entrepreneurship.

A third issue is the impact of the global economy on the environment. Here, I see the failure of the US to play a more constructive role in the Kyoto environmental protocols as a national disgrace. I was quite taken by Tom Freidman's column this past Sunday. In it, he laments our failure to exert global leadership on environmental matters. He writes, and I quote, "I want to wake up one morning and read that President Bush has decided to offer a real alternative to the stalled Kyoto Protocol to reduce global warming. I want to wake up and read that General Motors has decided it will no longer make gas-guzzling Hummers and President Bush has decided to replace his limousine with an armor-plated Toyota Prius, a hybrid car that gets over 40 miles to the gallon. I want to wake up and read that Mr. Bush has announced a Manhattan Project to develop renewable energies that will end America's addiction to crude oil by 2010." From my perspective, Mr. Freidman is "dead on." I hope that this issue - the U.S. government's and corporate America's environmental responsibility - will be a continuing focus of this series.

The fourth issue—which in a way is a bit of a throw back to an earlier era—is the issue of "sweat shops" for employees of American corporations in developing countries. This issue has lead to a rise in student activism targeting companies that were seen as particularly egregious in their abuse of indigenous workers. Nike's and other apparel company's "sweat shops" have become a burning issue on many college campuses, especially in cases where the corporate leadership has been unwitting—or even witting—partners in worker abuses. This campus activism forced Nike and others to adopt new standards for the protection of their overseas employees.

Taken together, these four issues - corporate malfeasance, outsourcing, environmental concerns and "sweat shops"-- have created a whole new perspective on global corporate ethics and business practices. For a long time, business ethics ran primarily along two tracks: First, basic compliance with legal and regulatory requirements; and second, an "inward looking" process addressing what constitutes a conflict of interest for executives, what employees can and cannot do, etc. Today, fortunately in my view, more and more companies are taking a broader, "outward-looking" approach to business ethics. Their area of ethical concerns has expanded to cover not only legal and internal issues, but also relationships with stockholders, the communities in which they operate, the environment, and even the welfare of future generations.

So we are now at a point at which the issue of "external" ethics—worker rights, human rights, environmental standards, etc—become prominent as we continue the inexorable march to a single world economy. In some of these areas, such as workers rights, U.S. practices are at the leading edge. We have to remember that, especially in the area of workers' rights, our standards were developed over centuries. One only has to look back several decades to find working conditions for some employees in the U.S. that would be deemed unacceptable today. In other areas, like environmental issues, we seem to be slipping behind others. From a practical stand point, blanket world-wide adoption of U.S. standards and practices is simply unrealistic. In some instances, our standards may well be seen as desirable as a long-term goal, but it is not possible or practical to simply establish them in a de facto manner. What is needed is a conceptual frame-work and broad-based agreement with our partners in the global economy.

I would submit that much of the "ground-work" in this area has already been done. Many of you are likely familiar with the work of The Reverend Leon H. Sullivan. In 1977, Reverend Sullivan developed the Sullivan Principles, a code of conduct for human rights and equal opportunity for companies operating in South Africa. The Sullivan Principles are widely acknowledged to have been one of the most effective tools in the dismantling of apartheid and the end to discrimination against blacks in South Africa.

To further expand human rights and economic development to all communities, Reverend Sullivan created the Global Sullivan Principles of Social Responsibility in 1997. In early 2001, I had the privilege of hosting a gathering at Ohio State of more than a dozen academic presidents and others to explore the potential of the Global Sullivan Principles for uplifting the attention paid to human rights and social responsibility. Sadly, Rev. Sullivan died later that year. And while his work continues—and while hundreds of businesses and organizations have endorsed the Principles (such as ChevronTexaco, DaimlerChrysler, PepsiCo, and Pfizer)—it is fair to say that much of the momentum that had been building around the Global Sullivan Principles has waned since his untimely death.

From my perspective, the current focus on the implications of the global economy gives us an ideal opportunity to revisit and reenergize the Global Sullivan Principles as a starting point in our efforts to develop an acceptable, agreed-upon framework through which we can tackle the issue of ethics and internationalization.

The Global Sullivan Principles are remarkably simple and straight-forward. In endorsing them, an organization is committing to the following eight practices as they operate in the international marketplace:

• Express support for universal human rights, particularly for those employees within the communities the entity operates and for the parties with whom it does business.

• Promote equal opportunity for employees at all levels of the company with respect to issues such as color, race, gender, age, ethnicity or religious beliefs, and operate without unacceptable worker treatment such as the exploitation of children, physical punishment, female abuse, involuntary servitude, or other forms of abuse.

• Respect employees' voluntary freedom of association.

• Compensate employees to enable them to meet at least their basic needs and provide the opportunity to improve their skill and capability in order to raise their social and economic opportunities.

• Provide a safe and healthy workplace; protect human health and the environment; and promote sustainable development.

• Promote fair competition including respect for intellectual and other property rights, and not offer, pay or accept bribes.

• Work with governments and communities in which the company does business to improve the quality of life in those communities-- their educational, cultural, economic and social well being--and seek to provide training and opportunities for workers from disadvantaged backgrounds.

• And finally, promote the application of these Principles by those with whom they do business.

So there—in about 200 words—is a framework around which we can build a discussion. The benefits of using something like the Global Sullivan Principles to launch such a discussion are significant.

First, there is the inherent fact that they are a morally appropriate code of ethical conduct. Lord Moulton, a British jurist in the 19th century, described ethics as "obedience to the unenforceable." Here is the critical distinction between ethics and the law. Ethics is internal, a personal predilection, an allegiance to doing what is proper as opposed to what is mandated. As a voluntary set of guidelines, these Principles provide a framework within which companies can collectively act in an ethical manner and still maintain a "level economic playing field."

Second, the Global Sullivan Principles have tremendous potential value because they are not simply theoretical or academic . . . they have a "real world" track record. As I mentioned, ChevronTexaco, DaimlerChrysler, and hundreds of other major world-wide corporations have endorsed these Principles. This endorsement goes beyond just issuing a corporate press release. ChevronTexaco features their adherence to the Principles prominently on their website. Occidental Petroleum includes a report on that company's progress toward each of the Principles. Sodexho proudly points out that they were the first company in the food services and facilities management industry to endorse the Global Sullivan Principles and publishes a full report each year on their progress. Information as to how the Principles can be applied and what impact they have in actual, real world implementation is readily available.

And third, it is important to note that the Global Sullivan Principles are not merely altruistic or philanthropic in nature. No one is naïve enough to believe that businesses should abandon their fiduciary responsibility to their shareholders for a nebulous concept of the "greater good". The fact is, the Principles recognize and reinforce the importance of the financial strength of businesses. While it is true that they call on global corporations to seek goals beyond simply bottom line, they also position a business for greater long-term profitability. When a company respects diversity, helps local economies grow, provides safe work places, protects the environment, and contributes to the health and educational facilities in a community, that business exhibits the kind of social responsibility and ethical behavior that promotes long term global progress, a broader base of prosperity and, ultimately, expanded markets. It's also the kind of behavior that we consumers should reward in the marketplace.

This is a factor that is often over looked . . . that being a—quote unquote—"good" company is ultimately good for the company. It reminds me of the scene for the holiday classic Miracle on 34th Street, when Macy's Santa Clause recommends that a customer purchase some products at Gimbals'. The character playing R.H. Macy walks by and embraces this idea . . . he says Macy will be the store that "puts people ahead of profits, and—as a result—our profits will go even higher". Obviously that is a vast oversimplification of the point I am making, but it is nevertheless illustrative of the potential impact that broad frameworks like the Global Sullivan Principle can have.

Throughout today's seminar, and over the course of study enabled by this grant, I am hopeful that the examination of "Ethics and Internationalization" moves beyond the theoretical and into the practical. Whether it be with the Global Sullivan Principles or any other ethical construct, this is a national—even international—conversation that must take place. As the world is rapidly shrinking in economic terms, the need for this discussion is growing just as rapidly. I look forward to the outcome of Dr. Jain's efforts and thank all of you for taking part today.