hello and welcome to the NCR leader Kass

series i am craig smith the NCR chair

professor of ethics and social

responsibility and we are joined today

by dr. klaus lai singer who is the CEO

of the nevada spacian for sustainable

development welcome dr. Lai singer thank

you nice to be here that's my saying you

are known for a long and distinguished

career as a champion of CSR in the

pharmaceutical industry can you say

something about what took you down that

particular path why CSR and why CSR

perhaps at a time when it wasn't so so

popular and in an industry where it

wasn't perhaps so warmly embraced well

first of all I did have an interest in

in ethics I thought it was from

philosophical point of view interesting

to analyze what people are doing on the

background of norms that have been

established through time and I was

growing up in the company in a time

where there was a lot of criticism of of

an anti-capitalistic nature the bigger a

company the more profitable a company

the more it was almost suspicion and

there were a lot of bad examples of

misbehavior of misconduct I was growing

up in a time a Yenta was elected

president in Chile and where ITT was

seen to have been instrumental to the

coup d'etat that happened by Pinochet

and as a student this was something that

I thought would be illegitimate so it

was a kind of an in-law interest on the

one hand but external factors that would

make an analysis of what's the right

behavior necessary and

and also good for companies if you look

back at that at that career was it a

good career choice I always had the

feeling I'm doing the right thing

it was intellectually stimulating it was

controversial so you could look at it

from different different angles and I

had the feeling that one could

contribute to a change of a business

model a lot of things that are natural

today were totally out of consideration

in in the 70s a lot of things that were

done with the best of intentions and

with a clear conscience

25 years ago are frowned upon today

which means that a lot of things that we

are doing today with good intentions

will be frowned upon in 10 years from

now so the question is is a company

better off if it reflects what it is

doing in the light of international

norms in the light of changing societal

expectations yes or no and I think the

answer is a no-brainer when you think of

corporate social responsibility today

what you see is the major challenges for

companies in the pharmaceutical industry

and more broadly who are looking to

embrace corporate social responsibility

there are two challenges one of the

challenges that today's societies have a

very high level of expectations of what

a company should be doing and it's not

the question the easy question is what

is legitimate and what is legal there

are countries that have a legislation

that is enforced or not enforced that

would make it legal that

fifteen-year-old girl is working for 60

hours in a blonde it's obvious that

might be legal in that conference

context it cannot be considered to be

legitimate so there is a gap between

local legality and international

legitimacy legitimacy based on

international norms so that is one area

the second area and I can give you

example here if you commit to the global

compact you also committed

to human rights principles and the human

rights principle basically say you

should support and endorse the human

rights as proclaimed by the

International Bill of Rights and you

should not become complicit if you look

at the Universal Declaration of Human

Rights you have for example article 25

that says there's a right to access to

medical care that a right to access to

medical care has been articulated by the

International Covenant to be the right

to the highest attainable standard of

physical and mental health what does

that mean for a pharmaceutical company

who has products that can help people to

live or to become healthy or to manage

disease in a situation where we have 2.5

billion people with a per capita income

of one or one dollar fifty per day

which by definition means that they will

never be able to afford any drug that is

researched developed manufactured in

Switzerland and sold in Swiss francs

from a purely economic point of view

we'd say tough luck you know we are

there to serve the customers who can pay

if this makes our living Society thinks

they're friendly so there are our issues

we are a normal human being as a private

person we would say for you know what's

the right thing to do where society

would expect companies to do things that

financial analysts would not expect

companies to do so there is a necessity

to reflect on what is the right thing to

do beyond legality and last sentence

here legality is something for the

courts for the legal courts legitimacy

is something that is for the court of

public opinion and if you look at the

court of public opinion the image that

the pharmaceutical industry has today is

not a good one and I'm not going to into

details I'm sure

saying obviously there is something we

are not doing right and I want to know

what that is and how it can be salvaged

just taking that pharmaceutical industry

example a little further this this issue

of access to medicines and particularly

perhaps access to essential medicine

here and the human rights that go go go

with that ostensibly what what some

people might say well you you do CSR to

the extent that there is a business case

for its that if if if only in the long

run you know this is going to be in the

economic best interest of the company

well what's your view on that on that

position it's very difficult to make a

final judgment on here I think Josh and

Margolis and his colleagues at Harvard

Business School have analyzed about 700

studies whether a good social

performance creates a good financial

performance and the result is probably

half of it says no it's not connected

and the other half says yes it is

connected but those where there is a

correlation you don't know whether the

good financial performance allows the

good total performance or whether the

good social performance break us the

good financial performance so I would I

would be hesitant to say there is a

clear business case except a company

that is reflecting norms societal

expectations ethics in the wider sense

is kind of doing a proactive issue

management it thinks from different

angles into a situation and reflects how

could that be perceived outside what is

it in the sense of congruence with our

own values what's the right thing to do

and the more you review reflect on that

the more you kind of act proactively you

don't have to wait until amid sense of

what your green pieces chained against

your factor

if you do the right reflections you will

find your vulnerabilities and your

opportunities that's one thing the

second thing is I hear from from my

colleagues at the human resources that a

lot of people a lot of good people make

their choice which company they are

going to work for on the base of do I

have an affinity with the values of that

company is that company in a value

corridor that I that I agreed to can i

fulfill can I live my personal values in

such a business environment and they on

that basis then make the decision to

join a company a over a company B I'm

not so sure some business ethics a sec

say that they would forego higher income

maybe some of them the third point here

is we have about 15 to 20 percent of

customers who if it is a me-too product

make that choice consciously I'm going

to buy from that company because of

ethical reasons at the end of the day

others don't so there are good arguments

in insurance policies so to say so

customers might care employees might

care and they may be good ultimately

business case reasons for doing CSR but

if you think of your career in the

pharmaceutical industry can you think of

specific examples where pharmaceutical

companies perhaps Novartis perhaps

others have put social responsibility

ahead of profit where they have done

something that is in the name of social

responsibility or is in some way

fulfilling a social or environmental

obligation that even with a long term

perspective could not be seen as likely

to to to be profitable and may even have

been

constituting some sort of economic loss

or diminution of profit well the short

answer is yes but let me first go one

step back if it would be such a simple

thing if you are responsible you are

more profitable we would not have a case

to sell because everybody would do it

because it's more profitable so

obviously there is not such a simple

correlation and my experience is that

the company that consciously reflects

let's say on the ten principles of the

global compact what exactly do we

understand if we comply with the to

human rights principle what exactly do

we think say if we comply with the

social principles then there is no free

lunch at the end you're going to invest

more in infrastructure or to pay more if

you pay living wage instead of

competitive wage nobody should tell me

that it doesn't cost anything and it's

profitable because then it would not be

controversial so having said that and I

said before there are some insurance

fees you pay through responsible

behavior and of course if you if you

think compliance is not necessary

think about where non-compliance has

brought some companies in the public

image and and and with punitive damages

but then they are calm there are

companies and there are corporate

leaders who make companies go well

beyond I'm working from Novartis

I think Novartis is one of these

companies last year the company has

spent 1.25 billion u.s. dollars on

access to medicine projects in the field

of malaria in the field of leprosy in

the field of leukemia we have pro bono

research in for poverty diseases in

Singapore we have the Novartis funded

for sustainable development and no but I

will at least me I cannot measure

because we are doing this we are better

off with regard through sales or with

regard to profit and

a lot of financial analysts or

shareholder for that matter could say

well these 1.25 billion basically money

that is spent out of the pocket of the

shareholders because the profit is

reduced by that so there are areas where

companies go beyond that I still do hope

that common sense prevails and that

civil society is making more difference

or judgments than they are making today

by looking at what our company doing and

what's the outcome and what's the impact

of what companies are doing but in my in

my experience it very much depends on

the top guy in this case Daniel Rosella

who is convinced that certain things are

the right thing to do and if they cost

something so be it and as long as we are

profitable and we can afford it proto

shoulders should carry more you know if

we would not be profitable or if we

would make losses then corporate

philanthropy in that case would not be

probably not be justifiable because you

could say you cannot on the one hand cut

jobs and on the other hand support

philanthropic things so you know there

must be a right balance between what you

do but but the whatever if we define

corporate let the corporate

responsibility as being living with

international norms while being

successful in your core competence then

it's good management to be responsible

to go beyond that might be excellence

and there I do hope that one gets

reputation capital for the good things

you do because otherwise it depends on

the values stands off the top management

and by definition sociologically we know

15 to 18 percent are willing to do such

things which means 85 percent are not

willing to do such things to take that

example to its logical conclusion

the and the argument that goes with it

you you mentioned a figure of 1.25

billion euros how much is enough is is

1.25 billion enough or is that too much

or perhaps it should be 2.5 billion or

more I cannot give you an answer you see

we have 2.5 billion people who live in

absolute poverty on the background of

this 1.25 billion dollars are not much

on the other hand it's 3 percent of our

turnover while the international

benchmark for what is Development

Assistance should be is 0.75 of of cross

national product so we are we are doing

much more how much is enough that very

much depends on your own value premises

I'm sure that if you ask people in the

company and I'm not pointing now but I

would say that if you ask people in the

finance department of the company they

would say about that on the very high

end and that if you ask people in the in

the foundation that people say well it

could be a little bit more the important

thing is that a company is making a

reliable tangible stand on we want to be

part of the solution of the access to

medicine problems and this is what we do

in our area I think at the end of the

day whatever you do as long as you are

able to explain why you are doing what

you're doing and where do does it stop

for what reasons you should be fine

so very much grounded in the values of

the people in the organisation let me

turn to the topic of mainstreaming

corporate responsibility I've just

published a book with with that title

and it argues that corporate

responsibility is something that needs

to be deeply embedded in the

organization affecting the day-to-day

operation of the business if we think

about the pharmaceutical industry how

embedded you think corporate

responsibility is in the industry and

what you see is potential challenges to

to embed in corporate responsibility

well first I think they are five six

seven companies in the world Novartis is

obviously one of them Merck is one of

them GlaxoSmithKline is one of them

Pfizer that are doing comparable things

and that have a strong commitment on

doing something for people who suffer

from failing markets or from lack of

purchasing power and I think that's the

right thing to do because they have the

means they have the product to solve a

problem that otherwise would cost lives

or or or enable people to live a normal

life so having said that this is on the

HLS a philanthropic side or social

investment side there are many other

things for the pharmaceutical industry

for example it would be under what

conditions are you making medical trials

let's say in a developing country

what is informed consent on the

conditions of poverty if you live in

South on India and have a per capita

income of $350 per year and if somebody

would offer you $1,000 to participate in

the medical trial is this still

voluntary of course it's not

and yet let's go one step further if any

pharmaceutical company has a product

against a serious disease and needs a

pediatric form you would have to do

medical trials with children in the

developing countries every student of

mine or every newspaper person will say

you know you must be joking you can do

that it's on the perceived list of

scholar of earthquakes

it's beyond six or seven and yet it has

to be done so under what conditions do

we have to do that that we can create

the transparency that makes it

legitimate so what can a company do to

embed it to mainstream it first of all

you need for the

personal sphere code of conduct what is

the behavior we want to happen what is

the behavior we do not tolerate and make

sure that the right kind of behavior is

rewarded and the wrong kind of behavior

is punished secondly make sure you have

copped responsibility guidelines for the

sensitive areas that's for example

health safety and environment that

certainly for label standards

that's probably for corruption that may

be for third third parties for supply

chain management and if you are very

very well advised you probably have kind

of an on boot function of business back

days officer where somebody in the

company who has evidence that in his

environment people work differently than

the company says through the codes of

conduct in the corporate guidelines that

they have something to talk about that

we have a a whistleblowing possibility

only if and when you create this

integrity compliance structure and if

you reward the right behavior and if you

if you punish the wrong give your so to

say meaning that in your performance

appraisal you do not only look as

somebody achieved the objectives but

also how has he or she achieved this

objective only then will this be taken

serious only then will it become part

and parcel of the normal management

procedure and everything break at the

end of the day that is mainstreamed has

to be part and parcel of the normal

management procedure if it is something

like the icing on the cake it will

happen in good times it will happen with

some people but I wouldn't be sure that

it happens all the time with all the

people so you know create a policy

structure a soft loss structure that you

treat as if it were external hard law

and do the compliance management make it

part of the of the performance

appraisals make it part of the bonus

system and then you can be pretty sure

you still have the GAO's district

and that means we have some geniuses and

some holy people and then we have some

unholy people and some idiots you know

this is la comédie humaine but if then

something happens to your company you

can at least prove that is not corporate

policy to do something wrong on the

contrary this is a human being that has

failed on the conditions that might vary

from case to case and it is important

that somebody who behaves morally in an

exceptional way doesn't have to be a

hero doesn't have to face resistance

doesn't have to be to be considered as

somebody who probably is a romantic that

doesn't really fit into our corporate

structure but that such people are

perceived to be the right people we want

in our company thinking about that that

process and state stakeholder engagement

an area where you've had a lot of

experience can you say something about

how going outside the company engaging

with stakeholders can inform what

companies should be doing in respective

corporate responsibilities thinking

thinking of the example you gave a

moment ago of testing drugs on children

in in developing countries the the

scenario we're familiar with from the

Constant Gardener film

how might stakeholder engagement inform

a pharmaceutical company honest

responsibilities in that sort of context

I'm very convinced that a company that

has a good stakeholder policy and has

regular dialogues with important

stakeholders is better off because they

have an early warning system of what is

changing with societal expectations what

is in the pipeline of of issues that

might be on your desk in two to three

years from now that's the first thing

the second thing is I think everybody

who participates in debates on what's

the right corporate behavior with regard

to a lot of issues we have on the table

is April to bring in an enlightened

private sector point of view that would

not become part of the debate if and

when companies would not participate in

such stakeholder dialogues and it is

obvious that a lot of things that we are

considering normal today let's look at

the Environmental Affairs as an example

the environmental debate started around

the Stockholm conference in 1974 out of

that came for example the green parties

in Europe and a lot of the early demands

of these green parties then were met

with resistance from cooperation we can

never tell you that if we do that we

will be go bankrupt we will have to

close down our Factory read respectively

we know this was resistance to the wrong

case and if you read the environment

reports of good companies today you

think you'll read the party program of

the green parties in the 70s and the 80s

so every change starts with small

committed minorities and it only gains

majorities over time so it makes sense

that you talk to people outside your

corporate silo because they have

different norms they have different

values they have different experience

they have different skills and it

enriches your perspective having said

that not everything outside the

corporate sector is by definition the

right thing or is good or it's desirable

I believe that we have the same

bell-shaped distribution of ethical

attitudes and of intelligence everywhere

in society so there are a lot of things

that might be desirable from a

particular point of view but not

prescriptive in the sense of everybody

should behave like this so you know

participating in dialogue listening to

people enriches your view pradhans your

horizons and enables you to make a

better decision but that decision does

not necessarily have to be in the

structure that this NGO or members of

civil society has been recommending to

you

how good do you think companies are

today at stakeholder engagement

companies in the pharmaceutical industry

or more generally my personal view is

there is a lot to do my personal

experiences companies that are in

trouble that have been caught on the

wrong foot that where there has been

corporate misconduct they want to have a

stakeholder dialogue just to mitigate

damage and the whole attitude is you

know let's do everything to get this

problem off the table that is legitimate

to get the problem of the table but it's

not the root of the problem that is to

be debated a company should and I mean

the top management is the best internal

and external advisors they can get

should reflect on what are the most

important stakes for ours in our

strategic interest if we think we want

where do we want to be in 10 to 15 years

what will be the major factors of

influence and what are the stakes in

that regard then secondly who are the

most credible stakeholders credible in

the sense of that they have deep

knowledge in the subject matter that

they are honest that they are

transparent that they are willing to

cooperate that they are reliable in the

sense of not telling you one thing if

you talk to them and telling something

else to the press once they leave the

room and then you know choose and say if

these are the stakes and these are the

stakeholders how are we going to start

up a dialogue over a long time not over

the next six weeks and you have a result

don't look at this as oriental bazaar

where you negotiate what's in the

shortest how much can we get out of them

and how little do we have to give for

our be able to give but what is in our

what's the target what's the objective

the stakeholders and us agree on and

what would be constructive positive

steps that brings us near to this and

then also delegate people from

top management to participate because a

lot of the decisions that are at stake

offer strategic importance of importance

of a dimension that cannot be decided by

somebody being delegated from the

communication department that person by

definition will not be able to do that

and if you have a dialogue you have you

ought to have people in this dialogue

who are able by the empowerment they

have been given from the company to make

statements the company later on is going

to stand by there is nothing more

eroding with regard to confidence than

if a company talks in the stakeholder if

delegates of a company talking is they

called or dialogue in one way and then

get home and run against the wall and

the company is turning away from that I

have once participated many years ago in

a stakeholder dialogue on green

biotechnology which was a three years

experience and at the beginning say

three years you must be joking this is

such a simple thing

no it's complex and it's contingent and

if you're not aware of the complexity

and contingency don't even go there

because they eat you up before you have

been sitting down the first year was

full of controversy every side wanted to

kind of go on record I know it better

and this is the field I'm covering and

who are you to say something different

in the second year people were starting

to listen to each other people were able

to say that's a point I have not been

thinking of or that's a priority I have

been seeing differently but now I

understand and in the third year one was

finding a compromise consensus that was

up to 80% and we even were able to then

say let's stick to the 80% and let's

take the 20% davian's in the sense of

make an addendum to the document that

says these are the points we could not

yet agree or not agree and everything

seemed to be fine

that then the people from civil society

from the companies from the different

parties had to go home and sell that to

their superiors at home but with their

bots or whatever it is and most of them

were then met with complete astonishment

in the sense of I was not sending you

they are to get a compromise on this I

was expecting you to defend the

fatherland more or less and what did we

learn from that if you if you mean

serious stakeholder dialogue you mean

you are willing to go on a learning

curve where you are willing to question

your own premises and if rational

arguments tell you to do so be able and

willing to change your position if you

are not willing or able to do that don't

go into stakeholder dialogues that are

on basic values and on basic norms and

for that stakeholder dialogues you need

members of the top management because at

the end of the day this is where these

decisions are taken and presumably

people with very particular talents if I

if we if I think of the rich account

you've given us today of the demands of

corporate social responsibility and the

sort of people that we need to do to

being engaged with it to to to go out

and meet with stakeholders to be willing

to have a two-way exchange the sort of

people we want to embed corporate

responsibilities what in terms of

professional development do you think

companies should be doing to to develop

the right sort of people who are CSR

specialists but also the rest of the

organization to bring them along with

that with that view of CSRs and embedded

activity these are two phases you need C

is our specialists you need people who

are able to communicate who know the

state of the art of the differ

shades of the debate to inform and

consult with the management what is the

spectrum of the discussion what are

empirically the the societal

expectations in different countries and

what's the corridor within which we

should be and that than that is the

basis upon which top management decides

on the code of contracts and the

guidelines and all these things now the

implementation is the mainstreaming is

everybody's job I mean once you have

decided this is the soft law we adhere

to everybody in every responsibility at

every place in the company has to abide

by it and otherwise he or she gets into

appropiate through performance

appraisals or beetroots through auditing

or compliance management so the

important part is at the end is at the

beginning it's also the top management

that sets the tone that gives the right

signals that lives that walks as it

talks because people in the company

always look upwards in the sense of you

know what's the role model I'm expected

to follow and once the homework is done

the mainstreaming should be a part of

normal life in the sense of people do

not have to make an ethical decision at

every deviation of the street but they

should know as long as I stay within

this corridor I'm on the right side dr.

Klaus line singer many thanks for

joining us today has been a very

insightful account of your career and

your many contributions to corporate

social responsibility thank you you're

welcome

you