Charter for NEW leadership English


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NEW Leadership is Servant-Leadership. This is the future!

Leaders should manage others based on trust, not power and control.

• They should collaborate with employees in the company to determine targets and moral values, and should allow teams to determine their own targets.

• They should practice collegial management, i.e. they should consult other managers and supervisors.

• They should ensure company teams are diverse, and be willing to accept statutory quota in order to achieve this diversity.

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Charter for NEW leadership English

  2. 2. TABLE OF CONTENTS 3 Preface 4 Charter 5 Recommendations 6 Findings and Considerations 1. Morality 2. Diversity 3. Sustainability 17 Appendices 1. People consulted 2. Members of the Young Bilderberg Conference 2. Notes 22. Colophon
  3. 3. PREFACE We represent a group of young executives from the Dutch corporate sector. Our aim is to set an example through innovative and modern management. The annual Young Bilderberg Conference gives us the opportunity to collaborate with the next generation of business leaders to develop plans for a new management style. We do this because we believe the Dutch corporate sector has a strong social and economic responsibility, as do leaders who fulfil an exemplary role. Yet above all, we do this based on our conviction that companies managed in this way will perform better and add greater value. At the last Young Bilderberg Conference in June 2009, the SER chairperson, Alexander Rinnooy Kan 1 , encouraged us to challenge ourselves and come up with concrete suggestions as to what the new leadership should entail. We took on this challenge wholeheartedly, knowing action had to be taken as soon as possible. The Dutch corporate sector has an important role to play in helping the economy recover and in creating work opportunities for people with very diverse backgrounds and abilities. It also has a responsibility to the environment, to future generations and to the majority of the population for whom prosperity is not so self- evident. The corporate sector needs to help find permanent solutions for the distribution of scarce materials. In addition, leaders in the private sector need to regain the trust of the public. This is why, in addition to making a number of recommendations, we decided to set a new tone with our Charter for New Leadership. This charter will act as a moral compass from now on. This charter and its recommendations are the product of a great deal of discussion, research and talks with both sympathisers and critics inside and outside the Young Bilderberg Conference. However, none of the words in this charter are set in stone. The charter is a “living document” that will be regularly scrutinized and revised when deemed necessary. However, the direction in which we are headed is clear: leadership that takes the corporate sector’s social role seriously, whilst also making the most of opportunities offered by global markets and a new and diverse society. These factors do not always make leadership easy, meaning we will sometimes be challenged to make choices in favour of long term goals, short term goals, profit and other forms of added value. Managing a business is a creative profession that requires daring and innovative ability. The first part of this document contains our charter and recommendations. This is then followed by a summary of our research on new leadership based on 3 main themes: morality, diversity, and sustainability. The final part of this document contains an overview of the people consulted during this project. On behalf of the Young Bilderberg Conference, the new leadership working party: Alexandra van Huffelen, Veronique Pauweld, Olaf Sleijpen, Frank Swinkels en Dimitri de Vreeze.
  4. 4. CHARTER OF NEW LEADERSHIP 1. Leaders should be an example to others based on their behaviour. They should be willing to learn and be open to other people’s opinions. Their position should not be self-evident, but should be dependent on assessments of their performance. They should lead for a limited term in office and be willing to accept statutory term limits so this can be achieved. 2. Leaders should manage others based on trust, not power and control. They should collaborate with employees in the company to determine targets and moral values, and should allow teams to determine their own targets. They should practice collegial management, i.e. they should consult other managers and supervisors. They should ensure company teams are diverse, and be willing to accept statutory quota in order to achieve this diversity. 3. Leaders should adopt an ambitious and innovative approach. They should create an inspiring work environment and have high expectations of themselves and their employees. They should focus on the process as well as the desired result. 4. Leaders should be able to maintain a balance between ensuring optimum growth for the company, as well as taking stakeholders’ interests (clients, shareholders, civilians, governments and other interested parties) into account when focusing on corporate objectives. 5. Leaders should take a broad view of how value creation can be applied and should focus on long-term opportunities. They should see that value creation is about more than just short-term financial gain, it can also offer benefits in terms of sustainable development. They should ensure complete transparency throughout the entire value chain. 6. Leaders should exercise restraint with regard to their salaries. They should accept a fair, but not overly generous reward. They should not accept bonuses in advance as part of their contract.
  5. 5. RECOMMENDATIONS 1. We wish to advocate a (statutory) model for collegial management (for both the Board of Directors and the Supervisory Board), as this guarantees more careful decision-making, and the protection of all stakeholders’ interests. 2. We advocate the abolition of performance-related rewards for executive directors. We believe this will ensure senior executives are operating on the basis of intrinsic motivation and good conscience, rather than a prospective reward. Employees will only receive performance-related rewards upon achievement, i.e. no prior agreements will be made regarding potential (financial) rewards for good performance (old-fashioned gratuity). 3. We encourage companies to establish goals for value creation in the broadest sense of the word (for businesses/services and society, not just in financial terms) and to account for withdrawals and deposits in the annual reports with regards to sustainability throughout the entire value chain. These reports should be evaluated and certified by an (external) accountant. 4. We encourage social partners and the government to enforce a covenant that encourages diversity in management as well as in the supervisory board of enterprises. In this context we advocate concrete, preferably quantitative objectives, with a broader scope on diversity than just gender and ethnicity. We believe goal-oriented and supportive measures are essential in ensuring the success of such a covenant. In this vein, existing and established initiatives, particularly those aimed at women, can be compiled and used for other groups. 5. We encourage entrepreneurs to implement diversity in their corporate strategy, and to formulate clear goals, measure results, and assess management with regard to this issue. In addition, a broad spectrum of best practices can be drawn upon to help achieve these goals. 6. We encourage entrepreneurs to invest in diversity by using new technology and by creating opportunities for new forms of collaboration that are not restricted by time or location. By doing this, an employer becomes increasingly attractive to certain specific groups such as parents with young children, the elderly, and the disabled. In addition, new opportunities should be created for exchange, internships and posts within the public sector. FINDINGS AND CONSIDERATIONS We have chosen 3 main themes to help shape our thoughts on new leadership: namely; morality, sustainability and diversity 2 . We believe these themes form the cornerstones of good leadership, and are completely aware of how strongly interwoven these three themes are. For instance, working on sustainability and diversity are practical examples of moral conduct. Similarly, investing in diversity with regard to labour participation is often seen as one of the social aspects of sustainable development 3 . However, despite this overlap, we would prefer to focus on each theme separately as each one has its own specific message for leaders of enterprises. Working in sustainability requires a certain drive: leaders must be genuinely committed to the cause and understand economic and social interests go hand in hand. Policies for sustainability should be about more than just establishing one or two goals for show, or meeting environmental requirements so as to rank high on polls. We believe diversity is not only a moral and social obligation, but that it also creates added value and acts as a source of inspiration. In our opinion, morality is a precondition to everything else, it is a basic attitude that cannot be enforced by rules or legislation. We used the three themes described above to research social developments and results from scientific studies, and to gather opinions from experts. This research resulted in a written proposal that was discussed and commented on by a number of experts both inside and outside the young Bilderberg Conference. The experts had two main opportunities to comment on the proposal: namely, the expert meeting on the 11 th of May and the internet forum that had been added to the Young Bilderberg Conference website. Many new insights were gained from the comments we received, and this feedback helped us to formulate the charter and recommendations you have in your hands now.
  6. 6. 1. MORALITY ‘Work brings out the best in people’, said the British philosopher Alain de Botton in an interview 4 about his 2009 book “The pleasures and sorrows of work”. Yet, despite people’s almost instinctive sense of justice, which has been repeatedly proven in the Ultimatum Game (an economic experiment that requires subjects to distribute money amongst each other), work can also demoralise and corrupt people as well. In September 2009, Rick van der Ploeg wrote in the NRC Handelsblad 5 , “How can a manager motivate his staff to work hard and moderate their salaries (…), when he earns twenty times as much as they do? An organisation owes its success to teamwork, not just to prima donnas (…). If productivity of top performers is stimulated by exorbitant performance-related rewards, this damages someone’s intrinsic motivation to do things in the interests of the organisation.” For this reason, Van der Ploeg favours the ‘Tinbergen norm’ which stipulates the highest paid employee should earn no more than five times as much as the lowest paid employee. Extrinsic incentives in the form of extravagant salaries demoralise employees in general, but also demoralise the very people earning the highest salaries. In “Not just for the money” 6 Bruno Frey refers to this as the crowding out effect: whereby external incentives have a detrimental effect on intrinsic motives. There are plenty of examples of this phenomenon. For instance, in a review of his book “The Prey”, Jeroen Smit describes what banking culture was like before bankers got caught up in money and greed. “Bankers used to be proud of their fiduciary duty whereby they served the general interests of the public. They experienced great job satisfaction, and in collaboration with governments, felt responsible for economic stability. They inspired confidence and trust in the public and were generally seen as risk-averse. Deep down everyone knew a good banker was more or less a civil servant.” 7 THE IMPORTANCE OF CRITICISM The fact that leaders have a choice in how they behave is not necessarily a reflection of their morality. For example, in the magazine Tijdschrift for Compliance 8 , Edgar Karssing, associate professor for Business Ethics, discusses Werhane’s work, who states: ‘Most managers and their institutions do not lack moral principles. Rather, they sometimes have a narrow perspective on their situation. They lack a sense of variety of possibilities and moral consequences of their decisions and the ability to imagine a wide range of issues, consequences and solutions.’ In other words, as Karssing explains: people in power need to hear other people’s opinions and be able to take criticism. “The conscience is most active in an environment that stimulates colleagues to discuss difficult issues, as well as tasks and responsibilities, so that collective assumptions can be clarified and applicable frameworks can be sought and assessed.” This is, however, not something that will happen automatically as is revealed in another article by Karssing wherein he addresses the ‘moral taciturnity’ of managers 9 . Indeed, research has proven integrity issues are not popular conversation topics with management. This is clearly visible in the day-to-day reality of things. Supervisors have little influence on decision-making at the top, and can thus forget about putting structural ethical issues on the agenda. We are therefore convinced good leadership cannot be enforced by increased regulation or codes, which is why we abandoned the original title of our working group ‘leadership code’. We believe a good leader to be someone that is an example to others based on his/her conduct. Leaders that have moral authority inspire others, and create opportunities for ambition and talent. They do not operate from a position of self-interest and have a broad vision that is focused on the future. An essential part of good leadership is being able to be open to criticism, and ‘organising debate’, as Obama did immediately after his inauguration. “Obama has not chosen the easy way out.” stated the Volksrant headlines at the time. “Obama (...) deliberately avoided surrounding himself with people who would agree with everything he said. The ministers and advisors in his cabinet are strong personalities who have some very different opinions to him, of which Iraq is a good example. Obama chose to have a bipartisan cabinet with diverse viewpoints so that there would be no danger of groupthink” 10 . Leaders may be tempted to surround themselves with sympathisers or ‘clones’, or to passively allow such an environment to develop. However, true leaders are brave enough to surround themselves with people that might be more intelligent than them and thus challenge them regularly. This demonstrates how important it is for the leader’s environment to be diverse as well. In continuation of this theme, we feel it is inadvisable for leaders to remain in power for too long. In the words of an American proverb, ‘When you start to believe your own bullshit, you’re in trouble’. In light of this, we agree with Steven Schuit, a professor of corporate governance, who advocates legally limiting the term in office for directors and supervisors 11 . Indeed, it is often said that leaders who have run an organisation for more than ten years, frequently lose (willingly or unwilling) their ability to be innovative and self-critical.
  7. 7. SERVANT LEADERSHIP, THEN AND NOW “These men knew what is was like to be plain and boring” stated a headline in the NRC Handelsblad in 2009. The article was written by Jannetje Koelewijn who collaborated with a number of former Dutch CEOs to reflect on the period before the financial crisis 12 . In this period, directors did not behave as “mercenaries” – a term Kees van Lede, former director of Akzo Nobel, likes to use for people such as Anders Moberg (former CEO of Ahold). It was also a period in which CEOs did not “overstate profits and share prices”. Van Lede states, “Loyalty no longer exists… It’s all about what’s best for the individual and what they can get. Companies now hire people who share no history with the company, and have no idea what the culture of the company is really about.” Prior to the financial crisis, corporate networks existed that maintained an unwritten set of rules for decency. What’s more, the interests of the company, its employees and the clients came first. “Naturally, CEOs were in charge, but their power was always put into perspective. It is fair to say that in those days, businesses practiced collegial management.” Fokko van Duyne, the CEO of Hoogovens, remembers that the only time he used his authority to push something through was when it came to choosing which Christmas cards should be used. Koelewijn writes, “Discipline, clarity, modesty, and restraint. These were the traits CEOs aspired to have. What’s more they were extremely open to, and embraced, change. The CEOs of those days would probably not have referred to their leadership style as Servant Leadership, but what this contemporary term actually entails is that leaders should have modest and decent attitudes. Advocates of Servant leadership (Greenleaf, 1970) believe a leader’s primary role is to serve the interests of others as ‘… by serving others first, business will benefit too.’ Until recently, there was little empirical support regarding the effects of servant leadership. It was a controversial idea amongst scientists. This was partly due to the internal paradox it presented, but it was also due to the fact that, at the time, Servant Leadership was based on a faulty theory and had many differing definitions in circulation. For a long time, servant leadership belonged to the domain of management gurus. However, Inge Nuijten 13 , who gave the term an operational definition and made it verifiable, has used her latest research to prove the concept can be of major economic significance. Nuijten defines servant leadership as ‘a leadership style that is primarily focused on the growth and well-being of individuals.’ At a first glance this may sound a little soft, but, at the end of the day, directors also want to ensure the continuation of the company; and it appears this type of leadership has a positive effect on employees’ performance and relations (with the company), as well as on their ability to work independently. LEADING THROUGH TRUST An employee’s intrinsic motivation is greatly influenced by his/her level of autonomy (Frey and Jegen 2001, also mentioned in Beroepstrots) 14 . Moreover, as Nuijten’s research demonstrates: Servant Leadership sets an example, as employees appear to adopt this same behaviour when they are in charge. Alexandra van Huffelen and Kees Cools wrote an article called Het einde van de hiërarchie which appeared in the Dutch newspaper Het Financieele Dagblad. The article describes how Essent’s Consumer Relations department successfully switched from a leadership style of ‘command and control’ to a style of ‘leading through trust’. Many of the employees in the department had previously been demotivated, but the switch ensured employees were gripped with a newfound zest and fervour. They developed new initiatives which improved results and customer satisfaction considerably. The concept of leading through trust is based on a leader ‘who does not think the world revolves around him, but is a reliable, sensitive and enthusiastic person who is open to ideas and criticism 15 .’ This type of leadership ensures employees are given the space to develop. It also makes them feel respected and valued, which indirectly invokes their sense of responsibility. What’s more, research has shown that leading through trust results in better teamwork and decision-making. Kools and Van Huffelen point to similar findings in The wisdom of crowds which was written by James Surowiecki in 2004. The idea of servant leadership corresponds strongly with our vision of the social role organisations should play in society. Organisations, wishing to have a significant long-term social and economic role in society, should encourage employees to develop their strengths, whilst also appealing to their sense of responsibility. This point of view is supported by Stichting Beroepseer who would like the strength of professionalism to be re- evaluated in each strata of the labour market.
  8. 8. THE LIMITATIONS OF RULES AND REGULATIONS Naturally, governments/legislators have a responsibility to protect their citizens and safeguard their rights; but introducing more rules and regulations to restrict misconduct may temporarily avert a crisis, but will do little to produce conscientious leaders. Rules are actually a self-perpetuating phenomena: meaning, any action that has not yet been prohibited is suddenly considered acceptable. This is why more and more rules are required to prevent undesirable behaviour. It is an illusion to think managers will make wise, rational decisions when they have rules and regulations to live by. Research has proven people often make decisions on irrational grounds and that their idea of reality is limited and distorted. This brings us back to what we mentioned before: namely, the importance of diversity. A system of checks and balances must be implemented by which the opinions of others are heard, both inside and outside the organisation. ‘This must be organised on a structural basis, not just when something goes wrong’ state both business ethicist Edgar Karssing and political philosopher Raoul Wirtz as they refer to the 2008 article It’s lovely at the top by Trevino, Weaver and Brown 16 . They were inspired to research this issue as they were curious as to whether Enron managers really had no idea of the immoral practices going on in their company. It appeared Enron managers identified so strongly with the company, they were incapable of imagining improper practices taking place within the organisation. In this context it is interesting to observe the different perceptions regarding compliance policies. Employees often feel such a policy is a form of window dressing, whereas managers feel they are taking the matter very seriously and that nothing untoward could be going on as corporate ethics have already been established. In this way there may be compliance, but there is no commitment from any of those involved. Researchers on this issue, believe the only way to break through such narrow-mindedness is by ensuring employees from all levels of the organisation interact with one another about ethical issues. Karssing believes morality can only be achieved at the workplace through permanent investment. Complicated decisions should always be made based on morality. Yet, decisions and considerations are often so complex, it is impossible for one person to oversee all the consequences. Indeed, it is people’s mindsets that cause narrow-mindedness. “This is why imposing ethics in an organisation is not only undesirable but also inexpedient (indoctrination), for the effects of such ethical regulations will be limited as long as narrow-mindedness exists 17 .” VALUES However, a specific mindset or groupthink does not always have to be negative. Meindert Fennema and Eelke Hemskerk reveal this in De Nieuwe Netwerken: de elite en de ondergang van de NV Nederland 18 . This publication goes back further in history than Jannetje Koelewijn, and describes the relatively small ‘old boys’ network’ culture that controlled Dutch business thirty years ago. According to Fennema and Hemskerk, leadership at this time was based on strong morals that were implicit to everyone involved. “Groupthink is positive when it encourages people to exhibit socially desirable behaviour (…) and prevents them from committing undesirable behaviour (…). These values are often stronger than any feelings of mutual solidarity such as a shared social background. This can be easily observed in the “old money” circles where no one wants to come across as “nouveau riche” or “money obsessed”. The social control and self-management that used to exist in directors’ networks has decreased considerably in the past couple of decades.” It is clear from statements such as these, that Fennema and Hemskerk wish to put the code Tabaksblat into perspective. This code was established in order eradicate groupthink and to stimulate good management. The groupthink culture continued amongst the generation of managers portrayed by Jannetje Koelewijn. These leaders were frequently of humble descent and had reached the top by working hard. However, their culture soon declined when the ‘mercenaries’ took over. The question that now arises is: how, in our individualistic society that is devoid of social control, can we ensure that values come from “within” rather than from legislation? And how can we ensure integrity and morality remain recurring conversation topics? The consultancy firm, Bain & Co, have found an answer that seems to work for them. They have chosen to use certain “operational principles” that form the driving force behind the ins and outs of the organisation, and that form the basis for how employees should conduct themselves. The principles are not about rules, but are based on mutual agreements regarding how one should work and interact with others. The agreements have been developed in such a manner that they can be applied across the organisation. People remind one another of the agreements made at both a collegial level as well as during assessments. If an “organisation code” is applied in this manner, it becomes much more than just a list of rules. It becomes a collective conscience that serves as a frame of reference, which everyone adheres to in a conscious way 19
  9. 9. EXEMPLARY LEADERS It is currently more important than ever, in our highly individualised society, to have leaders that act as role models and that are an example to others. In Gevaar verplicht Paul Frissen, a public administrator, describes the 2 virtues every political leader 20 should have: namely, political passion and professional restraint. We believe these virtues are equally important in executive leaders of organisations. Every leader should possess: prudence: as defined by Aristotle, cautiousness based on common sense and wisdom. Politicians must never let their own self-interest damage the interests of individual citizens. Similarly, executive leaders of organisations must consider and weigh up the interests of different stakeholders. proportionality: in proportion or balance, meaning the government must show restraint in the use of its monopoly on violence; in other words, the end does not necessarily justify the means. For executive leaders of organisations, this means being aware of the impacts (for example environmental impacts) of certain production methods. modesty: the ability to resist temptations such as power and personal gain. discernment: decisions and actions that respect and recognise the complex and ‘healing effects of social conflicts’. Here too, the ability to manage conflicting interests is of the utmost importance. tolerance: the ability to accept others, as well as recognise the advantages of a diverse society. cosmopolitanism: this virtue is essential in helping leaders understand the global and social impact of their responsibilities. We hope this list inspires educators of new, potential leaders. A study by the KPMG and Aspen Institute revealed students often receive poor training with regard to ethical and social matters (see the chapter on sustainability). However, we believe the coming generation will be more receptive to leaders modelling exemplary behaviour. This idea is supported by the bestseller De generatie Einstein: slimmer, sneller en socialer written by Inez Groen and Jeroen Boschma who conducted years of research on youngsters up to the age of 18 years 21 . Their research revealed the ‘Einstein Generation’, born after 1985, is more intelligent and social, and more focused on character and authenticity. In addition, as is befitting of a new generation, they want to innovate and modernise things. In their publication, Young Professionals: geef de toekomstige generatie reden tot hoop, Jansen Venneboer and Nijhof both state, “Organisations wishing to stay in business must learn to embrace these characteristics, even if they occasionally cause tension between the different generations” 2. DIVERSITY Leadership requires a rigorous combination of skills, intelligence, and qualities that are rarely found in just one person. This is true even if someone possesses all the virtues mentioned by Frissen. This underpins the importance of checks and balances, argument and rebuttal, and reflection. Leaders need to be open to new input, not only from their immediate surroundings but also from far beyond. This suggests leaders should operate in teams, but also that diversity is an absolute precondition for effective leadership. It goes without saying, that diversity also offers great social and economic advantages in terms of equal opportunities, employment, and affordable retirement benefits. What’s more, a wide range of talent, experience, and cultural baggage exists within Dutch society. We find it embarrassing to have to encourage diversity in an organisation, when individual, social and economic interests depend on it. What’s more, there is widespread support for the notion of diversity. However, it has to be said that at present, diversity policies have had quite a limited effect, especially with regard to executive positions. In Dividend van diversiteit, one of many publications about diversity in the last couple of years, Ben Verwaayen, former CEO of British Telecom and chairperson of the Board of Directors at Alcatel-Lucent, says, “Today’s world is so different to the past. Nowadays, one cannot be on the Board and say ‘we are not going to change anything’. That would be unthinkable and impossible”. Verwaayen is a huge fan of diversity - at all levels in an organisation. He asks, “How can you serve a multicultural society if you are operating in a monoculture?” The answer is you can’t. You’ll sell yourself short if you don’t take society, your clients, and the environment at large into your decision-making process.” 23 A lot of people share Verwaayen’s point of view: diversity is essential. People do not only hold this viewpoint out of moral duty or because of “equal opportunities” – such things are self-evident. Rather, people feel diversity is an economic necessity. Society and the market has changed: it has become larger and more diverse; and there is a lot of untapped potential in the market, particularly amongst women.
  10. 10. FACTS AND FIGURES It is clear that the corporate sector has wasted a great deal of opportunities in terms of diversity. Verwaayen’s organisation provides a welcome exception to most companies as 3 of its 16 board members are women. However, if we look at the corporate and private sector in general, only 15% of managerial positions are held by women 24 . What’s more if we look at executive positions only, this figure drops to 7% 25 26 . According to the Female Board Index, in 2008 only 7% of directors and commissioners in quoted companies were female 27 . In comparison, relatively speaking, quite a few women hold political positions (in national politics about 40% of posts are held by women) 28 29 . Statistics and policies related to diversity are mainly focused on women and non-western immigrants, which is both understandable and necessary to an extent. Considering the majority (60%) of graduates (Bachelors and Masters) are female and that this number is expected to rise to 75% in the coming years; and considering females graduate with better results than males, it is fair to say there is a lot of untapped potential in terms of highly valued competencies. Additionally, the last couple of decades have seen an increasing number of migrants settle in the Netherlands, of which the second generation is doing extremely well 30 . At present, 25% of graduates (Bachelors and Masters) are immigrants. This group has a lot to offer, in terms of opportunities and input – a fact acknowledged by everyone. In fact, no one with any amount of decency would dare to argue otherwise, which is why it is so shameful that diversity policies have had so little effect. What’s more, even less has been achieved in this regard at the executive level both in the corporate sector and in academia 31 . When it comes to determining how diversity adds value to business economics, people often refer to social psychological research that studies how group composition affects decision-making and creativity. The Difference 32 by Scott E. Page provides a useful overview of this type of research, and in Diversiteit en Innovatie TNO 33 gives a review of the various kinds of studies in this field. Sander Hoogendoorn and Mirjam van Praag are currently researching the effects of group composition (the degree of diversity in terms of sex and nationality is variable) on virtual organisations led by business administration students. The purpose of this study is to assess how group composition affects company results, and the study itself is being conducted at the Amsterdam Centre for Entrepreneurship in the University of Amsterdam. So far, the first few results have revealed a positive correlation between diverse group compositions and company results. Statistical evidence also shows the positive effects of diversity. For example, it is often pointed out that a relatively high number of women, and in the states black people, hold executive positions in the world’s top performing quoted companies: respectively 13% and 15%. Of course, this is still far from representative in terms of what American society could offer, but it is noteworthy that more diversity exists in the most successful organisations 34 35 . DIVERSITY PROGRAMMES The last twenty years have seen a lot of initiative in terms of implementing diversity in organisations, at both the shop floor level and the executive level. Indeed, Verwaayen’s book is one of many publications in this field. The importance of diversity and the opportunities it offers has been reiterated in a variety of ways, and has frequently been supported by scientific evidence and statistics. Examples of diversity programmes are: Government policy encouraging diversity in general, with particular focus on the shop floor level: the implementation of Wet Samen (1998 – 2003) and the continuation of this act in the form of, the focus was labour participation of minorities. Initiatives to encourage diversity at the executive level, aimed in particular at women. The Ambassadeursnetwerk, founded in 2001 by EZ, OCW and VNO-NCW resulted in the Charter Talent naar de Top (called Topbrainstorm until 2007). The charter has been signed by 134 companies. Signatories must strive to employ more women at the executive level and must report on what has been achieved 36 . Government policies aimed at stimulating minority labour participation in the civil service, and at increasing the percentage of women in official, executive level positions. Special BiZa (Ministry of Foreign Affairs) programmes aimed at increasing the number of women and minorities in police leadership (Politietop Divers), as well as increasing the number of female mayors, city managers, and women in the armed forces (operatie Genderforce) Programme aimed at increasing the number of female professors (Participatie als prioriteit) as stipulated in the European Equal-project: number must increase from 10% to 15% in 2012 (N.B. the EU goal at the
  11. 11. Treaty of Lisbon was 25%) There are numerous advisory research reports regarding the issue of diversity and diversity policies. Some of the organisations that have contributed to these reports are: RIVM, TNO, SCP, universities such as Nyenrode, RUG, VU Erasmus, and ministries and consulting firms such as: McKinsey, Bain & Company, Accenture, Opportunity in Bedrijf , and Ernst &Young. There are a lot of very convincing programmes, reports, studies and recommendations regarding diversity. Yet, there is also a lot of “know how”, particularly amongst consulting firms, regarding diversity management, the implementation of diversity policies, and the recruitment of very diverse people. As part of the Charter Talent naar de Top, Bain & Company collaborated with consultancy firm Egon Zehnder to develop a ‘best practice guide’ for companies that had signed the Charter and used the Monitoring Commission for advice 37 . Nowadays, virtually all executive search firms have special programmes for recruiting executive female talent, and some firms even specialise in this field (such as Woman Capital and Women on Board) 38 39 . There are also a lot of compelling examples of companies successfully implementing diversity, even at the executive level, with the help of networks such as Talent naar de Top, Opportunity,, and WHAT HAS BEEN ACHIEVED? A lot of initiative has been taken in terms of diversity in government: the goal of 25% of executive-level positions being filled by women has been achieved. Labour participation of minorities in government is still minimal. 40 The Politietop Divers programme resulted in a 50% increase in the number of females and 1 foreigner in the leadership corps in 2009 (the 2009 goal was thus achieved). 41 Results regarding GenderForce’s aim to increase the number of women in military leadership roles are unknown. In 2007 goals were established for 2010: namely, that 12% of leadership roles and 30% of civilian positions should be filled by women. However, neither of these goals were achieved. In fact, the number of women in leadership roles actually decreased to 9%, whereas the number of females in civilian positions increased to 1%. 42 Labour participation of minorities has improved slightly, especially in the second generation and amongst women 43 . The number of female professors is slowly increasing by 0.5% per year. In 2008 this was 11.7%, whereas the European average is 19% 44 . The number of women in academic roles has risen from 32% in 2001 to 38% in 2007 45 . Diversity in executive-level and senior executive positions: the number of women in these positions is barely rising. The percentage of women with positions in the Board and the Supervisory Board of quoted companies was 5.7% in 2007 and 7% in 2008. This is probably due to one woman, who became a Board member (KPN) in 2008 and thus, caused the numbers to rise from 6% to 7%. Figures regarding senior citizens and minorities are unknown. What is known, however, is that more than half of the women in executive positions in Dutch companies are of a foreign nationality. 46 The number of companies that have signed the Charter naar de Top amounted to 134 in 2010. These companies represent approximately 8% of total employees in the Netherlands. According to Talent naar de Top, the number of female executives rose from 16.7% (a baseline measurement in 2008) to 18.4% in 2009. Interestingly, this increase is most marked amongst companies that have signed the Charter. This last detail is in line with Bain&Company’s research on behalf of Talent naar de Top. Namely, that diversity is only achieved once directors have decided to make it a part of their corporate strategy, and have established clear goals with results that can be measured. Best practices pertaining to this can be found on the Talent naar de Top website. LEGISLATION BOTH INSIDE AND OUTSIDE THE NETHERLANDS The continued under-representation of women in executive positions led to new legislation being passed in the House of Representatives in 2009. From then onwards, companies with more than 250 employees were required to pursue proportionate representation of females in senior positions. What’s more, they were to be held accountable for this. By 2016, 30% of all supervisors and directors had to be female. The PvdA had made prior attempts to legislate a quota of 30%, but this received no widespread support in the House of Representatives. Diversity quotas are on the whole very controversial, even amongst feminists. Proponents often cite Norway as an example, where in 2003, the conservative minister of Trade and Industry, Ansgar Gabrielsen, “the archetype alpha businessman” 49 according to TimesOnline, threatened to implement a
  12. 12. legislative quota of 40% unless companies started employing more female executives. Initially, this move received a lot of opposition, particularly from the NHO, the “Norwegian VNO-NCW”. Yet Gabrielsen held firm, driven purely by economic motives. For America’s most successful companies had a much larger representation of female executives, whereas in Norway this figure was a scant 8.6%. Eventually, the idea of “female potential” caught on and received widespread support amongst NHO-members. Employees set up Female Future, which had the goal of training women for senior positions in a very short time frame. This strategy was coined “pearl diving”: “We know that they – the pearls – exist and we want to help companies to find them”, said NHO-representative, Fagerland. Women who successfully graduated from the training scheme, were entered into a database, from which companies could select candidates. This led to a huge commitment on the part of the companies. The result was that the target number of female supervisors and senior managers was achieved in just a couple of years. At present, Norway has the highest percentage (just over 40%) of female supervisors in the world, and the number of senior, female managers is increasing as well. However, the number of female directors is still lagging behind. Nevertheless, Norway is often cited as an example of how effective quotas can be. Yet Jean-François Retournard, director of the Employment Activities agency of ILO, believes this example actually shows how effective it is when initiatives come from the corporate sector itself 50 . In 2007, Spain passed legislation requiring 40% of all company board members to be female by 2015. Additionally, Switzerland implemented a quota of 30%; and at the beginning of this year, France passed legislation to ensure the implementation of a female quota at executive level positions. A couple of year ago, Sweden set up a similar programme to Female Future; and in Germany, England and Belgium, measures were taken to equalise the under-representation of females in senior positions. WORKING WITH DIVERSITY We believe the corporate and public sector in the Netherlands need to do more to boost proportionate representation in the labour market. In our opinion, diversity programmes single-mindedly focus on external characteristics (ethnicity and sex), which up until now, have had little effect. Paul Frissen’s brilliant and persuasive publication Allemaal anders, een lofzang op verschil en ongelijkheid convinced us of how important and advantageous differences between people really are 51 . We view diversity primarily as ‘working and interacting” with the very things that distinguish us from one another (inclusion). This is not just a moral duty, it also serves huge economic, social, and individual interests as well. We, therefore, favour a broader interpretation of diversity that focuses on the added value people’s different talents, history, background and age bring. This type of interpretation does not just focus on recruitment, but focuses on how diverse people can be kept in an organisation and in the labour market. We feel a person’s identity and talents should not be based on appearance, ethnical background or sexual orientation, especially in a multifaceted, cosmopolitan environment. Additionally, we would also like to point out the huge potential amongst highly educated senior citizens for executive-level positions, particularly since the age of retirement has risen. Yet, the government’s target-group policy (which involves special measures to combat unemployment among certain target groups) has not developed any specific programmes to prevent the talent amongst this group going to waste. We, for one, do not buy into the somewhat fashionable thought that it was “the old boys and girls” that caused the current economic crisis. Experience, which often comes with age, is a very important element in a diverse society. Noteworthy is the fact that unemployment in the 55-65 year age bracket has doubled in the last five years, with figures being at about 6% for both men and women. Moreover, 18% of the women and 33% of the men in this group are highly educated 52 , freeing up a great deal of potential for senior and executive positions. In short, social partners have a duty to pave the way for groups that have been under-represented in executive-level positions. This group includes, but is not limited to: women, non-western immigrants, homosexuals and lesbians. However, just this is not enough. Diversity goals need to be incorporated in company policy, so that senior executives and HR-managers from the public and private sector can implement a broad and active diversity policy, such as the one described above. It is also important to recognise the importance of new technology and new, flexible collaboration forms, as these factors increase labour opportunities for senior citizens, people with disabilities, and parents with children. With reference to the last group in particular, entrepreneurs should effect change and ensure part-time, male employees become an accepted phenomenon, even at the executive level.
  13. 13. We do believe, however, that target-group policy is only part of the bigger picture. Diversity is also a question of mentality: it is a matter of being able to look past artificial boundaries and past one’s own narrow- mindedness. This mentality can be shaped at the educational level with well-rounded courses that awaken social consciousness. Employers in the corporate and public sector can also help form graduates’ ‘mindsets’ by incorporating exchange and interim programmes (between the corporate and public sector) in their training schemes. Indeed, this is one of the points that was included in the recommendations of the Young Bilderberg Conference of 2009. A mindset is a set of views, assumptions, values, expectations and taboos that determines how people behave. A mindset is primarily learned, or as business ethicist, Karssing puts it, “It shapes how you view the world. Thus, a mindset that receives a great deal of input and inspiration, will have less chance of narrow-mindedness, and will be better able to look at problems from different perspectives” 53 , which is exactly what a leader should be able to do. 3. SUSTAINABILITY There is a Dutch television programme called Keuringsdienst van Waarde that investigates the truth behind products in the Netherlands. The journalists in this programme use a great deal of perseverance. They spend many hours on the phone with the consumer information department, and do a lot of independent research as well as occasionally performing (often unannounced) research at the manufacturing site. The truth behind the product is always exposed, both in terms of the effects on the consumer and in terms of cost. This programme is very revealing, which really shouldn’t be the case. For we believe all organisations should operate in this way, so that there is complete transparency regarding the entire production chain. Unfortunately, most organisations simply comply with the established requirements concerning transparency and sustainability goals. Corporate self-regulation such as corporate social responsibility (CSR) or working on sustainability, is often merely a show, a form of window dressing. The standard for organisations nowadays seems to be all about appearances: about giving the impression that everything is on track, whilst simultaneously not giving away any information at all. We seem to be living in a tick box culture, whereby the most important thing seems to be about performing well in rankings established by institutions. It would be so much more interesting if organisations would be open and honest about their goals and policies, as well as their successes and failures, as this would ultimately benefit everyone involved. MVO Nederland (CSR Netherlands) has deemed CSR to be the standard for Dutch organisations in the 21 st century. Yet, CSR is a catch-all term that gives organisations a great deal of freedom, meaning it can be interpreted and thus, implemented in a range of different ways. Corporate Social Responsibility (CSR) entails running a business in such a manner that it contributes to sustainable development. In Our Common Future (1987), also known as the “Brundtland Report” the World Commission on Environment and Development described sustainability as, “A development that meets the needs of the current generation, without endangering the needs of future generations.” 54 According to MVO Nederland, CSR encourages organisations to embrace responsibility by using their business activities to positively impact the environment, management, and people in general 55 . Companies that implement CSR make conscious choices to create added value at a social (people), ecological (planet) and economical (profit) level. The business ethics department at the Nyenrode Business University describes CSR as: “A firm commitment to using one’s business to encourage economic development by improving standards of living amongst employees, clients, the local community, and society in general 56 .” This definition is based on the general views of the World Business Council for Sustainable Development (WBCSD). The WBCSD believes “the three pillars” (profit, people, planet) of sustainable development are important, but also feels organisations have a greater responsibility to solve global problems regarding scarcity and sustainability. STEWARDSHIP A broader definition of sustainable development can be found in the term stewardship, which primarily refers to sustainable management in terms of the environment and nature. Indeed, the Dutch translation of this word, “rentmeesterschap”, has biblical origins and used to mean “man is the temporary guardian of the universe”. Nowadays, business economists increasingly use this term to describe a new concept in terms of managing a business. The basis of this concept is that the earth, and everything on it, (including businesses) is on loan to us from future generations. Urgent action is, thus, required and must be taken. Severn Suzuki, a twelve year old Canadian girl, expressed this urgency both passionately and eloquently at the Earth Summit in Rio de Janeiro in 1992. Her appeal to the world, which can be watched on youtube under the heading “The
  14. 14. girl who silenced the UN for five minutes” is more relevant than ever. Unfortunately, her speech did not manage to achieve much more than a standing ovation, a lot of applause and crying delegation members. Ten years later she expressed the following words in Time Magazine, “My confidence in the people in power and in the power of an individual’s voice to reach them has been deeply shaken... In the 10 years since Rio, I have learned that addressing our leaders is not enough. As Gandhi said many years ago, ‘We must become the change we want to see.’ I know change is possible.” 57 CHANGE This broader view of corporate social responsibility corresponds with current changes in economic thinking. A few well-known economists such as Arnold Heertje and Herman Wijfels favour the idea that economics is much more than just what can be expressed in profit and growth. They believe values such as nature, wellbeing, and quality of life are a part of economics too. “It is essential we review and reconsider the economic system we have been working with. Primarily, we need to reject values such as greed and (cultural and) economic nationalism, and embrace a stronger and more credible, fair, sustainable and global society.” said Esther-Mirjam Sent and geopolitician, Henk van Houtom, in the Volkskrant on the 20 th March in 2010. Their article was a reaction to the latest predictions made by the CPB (the Netherlands Bureau for Economic Policy Analysis) 55 . Yet, quite a few of these ideas can actually be found amongst older economists such as Bob Goudszwaard (Kapitalisme en vooruitgang 1974) and John Gailbraith (The affluent society 1958) who critiqued “conventional wisdom” regarding economic growth and material happiness. The book, Mind over Matter (2009), by Sander Tideman shares many of the arguments described above. In fact, in the preface Herman Wijffels states, “In my opinion, the financial crisis and the greater ecological crisis have the exact same causes. They both originated in the industrial era, which was based on a distinct set of values such as social Darwinism and anthropocentrism. These type of values encourage human behaviour and institutions to become exploitative in nature. A ‘take what you can’ mentality develops which results in people going far beyond the limits of what is sustainably possible.” Wijffels sees the financial crisis as the moment to change tack completely. “... we must re-evaluate all institutions and models derived in the industrial era, including the GNP, which is no longer an adequate measuring tool for growth.” 59 Tideman points out nearly all successful companies operate on the basis of social entrepreneurship. He supports this theory using evidence from an American study that researched organisations that had existed for more than a hundred years (Built to last: successful habits of visionary companies from 1994 and Good to Great, why some companies make the leap and others don’t from 2001). What Tideman finds most intriguing about the findings in Built to Last is, “These companies had a number of goals, and making money was only one of them. What’s more, it was not necessarily the most important goal. Company ideology went much further than just economic results. And, most importantly of all, these companies had a much greater commitment to their values and vision than the competition did.” FAMILY BUSINESSES The vision described above has a lot in common with the culture present in family businesses, even though the backgrounds are somewhat different. “Family businesses explicitly take the interests of stakeholders closely involved in the business, into account. This is absolutely essential, as this close relationship of trust is a precondition to the continuation of the company. These close bonds are demonstrated in a variety of ways, particularly in the strong commitment to the staff in both ups and downs [...], they tend to seek employment in their surroundings and thus, implicitly practise social responsibility due to their strong affinity with that particular area [...].” This is an excerpt from a Dutch study, De kracht van het geduldig kapitaal, that researched family businesses in the Netherlands- the type of businesses that the authors believe to be “the engines of the Dutch economy” 60 . There is not a lot of research regarding the success factors of family businesses (69% of all Dutch enterprises and 49% of all jobs). Yet, the research that does exist, suggests these types of businesses can be characterised as having the following traits: they have a tradition of strong, family dominated leadership that is focused on continuity; and they have a huge sense of responsibility to their staff, the neighbourhood and charities 61 . Thus, one could say a sort of ingrained sense of corporate social responsibility exists within family businesses. Albert Jan Thomassen, the director of FBNed (the Dutch Family Business Association) believes certain characteristics such as loyalty, trust, and attention to detail are implicit core values in family businesses.
  15. 15. One such example is SHV, a family business that was founded in 1896. The company describes its philosophy in the following way, “SHV is a family business and wishes to remain so. SHV’s core values are integrity and loyalty. Integrity means being honest, genuine and completely open in all communication regarding the company. Good news may travel slowly, but bad news travels very quickly. For us, loyalty means putting your very best effort into your work, the company and its development. SHV aims to continue its pattern of growth, based on the integrity and loyalty of its staff, for its shareholders and employees, but also for the betterment of society.” 62 MULTI-COMMITTED COMPANIES Social Responsibility, by its very definition, extends beyond country borders. In a recent report (March 2010) ING introduced the term “Multi-committed companies”. Multi-committed companies are companies that take responsibility regarding equal distributions of wealth, the distribution and use of scarce raw materials, and the importance of knowledge in upcoming markets. They are willing to share their knowledge on these matters and are more successful in the long term 63 . In its report (more or less an investment advice piece), ING talks about the world being on the verge of the ‘Third Industrial Revolution’ 63 . However, responsibility should not only be placed on international organisations, as sustainability, is after all, a global issue. DSM embodies the approach described above. Senior executives at DSM use CSR as a source of inspiration. Feike Sijbesma, the CEO of DSM, once said, “We cannot be successful or consider ourselves successful in a world that is failing” 64 . Thus, DSM’s mission is “to create brighter lives for people today and generations to come”. Their strategy focuses on finding innovative solutions for important global issues. These issues range from finding alternative energy sources and raw materials, to addressing climate change and producing healthy, nutritious food for everyone. DSM is convinced this strategy will provide long-term market opportunities, that will benefit not just the company, but also people and the planet. DSM tries to help its customers by offering them sustainable solutions. It uses its innovative strengths to create ECO+ products that have a low carbon footprint. DSM has also entered into a number of very effective partnerships such as the Public Private Partnership with the World Food Programme. This close collaboration has had a number of positive effects: it gave DSM a better understanding of what people needed all over the world, it gave DSM the opportunity to transfer its expertise and knowledge, and it also helped DSM develop products that literally improved the lives of millions of people. However, the partnership was not entirely selfless, as DSM gained huge advantages from it as well. For example, it gave DSM a lot of insight into new markets, it inspired and motivated DMS staff, and it strengthened DSM’s reputation. Our impression is that DSM has a very different approach to CSR than most companies. The majority of companies seem to think they have done their bit if they set one or two CSR goals and try to operate in a more environmentally friendly manner. In 2009 the Monitor Duurzaam (sustainable) Nederland report made clear what a strain the Netherlands is putting on natural resources, and how little it actually contributes in terms of solving global issues such as scarce raw materials, climate change and biodiversity 65 . We believe organisations have a moral duty to take on active roles in sustainable development. DSM has shown this is achievable once sustainability goals correspond with an organisation’s goals. ICI Paints, a subsidiary of Akzo Nobel, demonstrates this with their involvement in the creation of a user-friendly sustainable life cycle assessment tool. This tool offers users a visual representation of the ecological impacts of a product throughout the production chain. This tool was sponsored by The Natural Step, an international NGO in sustainable business 66 . The Dutch waste management company, Van Gansewinkel, also adopted an approach that was in line with its core business, namely, the cradle to cradle concept 67 . This concept, developed in 2002 by Braungart and McDonough, ensures all waste is reused in new products without damaging the environment (which is often the case in recycling). The cradle to cradle concept is perfect for the production and design industry (including architecture and construction), but has only experienced limited implementation up till now.
  16. 16. INTEGRATED SUSTAINABILITY POLICIES Research has shown that an approach focused on continuity will yield positive results, even for shareholders. This is in line with what the previously mentioned ING report predicted. A recent doctoral dissertation from Rotterdam (Diffusion of Corporate Governance Beliefs by Pieter-Jan Bezemer, March 2010) demonstrated that single-mindedly focusing on shareholder value, which is what approximately 75% of Dutch quoted companies do, will have a negative effect on profit 68 . Equally interesting are the findings of The Vereniging van Beleggers voor Duurzame Ontwikkeling (The Dutch Association of Investors for Sustainable Development) (VBDO): namely, that stock on the European Dow Jones Sustainability Index has been outperforming similar stock on other indices for several years now. Yet, despite these trends, as the VBDO points out, very little has been done to incorporate integrated sustainability policies into the corporate sector. Some companies have done some very good things such as: improving working conditions for subcontractors in other parts of the world (Unilever) 69 , helping the environment (Boskalis), or basing executive bonuses on how well the company performs on the European Dow Jones Sustainability Index (AkzoNobel). Yet the majority of organisations are lagging behind. “Most companies have no idea of what to do when it comes to sustainability. They don’t believe it has any added value, when in actual fact, it can bring in a tidy profit.” 70 , say Guiseppe van der Helm, chairman of the VBDO. Investors are increasingly starting to realise well-managed and sustainable organisations actually yield more profit in the long term. It is this trend amongst investors that will enable sustainability to really gain momentum in the corporate sector. What’s more, this vision is receiving increasing wide-spread support – a fact that is reflected in institutional investors’ investment policy. For example, APG, the pension fund for government and education employees in the Netherlands, deliberately strives to only make investment decisions that meet certain standards of sustainability. We are not trying to set a standard when citing compelling examples such as DSM and Van Gansewinkel. Change takes time. Organisations do not necessarily have to implement huge change, as long as what they do is more than just “window dressing”. In fact, small steps often have a tremendous impact. Examples of such steps could be: ensuring only sustainable food is served in the canteen, using cradle-to-cradle products as much as possible, ensuring company waste can be easily used in the cradle-to-cradle process, and limiting (international) travel by using modern, communication technology. SOCIAL EDUCATION We believe it is essential that future leaders of organisations are properly trained. Every year, the Aspen Institute, an American organisation specialised in leadership, conducts a survey of MBA students on their attitudes toward the role of business in society. The results of these surveys are published in a report titled, “Where will they lead?”. The most recent results reveal the future captains of industry understand the importance of social responsibility in the corporate sector, but don’t see how this relates to profit. Moreover, only a minority sees the importance of value creation in a broader sense, and almost none of the students feel their education is teaching them to properly consider the interests of different stakeholders 72 . No comparable studies have been done in the Netherlands, but we do have the results of a study the KPMG conducted on recruiters for Dutch companies. The results are worrying: approximately 30% of Dutch companies are dissatisfied with their graduates’ ethical training. They feel graduates only seem to care about their career, income, and status, and don’t seem very interested in ethical values. Even more shocking, 40% of companies dismissed “high potential” graduates on these very grounds. The majority of those surveyed felt students should receive more training in the social and moral aspects of the corporate sector 73 . The KPMG has now developed an “educational toolkit” called Vertrouwen, Integriteit Leiderschap (Trust, Integrity Leadership) which aims to help universities produce good citizens.
  17. 17. APPENDICES 1. PEOPLE CONSULTED Names with a * are members of the Young Bilderberg Conference. The following people commented on the online rough draft of this charter via our website:
  19. 19. 3. NOTES