What is the Company For?

Remarks made at The International Forum in Stockholm, Sweden
April 27, 2002

By Ian L. Rushby
Vice President and General Auditor, BP, United Kingdom

 

The company exists to create future wealth for its (greater) shareholders, in doing so it creates wealth for others, employees. It operates therefore though altruistic principles but based on self-interest. This self interest has to be enlightened self interest Ėto do nothing other than look after our own interests and to reject the world we are operating in would put at risk the interest of our shareholders. The company is never an aid agency or a charity Ėbut we make long term investments - investments that will thrive if the societies in which they are located are also thriving - so the health and welfare of the societies in which we operate of paramount (importance) to us- and we therefore will seek to influence that society-being a force for good in what we do.

Clearly the motives and actions of large global corporations are under scrutiny. There is a climate of distrust surrounding international trade and investments in general and the role of big business in particular.

One of the consequences of globalization has been a restructuring of the corporate sector to create firms, which can compete in a global marketplace. Thatís true in our industry sector of course - since the end of 1998 when we created BP Amoco, the value of mergers and acquisitions worldwide has amounted to more than $3 trillion.

We actually see the restructuring has increased competition - but it can also look like a concentration of power in the hands of a limited number of gigantic companies.

Ten years ago the largest company in the world had a market capitalization of just $60 billion - now the largest 20 corporations are all more than twice that size.

With size comes a fear that such power in unconstrained, accountable to no-one - able to move at will and able to play off one group against another - even one government against another.

According to the recent market research, if you ask Americans if they trust what big companies tell them only 16% say yes. And companies are getting bigger with more global reach. They are being perceived as more powerful and less accountable.

In the first 50 years of the 20th century, the living standards of the world measured by the GDP per capita per head, rose by just 1% (pa) with population growing by 1 billion.

In the 2nd half of the century, GDP per head, rose twice as fast despite the population growing by 3.5 billion people.

The difference between the two values has a lot to do with openness in the world economy - in the 50 years from 1950-2000, world trade grew by an extraordinary 1700% - unprecedented growth in both trade and international investment leading directly to a remarkable growth in living standards not just in the developed industrialized world but also in many developing countries.

Of course the process isnít complete and there are still far too many people living in desperate poverty - but that should not disguise the fact that more people been brought out of poverty than at any other time in history, and I suspect in parts of Europe that would be even lower.

So as believers in global trade and the power of the company to do good, by doing well, what should we do? Firstly, it is about how we work and apply our values in practice. At the very basic level, we have to deliver what we promise - to the investors, to customers, to everyone we do business with. Trust comes then performance - from a track record of doing what we say we will do - always and everywhere.

We have to be transparent in reporting on our activities and finances, because where there is not transparence there is doubt.

Corruption-

We have to adapt and adhere to universal rules of behaviour and care. Doing no damage, managing every risk with care and professionalism, managing every relationship on the basis of genuine enduring mutual advantage. We codify our behavior and expect everyone to live by that code.

Secondly, it is about how we apply the skills we have.

As a long-term business, investing on a 30-40 year (business) we have to recognize that as part of society we benefit from its wealth- so we must contribute to that wealth. When society faces challenges we have to provide answers-not excuses and denials.

People expect big companies to lead through taking action, and to use their skills and access to technology to offer better choice-not to dismiss real challenges as problems, which will be, take care of by someone else.

People of course means employees as well as customers and our neighbors where we operate. The alignment and motivation which employees feel-a sense of pride and identification with the firm is largely powerful-especially when responding constructively to a challenge.

Climate change is an example of constructive engagement but there are many others-the use of technology and skills ensure communities have clean water; the use of solar powered equipment such as refrigerators which store vital medicines in remote areas; help communities threatened by AIDS; support for the creation of civil society in countries damaged by conflict and violence- our companies are engaged in all of these- and I am sure you too have many similar examples.

Thirdly, it is about the development of meritocracy-about the need to demonstrate that global companies are actually global- business is very competitive- and those who win will be those who attract and develop and retain people with the greatest skills and brains. The challenge always is to recognize the value of diversity and unique contributions in an organization which has a powerful culture joined with strong Anglo American business ethics. Is it possible to be both a citizen of BP and a citizen of China, Trinidad, Germany-the answer has to be yes-the opportunities have to be open and transparent to all.

What we are not about to do is to subvert or interfere with proper political process, either by financial or other means.

The question we are wrestling with then is how to answer the question what is our socio-economic impact and is it strategic to our business?

 

This published resource is provided for dialogue and discussion purposes only.
The International Forum 2002