January sees the World Economic Forum’s Annual Meeting at Davos. But what should the leaders of the world be discussing? London Business School faculty make their suggestions.
Every January the World Economic Forum holds its Annual Meeting at Davos. Participation is by invitation only and limited to chief executives of leading global businesses; politicians from the G20 and other key countries – including over 30 heads of state and government; the heads of all major international organisations; as well as media, spiritual and cultural leaders. London Business School will be contributing to the debate, represented by Sir Andrew Likierman, Michael Hay, Kamalini Ramdas, Rajesh Chandy and Gary Dushnitsky.
The 2011 theme is Shared Norms for the New Reality. This, explains the WEF, reflects “the foremost concern of many leaders today – living in a world that is becoming increasingly complex and interconnected and, at the same time, experiencing an erosion of common values and principles”.
Ever ready to go off piste, we canvassed London Business School faculty on what they would like to see top the Davos agenda.
Over the last twenty years, Julian Franks, Professor of Finance, has studied capital markets in Germany, Japan and France, as well as the United States and UK. He believes that, with the emergence of new economic powers, ownership models need to be questioned and discussed with great urgency. “The threat to our ownership model is that the dominant form of corporate ownership in other markets – concentrated holdings by families and blocks – intrinsically incurs lower agency costs. This is because ‘real’ owners monitor management far more tightly: their personal wealth is directly at stake. If the scope for such owners to exploit their control for private benefits is now being progressively curtailed through better regulation – in blunt terms, if there is less scope for stealing and expropriation – the family and block ownership model might well increasingly rival our own.”
Freek Vermeulen, Associate Professor of Strategic & International Management, and the author of the bestseller, Business Exposed, suggests that Davos should be looking at how to encourage contrarian behaviour among the world’s corporations. “For decades, in the world of business, we have seen waves of firms concurrently making the same strategic decisions, and adopting the same management practices. Not seldom, in hindsight, these decisions and practices turned out to be detrimental, both for the firms and for society as a whole,” he laments. “Firms are often also pushed into this ungainly behaviour. For instance, we know from research that firms following a contrarian strategy get downgraded by analysts and the stock market in general. Hence, they are pretty much forced to do stupid things.”
As a result, the question, Freek Vermeulen would most like addressed at Davos is: How can we stop and prevent such waves of collective detrimental firm behaviour?
Over the last year, Lynda Gratton has been leading a major global research project on the future of work. This will form the basis of her new book to be published later this year and offers a far reaching alternative agenda for Davos. “CEOs will continue to face ever more challenging roles as work and organisations fundamentally shift over the next decade,” she anticipates. “Technology will bring ever great transparency; global connectivity will see five billion people actively connected with each other creating a community the world has never experienced before; many of the young people born in this decade will live more than 100 years; Asia and China will increasingly take their place on the world stage as innovators rather than simply the back-office and factory of the world; societal trust in business leaders and large companies will continue to fade; and the challenges of energy resources and climate change will have to be addressed. Together these five forces will bring both opportunities and challenges. The opportunity to bring together extraordinary talent from around the world; but also the challenge to craft collaboration in a world that is ever more complex and diverse.”
Corporate social responsibility has been high on the agenda of Ioannis Ioannou, Assistant Professor of Strategic and International Management, for a number of years. He believes its implications should also be discussed at Davos. In particular, he suggests: “As firms come under increasing pressure to become socially responsible and even solve broader societal issues, does our conception and implementation of business and corporate strategy need to change? If so, in what ways? How do managers deal with potentially competing and conflicting strategic initiatives arising from a firm’s need to satisfy multiple stakeholder expectations and potentially ethical or moral demands? How and under what conditions can these expectations be aligned?”
London Business School Fellow, Jules Goddard, believes that Davos offers an opportunity to look atlarge-scale experiments in public policy. “Organised knowledge grows mainly as a result of carefully designed experiments. Indeed, experimentation could be said to be the hallmark of scientific progress,” he explains. “Why, therefore, is there such widespread reluctance by governments to conduct public experiments that have as their explicit purpose the testing of their most cherished assumptions and the policies based upon them? What if governments were to test alternative ways of funding higher education, regulating financial services, fighting urban crime, enhancing personal happiness, reducing the national debt and so on?”
“Top of my list would be the China imbalance,” says Tim Ambler, Honorary Senior Research Fellow. “China is becoming the world's factory and is, for the time being, only buying raw materials and services. In the long run China's exports will decline if the rest of the world cannot afford to import them because of the decline in our economies. We need a balance to maximise the economy of the world as a whole. China itself will benefit from restraint, balance and a faster growth of its domestic market.”