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Globalization and the Corporation: New Challenges for Business Leaders

Globalization and the Corporation: New Challenges for Business Leaders

114th Annual Dinner Toronto Board of Trade - Speaking notes for presentation by Mr. Laurent Beaudoin, Chairman of the Board and of the Executive Committee. Source: Bombardier. Montreal. Toronto, January 21, 2002.

Mr. Ridabock - thank you for your kind words.

Minister Collenette, Mr. Flaherty, Mr. Mayor, distinguished guests, ladies and gentlemen, good evening.

It is a great honour for me to be the guest speaker at your annual dinner. When it came time to select a topic for my speech, I was reminded that for a dinner speech, one should select a light, preferably funny, topic. So, as I always listen to good advice, I decided to talk to you about... globalization! Not a light or very funny subject, except perhaps when some of the activists against globalization provide, without intending to, some humour to their cause. Here are a few examples: a French village of 610 people slapped a 100-percent tax on bottles of Coca-Cola sold in the village, all 24 of them sold every year, as retaliation for a tariff the United States had imposed on Roquefort cheese! When Canada imposed restrictions on the import of Brazilian beef, cows and oxen nicknamed Bombardier were paraded in the streets of Sao Paolo before being slaughtered.

But, no doubt that globalization is a serious subject. I just hope that what happened to a friend of mine a few months ago won't happen to me here tonight. He was giving a very thoughtful speech on an important topic when looking up from his speaking notes, he realized everyone had left, except for a single fellow. So, my friend said to him "you must be really interested in this topic." The fellow said, "Not really, sir, but I am the next speaker!"

Make no mistake about it; over the course of the last two years, we have witnessed the first manifestations of an all-out attack on corporations, on open markets, on free trade and more generally on capitalism. The tragic events of September 11th have shifted the focus away from the crowd of protesters against globalization but that will be short lived. Soon, they will find ways of making the evils of globalization somehow the true culprit for what happened on that fateful day.

What I'm proposing to do here tonight is share with you my attempts at understanding what's going on, share some of the conclusions I have reached and outline some suggestions for business leaders going forward. I wanted to understand what's behind the hooligans in gas mask, the smashing of McDonald's, the hatred of multinationals. To get a sense of the spread of this movement, just put the words "anti-globalization" and "protest" in any Internet search engine, it will produce some 10,400 entries, including more than a hundred web sites worldwide dedicated to the fight against the "evils" of globalization.

I have a great interest in this whole issue of the pros and cons of globalization, not because I have too much leisure time but because it is an issue of great importance for our company.

Please, believe me when I say that I do not come to this topic as a historian, philosopher, policy-maker or economist, although they all could shed light on a relevant part of this issue.

The historian would argue that not much is new under the sun, that societies have repeatedly gone through waves of free trade and protectionism. He or she may claim however that modern globalization does put pressure on the concept of the sovereign nation-state, the corner stone of world politics since the Treaty of Westphalia in 1648. The historian might also show how the Bretton Woods agreement of 1944 created a stable world order, which has been gradually eroded and then discarded.

The philosopher would probe the deeper meaning of this phenomenon, drawing our attention to what happened in this extraordinary decade of the 90's. Socialism died, or more accurately, went into a coma with the fall of the Berlin wall and the USSR. That left market capitalism as the victorious economic system, the only viable model for any society. But, too many forgot that markets and competition are not a free lunch, that innovation always pressures tradition. The 90's were years of remarkable innovation, particularly in the areas of communication and information.

Schumpeter famously stated that capitalism is an engine of creative destruction. Well, in the 90's we had Schumpeter on adrenaline.

It turned out that for many idealistic people, the global village seemed a mean, harsh place, brought to their comfortable home, courtesy of CNN, the Internet, etc. Youthful ideals and the quest for a better world must find some alternative model of society. At this time, the movement is still anti-something.

In a recent demonstration in London, someone was carrying a banner that read "Smash capitalism and replace it with something nice". They will soon find a label and a model for that "something nice" and you can bet it will be socialism in a new disguise.

The "policy-maker" would certainly discuss the whole issue of governance in supra-national institutions such as the WTO, the IMF, and the World Bank. For instance, what changes and reforms would make them more responsive, more democratic, more transparent? These institutions have been on the receiving end of the furious anger of activists who, quite unjustly, view these institutions as instrument of a vast conspiracy to foster the interest of corporations and rich countries, "a vehicle for corporate-led globalization". Policy makers would also point out that rich countries can indeed do more to open their markets to exports from developing countries, particularly in the areas of agriculture, textile, and clothing. That was a commitment made at the Uruguay round of multilateral trade negotiations about which virtually nothing was done.

The "economist" would marshal an impressive set of statistics to debunk many of the claims of these activists.

No, globalization has not increased inequality between and within nations. Worldwide income inequality has peaked in the 70's and has come down significantly since then.

Yes, in terms of economic growth, countries of the developing world that have opened their borders to trade and investment, have done more than twice as well as developed countries and almost five times better than those developing countries which have not.

Of course, the activists' response to this evidence is either "lies, damn lies and statistics" or "so what?" They will argue that GDP and growth statistics cannot account for what is essential to human happiness. How do you factor in the dislocation of communities, the stress of competition, the loss of tradition, the economic dependence on fickle markets? What's the point of more and cheaper consumption of goods if you're miserable? The "economist" might reply that in fact, those damn statistics do correlate quite strongly with measures of well-being particularly among the least privileged.

These are all fascinating points of view on a complex issue but my own take on it is that of a business leader, of the chairman of a company which operates in 24 countries and 19 languages, from Mexico to Poland, from China to Northern Ireland.

I suppose that makes Bombardier one of those multinational or transnational companies which are, so goes the slogan of the activists, about to complete a "silent take-over" of the world economy. From their perspective, our company must be one of the "lords of the universe, more powerful than nation states"! Needless to say, I don't recognize our company in any of the above, as I am sure no business leader here tonight would.

Let me illustrate how, at Bombardier, we have experienced the gradual expansion of our company into different countries and how we see our role in contributing to the welfare of those countries.

Not because our company is a welfare agency, it is not; but because the very interest of Bombardier calls upon us to be a good corporate citizen, to enhance and protect our reputation as an excellent employer and a fair buyer of goods and services.

Our company grew globally mainly through acquisitions. Our approach to acquisitions is to seek strategic synergies and invest for future opportunities. We thrive on openness and diversity. We work with the existing management in place and once the overall operating strategy has been agreed upon, we give them the freedom to get on with the job.

Today, forty percent of our employees are based in Europe, a base of expertise we listen to and learn from. As a result we are, in many ways, perhaps the most European of North American companies! Yet, in addition to our Canadian stronghold, we also have a large presence in the US, with manufacturing and service facilities in 15 states and over 15,000 employees in 43 states, so that it is equally true to say that we are the most North American of European companies!

We have always remained true to our roots and our values, no matter in which countries we operate, no matter how many cultures we have embraced, no matter how many languages we have added to the mix. And we have always integrated the knowledge and skills of the companies we have acquired to help us gain that leadership position. Beginning with the first acquisition in 1970 in Austria for the Rotax engines up to the most recent one - Adtranz in Germany - and with many acquisitions, such as Learjet, in between Bombardier has created value for the countries we are in as well as for our own company.

Our international expansion has served us well but has also been of value to our adopted countries.

For instance, in 1992, we bought Concarril, a railway equipment manufacturer, from the Mexican government. Our motivation was simple. We recognized that Mexico was rapidly industrializing and that the country's transit infrastructure would need revitalization. We believed the acquisition of a Mexican railcar manufacturer would give us an edge in supplying that market and eventually Latin America.

Our investment in people and facilities has resulted in the Mexican facility being a centre of excellence and a model of productivity - and cleanliness!

The workforce has risen from a few hundred to as high as 2,000 people. Some of our Mexican employees are now in management positions in Bombardier around the world.

Bombardier has helped create new jobs, improve working conditions and provide employment mobility to Mexicans...despite the fact we have yet to fulfill a single major contract for that market since the acquisition!

Nevertheless, we have gained. We have obtained a new Mexican-based export business that has added to our performance and helped us achieve our number one position in the transportation industry. The skills we helped our Mexican workers acquire have resulted in the development of a workforce that we value very highly.

What has made all that possible has been our ability to transfer the expertise we have developed in many countries - including Canada - and our ability to design and manufacture standard products in one country - Mexico in this case - and sell them to other countries, such as the United States.

That is globalization as a win-win solution. But host countries must do their part. Mexican President Vicente Fox understands that well. He said recently:

"We are convinced that globalization is good and it's good when you do your homework...keep your fundamentals in line on the economy, build up high levels of education, respect the rule of law....When you do your part, we are convinced that you get the benefit."

President Fox has it right. What's most important to us in deploying our activities is the legal framework and respect for the rule of law in countries where we choose to operate. We have no influences on government policies and practices. We are only free to invest or not invest in a particular country.

While globalization does result in the standardization of products and processes, it certainly does not result in the standardization of people!

People are not interchangeable cogs. They bring different values and motivations to the workplace and this diversity doesn't impede operations but serves to enhance their effectiveness.

For us, globalization is not about crushing individual characteristics but about harmonizing them. There is no other possible alternative that we could live with - given that Bombardier is a company that was founded and nurtured on entrepreneurship and innovation and given that this spirit continues to define our corporate personality.

Bombardier has greatly benefited from its interactions with different cultures around the world and is deeply committed to opening global markets to the transfer of technology, production skills, products and services.

Let me illustrate that with another example of our international experience. Perhaps, the one of which we are most proud.

In 1989, Bombardier acquired the aerospace manufacturing operations of publicly owned Short Brothers in Northern Ireland. Shorts was a classic case of lack of investment under government ownership.

The facilities were so outdated and the aircraft technologies so underfunded that it would never have been possible to make the operation competitive. Under our leadership, millions of dollars were poured into the plant to completely modernize it and Shorts was made a full partner in the development of our regional jet and in the production of major components. The end result was a major boost to productivity.

We are proud that Shorts today is an economic success both for Northern Ireland's economy and for our own performance. In 1989, there were 5,000 jobs at risk at Shorts - today 7,000 people are employed there.

Our Irish employees have achieved these results. True to our management style, the operations were left in the hands of the existing and capable management. In fact, one of the great assets we found in Shorts was a highly educated and trained workforce. Indeed, a number of our most senior managers in Montréal and throughout our global operations are coming out of the Belfast operations.

But there is another reason I highlight our Belfast experience. We are all aware of the tragic consequences of the centuries-old conflict between Catholics and Protestants in Ireland. Bombardier faced this issue head-on.

We took immediate steps to turn our plant into a "neutral ground" where our employees could leave their grievances at the gate. Bombardier's commitment to employment equity significantly increased the proportion of Catholics in our Belfast workforce.

But still we felt we needed to do more. When we opened a new training facility in Belfast we deliberately located it in a predominantly Catholic neighbourhood. That way we could encourage an even greater degree of "inclusion" among our workers. In a small but significant way, we made a contribution to improving the community environment.

What conclusions and suggestions do I draw from our experience and what is shaping as the next battleground for and against the business corporation? Let me sketch three recommendations.

First, let's not make the mistake of dismissing those dissenters and protesters as merely young people on a rampage, incoherent, misinformed and misguided. Indeed, these activists are a mixture of people and groups with divergent interests, ranging from idealistic to opportunistic. However, they may be asking relevant questions, even if their answers are ill advised, even counter-productive; but the questions they raise won't go away. For instance, should the flow of international capital be regulated and how? Knowledgeable people such as George Soros and Felix Rohatyn clearly think we should. What should developed countries change in their trade policies to facilitate exports from developing countries? How do we protect national cultures from the bulldozer of global media? As one critic recently stated, we already have movies and TV programs coming out of Hollywood and largely targeted at demented seventeen-year-old, which are shaping young peoples' values worldwide. Let's not make it too easy for global media companies to homogenize national cultures and diversity.

Two, we must debate the anti-globalization activists, bring facts and figures to make our case. We should not let wrong or misleading statements stand unchallenged. Business people must therefore support think tanks and business association such as this Board of the Trade, the Conference Board, the C.D. Howe Institute, the Fraser Institute, to provide the facts and participate in the public debates on these issues.

However, as a veteran of Québec referenda on sovereignty, I have learned that we can win all battles of facts and statistics and almost lose the war. Young people, children of the global media age, troubled by the misery and poverty of much of the world, worried about the environment, will not be swayed by cold statistics. We must speak to their hearts as well as to their minds.

Third, business leaders of highly visible corporations must be beyond reproach in their dealings with governments and civil societies where they have operations. We must let the world know that we do good by our activities in different parts of the world, that we are not the problem but part of the solution.

Corporations are, or should be, socially responsible, not out of philanthropic impulse, but because it is in their long-term interest.

Responsible business leaders should also be prepared to point the finger at corporations which, in their misguided pursuit of short-term interests, behave improperly. The sins of the few can tar all of us.

I have tried this evening to demonstrate the intensity with which the people of Bombardier believe that such practices are the "right" way to do business. I believe our record demonstrates that we have, at the same time, generated value for our shareholders.

Canadian companies have earned a valuable international reputation. We must ensure that globalization is, and is seen as, a positive force. We have the responsibility to make a difference and contribute to the economic and social well-being of every country in which we have invested.

Merging globalization and social responsibility is how we will make our world a better place.

I am reminded now of this English lord who said "I don't mind so much if people look at their watch during my speech, but I get very worried when they start shaking it to see if it still works."

Thank you and good evening!

 

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Directeur de la publication : Joël-François Dumont
Comité de rédaction : Jacques de Lestapis, Hugues Dumont, François de Vries (Bruxelles), Hans-Ulrich Helfer (Suisse), Michael Hellerforth (Allemagne).
Comité militaire : VAE Guy Labouérie (†), GAA François Mermet (2S), CF Patrice Théry (Asie).

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