You are here

Why every big firm needs a foreign minister

Businesses these days tend to get entangled in foreign ties between states.

MICROSOFT claimed a "win" in recent days when it asserted that it had thwarted Russian cyber attacks and data hacking against various US political organisations and US Senate offices. The episode underscores the apparently growing potential for businesses to become intertwined with foreign relations between states in sometimes thorny political, human rights, technological and/or legal issues.

The targets of the alleged attacks include a number of conservative think-tanks which had called for more US sanctions to be imposed on Moscow. And the disclosures come soon after the US government charged 12 Russian intelligence officers with hacking computer networks used by the Democratic Party and its 2016 presidential nominee Hillary Clinton.

The incident has secured significant media attention especially in the light of Microsoft's claim that "these and other attempts pose security threats to a broadening array of groups connected with both American political parties in the run-up to the 2018 elections". This is a politically very sensitive issue in Washington after the 2016 US presidential election, but Vladimir Putin's spokesman has denied any Russian involvement in the activities Microsoft has highlighted.

This drama is only the latest example of firms caught in political controversy in recent years. During the Egyptian revolution which overthrew Hosni Mubarak from power in 2011, some telecommunications companies for instance were forced by the regime to temporarily shut down their networks. Meanwhile, Google and Twitter collaborated on a "tweet to speak" programme which was used as a communications platform by some anti-Mubarak protestors.

sentifi.com

Market voices on:

Moreover, Google in 2013 unintentionally sparked a diplomatic row following its then-decision to change the name on its "Palestinian territories" homepage to "Palestine". The move, which Palestinian President Mahmoud Abbas reportedly called a "victory for Palestine and a step toward its liberation", provoked immediate complaint to the firm from Israel's then-deputy foreign minister Zeev Elkin. According to Mr Elkin, Google's action "pushes peace further away. . . and creates among the Palestinian leadership the illusion that in this manner they can achieve the result. Without direct negotiation with us, nothing will happen". An Israeli Foreign Ministry spokesman further asserted that "Google is not a diplomatic entity which begs the question why they are getting involved in international politics and on the controversial side".

POLITICAL SPOTLIGHT

In this complex (sometimes uncharted) territory, firms and indeed entire industries may find themselves under the political spotlight. For instance, Members of the European Parliament passed a resolution in 2010 following the disputed Iranian presidential election of 2009, calling on EU institutions immediately to "ban the export of surveillance technology by European companies to governments and countries such as Iran".

While this is not a wholly new phenomenon by any means, it nonetheless appears to be increasing in incidence and salience. Partly, this is driven by globalisation, and also the growth of key industries including new technology.

Yet, new technology firms are not alone in experiencing issues from working with diverse political authorities across the world. Indeed, internationally-focused companies in many other industries, ranging from energy and extractives, to fast moving consumer goods, have long been confronted with challenges too.

Of course, various international codes of conduct, including the UN Guiding Principles on Business and Human Rights already exist and reinforce the corporate social responsibility practices of individual firms. However, some of the most enlightened companies have recognised the need for a more decisive shift towards what has been termed strategic corporate foreign policy.

Corporate foreign policy aligns a firm's external affairs activity, including media relations, risk management, corporate social responsibility, government affairs, and operational planning, in a clear strategic framework. Recognising the need for an unusual mix of core competences in some of these corporate functions, capability can be enhanced where any gaps exist.

Other example areas of capability where firms occasionally have gaps include foresight and horizon scanning to anticipate and plan for social, economic and political opportunities and risks. Firms may also need clearer internal guidance for determining decision-making, protecting stakeholders (including customers), and/or remaining faithful to corporate values, especially in fast-moving, unpredictable, crisis situations.

The relentless march of globalisation, with the interconnections this brings, means that few international companies will escape these pressures completely. And, at the same time, owing to proliferation of media, and the influence of NGOs and related stakeholders, the actions of firms are increasingly under the microscope.

For those companies which are pro-active and invest in their capability, the prizes (both in terms of mitigating risk and seizing opportunity) are potentially ever more significant. Yet for those which are perceived to misstep, the fallout can be increasingly damaging, both reputationally and also for the financial bottom line.

  • The writer is an Associate at LSE IDEAS at the London School of Economics