Honorees: The Honorable Simão Jatene, Governor of the State of Pará, Brazil (represented by Vice-Governor Helenilson Pontes); Paul Polman, CEO of Unilever; and the Honorable Ngozi Okonjo-Iweala, Minister of Finance of Nigeria
Other Speaker: Peggy Dulany, Chair of Synergos
PEGGY DULANY: Good evening, everybody. For those of you I haven’t yet had a chance to greet personally, I look forward to that after this plenary session. And thank you, Bob. Thank you for everything, Bob.
The award that we’re gathered here tonight to give out is called the David Rockefeller Bridging Leadership Award. It’s named after my father, who is about to turn 99 and who has inspired me and the work of Synergos, and many other people including, I think, some of you in this room. This is the first University for a Night that he hasn’t been able to be with us. I was with him just before coming. He had hip surgery a week ago. He’s recovering amazingly well and he said to tell you that he’s with you in spirit and that he plans to be here next year. And I bet he will.
The award recognizes leadership that brings together people and groups that otherwise might not work together so well, in order to improve our societies and the world. And we’re very fortunate this year to have three honorees who exemplify this approach, and are also real systems thinkers, finding new ways to address major challenges. I’m going to give the awards one by one. Their bios are in your programs, so I’ll be very brief in introducing them. The first award is going to Simão Jatene, governor of the state of Pará, Brazil. We’ve chosen to honor Governor Jatene because of a partnership he’s launched to improve the quality of education in his state over the next five years. The partnership has Brazilian companies, parents, educators and government at all levels, working in new ways to directly benefit more than 2 million children. We’ve been working closely with the governor and he is a pleasure to work with.
Unfortunately, however, due to a sudden emergency he’s not able to be with us today. But we’re very grateful to Vice Governor Pontes, who is joining us in his stead. Vice Governor Pontes, would you please join me on the stage?
HELENILSON PONTES: Good afternoon.
This recognition is a demonstration that Governor Simão Jatene is on the right track in choosing as his greatest adversaries poverty and social inequality, against which quality public education is the greatest weapon. The Pact for Education, created by Governor Simão Jatene, is an effort led by the state governments and includes the integration of different sectors and levels of government, educational institutions, civil society, the private sector, and international organizations. The Pact for Education aims to encourage improvements in the quality of education in Pará and thus make the state a national reference in transforming the quality of public education. Our major goal is to increase by 30%, the Basic Education Development Index at all levels.
To achieve this goal, Governor Jatene is bringing together all sectors of society in the fights to improve the quality of our education, the state government, companies, universities, foundations, and especially the community itself are the agents of this revolution.
Finally I would like to invite you to join us in the Pact for Education and for more just and less unequal world. On behalf of Governor Simão Jatene, I would like to thank you for receiving the prize and share it with all those who believe in education as the best means of building a more just and happy world.
Thank you so much.
[APPLAUSE]
DULANY: Our next honoree is Paul Polman, CEO of Unilever.
Unilever is a company with which Synergos has a long history. It played a key role in an effort we started together almost ten years ago to create a highly successful business-government-civil society partnership to address child malnutrition in India, the result of which brought severe child malnutrition down in the state of Maharashtra from 39 to 23% over a period of six years.
Since becoming CEO, Paul Polman has pushed the company to become an even greater example of sustainability, working to break the connection between growing profits and its environmental footprint, all the while improving the lives of people along its value chain.
Paul, would you please join me on stage?
PAUL POLMAN: Thank you Peggy and thank you Bob, and obviously thanks also to David, who isn’t here. I certainly will take this award to 170,000 wonderful employees that we have, that are all leaders that make our vision come alive, and to make this a better world for all.
But I’m also very pleased that I’m here at the same time with my friend Ngozi. It’s a real honor for me to be recognized at the same time as you are because you really deserve it, and we are the warm-up act before you come up. I had the pleasure to be with Ngozi on the UN High Level Panel on the Future of the Global Development Agenda for a year and a half on now on the B Team and some of the other things are working on. She’s truly a remarkable lady, but I also looked at some of the previous people that you recognized. People like Kofi Annan, who we work with on agriculture. And Bill and Melinda Gates, on sanitation. Richard Branson now, with the B team and then obviously Mrs. Sirleaf of Liberia who was one of the co-chairs of the Panel.
There is an African proverb that says “If you want to go fast, you go alone. If you want to go far, you go together.”
I think Synergos understands that better than anybody else. The issues that we face today in the world of poverty, of climate change, of hunger, of water shortage, of rights to education, and many of the other ones are simply too big for any of the individual partners to solve by themselves. We really need to have these new forms of partnership that you understand very well and you should be applauded for that.
I just came to New York, but I was at the UN because this year is a very important year, where we need to try to finalize the post-2015 development goals, as well as the climate change agreements, and it’s not surprising that they come together at the same time. This is still a world where too many people are excluded, and that is a world that isn’t in equilibrium until we solve that. So unless we can get to a more sustainable and equitable growth, we will not rest, and I’m very glad that we can be part of that.
I just came back from the Philippines with my wife, where we toured parts of the country and obviously the devastating effects of Typhoon Haiyan are still very visible. It’s very clear that what is happening to this world - it’s the poor people that suffer more and if anything,
I want to dedicate to this recognition to them because they couldn’t be here tonight. And it’s certainly worth it for us to fight for them. It was Gandhi who said that what you do in the future depends on what you’re going to do now, so thank you very much.
[APPLAUSE]
DULANY: And next as Paul said, we have a major act to follow.
Minister Ngozi Okonjo-Iweala, who has demonstrated tremendous leadership on development, not only in Nigeria but also in Africa and also globally. She’s been a force for real South-South sharing of ideas on overcoming poverty and improving people’s lives. Today as Minister of Finance of Nigeria, she is striving to improve transparency and promote broad-based economic growth in one of the most dynamic economies of the world.
May I invite you, Minister Ngozi, to join us on stage.
NGOZI OKONJO-IWEALA: Thank you very much.
It is such an honor to be up here tonight. I want to first congratulate my fellow honorees. The governor from Brazil, and Paul, my good friend and co-conspirator in much of the work we try to do to try to change the world in poverty issues. His leadership in running a company that really cares about sustainability is acknowledged everywhere.
I’m really grateful to Synergos and to Peggy Dulany in particular, and to David de Ferranti sitting here somewhere, an old friend of mine who has tirelessly supported me in many of the things that I’ve been doing. I think that it’s wonderful to look at the goal of this organization: improving the livelihoods of the poorest people in the world, and eradicating poverty. When you’re miles away from that poverty, you really do not have to do it. I think this is a truly noble goal and I want to salute you. I want to thank you. And I want to say that we in Nigeria share this.
We are one of those countries that have this reality day after day of having a large number of poor people, and even though yesterday we had the historic honor of better measuring our economy so that Nigeria is now the largest economy in Africa with a GDP of $510 billion (twice the size we thought), we still have the challenge of millions of poor people. The challenge of inequality, and the challenge of creating jobs, and we know we cannot solve this unless we pursue the same kind of path that Synergos just outlined: working with individuals, working with communities, bringing the private sector in, and creating viable partnerships that will literally lift people out of poverty and improve their livelihoods.
It matters that Nigeria should do this, it matters in Africa, it matters for the globe. I want to show you that our president has given every support for us to embark on this path.
So I want to thank you, to say that I accept this award humbly on behalf of the people of Nigeria, especially the poor people who are not here today as Paul said, to witness the phenomenon of so many people they do not know caring for them.
Thank you so much.
[APPLAUSE]
DULANY: This is an opportunity for the three of us to have a conversation and the conversation will probably vary pretty widely, but I wanted to start with the issue of leadership. We at Synergos believe very strongly that in addition to partnerships that bring people together, that it is the leadership within every sector and every level of society, that makes it possible for people to work together.
So maybe starting with the minister, I’d like to ask how you arrived at your style of leadership and how would you characterize it?
OKONJO-IWEALA: Thank you very much and I think that leadership is a privilege and honor. I’m not sure that as a person, I set out to be a leader, but I think that as I went through school and through my life, I was often thrust in positions where you needed to set an example.
My leadership style is really to lead from the front. I believe that you should practice what you preach and you should be an example of what you’re trying to accomplish, as much as possible. It’s a very frank, up front, straight ahead type of leadership, but it’s also a leadership that recognizes the very complexity that the world has become now. And in many cases you cannot accomplish thing, as you said, unless you are also a partner, unless you can lead peers, unless you can convince the younger people that you’re really sincere. They look for sincerity, they look for truth, they look for transparency. So some of those things are attributes that a leader needs to practice and I tried to approach my leadership from there.
DULANY: Thank you. Paul, would you answer the same question and maybe talk about some of your prior experiences that led you to determine your own style?
POLMAN: You always find that the hardest question is the one where you have to talk about yourself, so I always say to ask the people around what they think is useful, is better, than having me explain it to you.
I think the first thing as a leader, as you mentioned, is that you need to be a human being and feel good about who you are. Knowing yourself a little bit helps. I’m very blessed, for a company of this size, to have a lot of leaders around me. So I learn from them and my job has become relatively simple, which is basically focusing on making them become successful.
I don’t believe in the ten tips of leadership, but what is very clear is that you have to be a little bit engaged with what is going on in the world more so now than ever. People call it authentic leadership or purpose-driven leadership. If you are not driven by a little bit of a stronger inner compass in the financial markets in the short term, it just doesn’t work anymore. I come from an upbringing that we always cared a little more about other things. I’m a product of being born just after World War II - I’ve seen my parents fight for a better future and focus on what you call the common good.
I think it’s our duty to do the same thing in the fortunate position that we’re in.
As a company we’re working on the leadership for 2020 because the world is changing quite dramatically. You alluded to it before, Peggy: we need people that are more systemic thinkers. It’s very difficult, the complexities of these issues. We need people that understand them, have a certain level of engagement and can boil it down into specific action. Unfortunately there are not many of them with more high levels of integrity.
And then I think humanity and humility are not such bad things after all.
DULANY: I agree with that, and it’s a fairly rare commodity. Maybe I can follow that up with one more question, because it’s not so easy to convince shareholders that taking an approach that isn’t necessarily automatically connected to the quarterly bottom line is the right approach. And so I’m wondering, this is following up on the leadership question, how you’ve been able to convince your shareholders, your employees, and your consumers that this is the right way to go?
POLMAN: The forces are not always with you, but increasingly they are actually and I think we’re closer to a tipping point than perhaps we realize right now. What is happening right now is I think we’re getting to a point - be it on climate change, be it on inequality - that people increasingly are starting to realize that we need to do things differently. Coming out of the 2007-2008 crisis if you call it that way, the people have realized that we’ve done incredibly well by lifting so many people out of poverty - 500 million over the last 20 or 30 years - but at the same time people realize that we’ve left too many behind.
The way that we were growing was enormous levels of debt government-wise, private debt, overconsumption. It’s just not a system that’s in equilibrium and I think a lot of businesspeople understand that as well because if the systems are not in equilibrium, and you increasingly see that being rejected, it’s not good for business.
The other thing that helps us is we’re getting to a point that the cost of inaction, in my opinion, is starting to exceed the cost of action, and that is very appealing to business communities.
So the financial community is starting to understand that. What we did as a company, we stopped giving quarterly reporting, we stopped giving guidance, we changed our compensation system. And that was very important in the beginning because we wanted to send the signal that business has to be done for the long term.
We also made very clear that we were there for a purpose to serve society, and then the shareholder would benefit. We were not there [just] for the shareholders’ benefit. That is a result of what we do. We’ve been very vocal about that, and I hear more and more business people talk about that. That sent a clear signal to our employees of what we were planning to do, it sent a clear signal to the market, and also to our partners in the value chain.
Increasingly there is evidence that if you don’t do your quarterly reporting, the discussions with the investor community are a little bit more mature and long-term. You tend to attract longer-term investors. So we see that actually happening to the positive side.
We’ve never questioned the fact that we also need to perform. But increasingly our model - which basically is decoupling our growth from environmental impact and improving social impact - has many things that are appealing to a broad group of investors. It is less risky if you take costs out of the system, your innovations have to be at a higher level, so you tend to be more correct and do things better. Increasingly we’re able to communicate these positives and win over people. And I think there is a significant group of the investor community, big enough for our company, that does care. Those are the ones that we’re trying to attract.
Unfortunately as a last sentence of many of the CEOs I think spent too much time catering to the current shareholder base. We spend a disproportionate amount of time toward the shareholders base that we think would be more in line with our business model. I discovered naively when I became CEO five years ago and this was my first job and I’m still learning, that it was easier to disinfect shareholders than to attract new ones.
But I’m in a reasonable shape now after five years.
[LAUGHTER]
DULANY: Great. Congratulations.
Minister, the voices of poor communities and poor people are often ignored by more powerful actors, even when those actors have the best of intentions. How can we make development more inclusive and what have you been able to do in your own government to include the people of Nigeria in the development that’s been so rapid and so extraordinary?
OKONJO-IWEALA: Thank you very much. I have to say that it’s a real challenge, the inclusion of poor people in development and we have a history of having grown rapidly, but growing with inequality, so the quality of the growth in the country is what we really need to focus on.
I think the biggest way to include the voice of poor people that we found is really through being a real democracy. I see now that Nigeria was a country that for four decades, was under military rule. Since 1999 we’ve had a functioning democracy and it’s become even more so with the recent formation of a very strong opposition party. So that has also put the ruling party on its toes. And I think getting the voices of people through their elected representatives is certainly one way, but it’s not always the foolproof way.
And what we are learning is that really in trying to make change, we have to work very concretely at three or four levels. One is in my country which is fairly large - 170 million people, 36 states, and a federal capital territory, 774 local governments and so many communities and wards - that we’ve got to get a partnership going between the federal government, the state government, the local government, and even the communities. In order to make change, if we don’t have all four coming together then it’s very difficult to evolve.
The good side of the equation is that Nigeria is a country where traditionally we’ve got associations in villages - associations women, of man, traditional associations that group together to try to accomplish things. So we’ve also found as a government that in trying to set up programs trying to involve those associations, giving them a voice in what we’re trying to do is another effective way of reaching them.
Do we have it all sorted and solved? I don’t think so. There are communities where you could use more of a voice. One of those voices is the voice of women. Women often give you the authentic feel for what is going on down on the ground, and so trying to get women more empowered and involved in programs is certainly another method through which we’re trying to give voice to the people.
Lastly we are finding a very interesting challenge: our youth are increasingly on the internet and this has really empowered them. Because whether you want it or not, they give voice to what they want government to do, and what they want the people to do, through the medium of engaging on the internet, on Twitter, on all the social media. And this can be sometimes a force for the good, mostly it is, and sometimes it’s a challenge.
DULANY: I can imagine.
POLMAN: It’s because they’re young.
[LAUGHTER]
DULANY: Maybe I can follow that up with another question, because you mentioned including state government and local government and even communities. What do you see is the role of the business sector and investors and also the civil society in Nigeria?
OKONJO-IWEALA: We think the role of the private sector and civil society are really key. The private sector we’ve acknowledged as a government, particularly this government. You have a president that is very friendly to the private sector to the extent of bringing them into the economic management team that does the thinking and the work for the economy. We have private-sector members, because of acknowledgment that government does sometimes cannot run certain of the services we are supposed to run.
Take the power sector, which is quite a strong gap in in our country. We’ve privatized all our assets except distribution and sold them off to the private sector in one of the most transparent deals - acknowledging that over the years we have not been very competent to do that.
We believe that the biggest thing we need to do in creating jobs, government of course cannot do it alone. We need the private sector to do that. We need to create 1.8 million jobs a year in Nigeria for new entrants. At the moment we are creating 1.6 million, so we’re still short of our goal. Without private sector involvement in creating jobs, in helping us deliver services, this dynamic growth that you have seen now cannot be sustained.
We also believe that to reach and include more people we need to partner with the private sector. I’ll just give you one example. It’s very difficult to have targeted social programs in my country because people do not have the identity cards or information that will enable you to sort out who is the truly poor from who is not. So we launched a partnership to set up an identity card system, and we launched it with MasterCard. We thought that we would do well with a pilot affecting 13 million young people, a big pilot, one of the biggest - the pilot is as large as some countries.
[LAUGHTER]
OKONJO-IWEALA: And we are loading on the MasterCard an e-wallet so people can make payments and include it in the financial services. So this is also the way that we are working with the private sector.
Now with civil society we strongly believe that a country or a nation that does not have that voice of civil society working cannot be a truly functioning nation. You need to have that voice, you need to have the criticism, you need the partnership to deliver services. It is not always private sector can do it or government. And civil society comes in.
So in Nigeria you have a very vibrant civil society and all we want from civil society, sometimes we joke that, you know, we don’t want NGIs - nongovernmental individuals...
[LAUGHTER]
OKONJO-IWEALA: ...we want true NGOs - nongovernmental organizations. So once we have those we believe they should be a voice for constructive criticism, and for delivery of services.
DULANY: Thank you.
Paul, you interestingly described Unilever as the world’s largest NGO and I was wondering in that capacity, whether you have any advice on how civil society and business can collaborate with government to fulfill the social mission that you’ve described.
POLMAN: Well, that statement came from when I was with my friend Muhammad Yunus in one of the panels [we were on] and he claimed to be the biggest NGO and I made clear to him that I wasn’t government either…
[LAUGHTER]
POLMAN: …and so the definition of nongovernmental organization also fit our company very well.
Seriously if you think that all your brands need to be to the service of society - and we really mean this when we bring Lifebuoy out there, it is to fight the infectious diseases. There are still four million children under the age of five die every year, or when we bring our food products to fight the stunting when you have a 160 million people stunting.
Or with our toilet cleaner brands it’s to fight against the open defecation when you have 1 billion people, or food security issues where you still have 860 million people still going to bed hungry.
All these things are enormous market opportunities, believe it or not. If your brands actually provide the solutions, society will accept you. But you cannot do it alone. Often you deal with a group of the population that this is difficult to be accessed in a reasonable way. Or companies don’t have necessarily that capacity [to reach them]. So you need to work together in these partnerships to achieve that. Increasingly we’re getting these partnerships established. Be it with governments, be it with civil society, And we need everybody there. I’m not in the camp of saying that this is the responsibility of one or other; this is all of our responsibilities to solve it.
Now I think we’re entering a period where, if you want to be realistic, that the political environment globally is very difficult. The reasons you don’t get climate change agreements or any of the other things such as a watered-down Rio agreement is that if you have now 193 or 200 governments in the room, it’s not a pretty picture. Probably if we were to run our company on every decision with 200 people in the room it wouldn’t be a pretty picture either.
But it’s clear that the economic process has become more short-term, and Ngozi was already alluding to that, and has become a little bit more internally focused. Our institutions, our global governance hasn’t really adjusted to an incredibly interdependent world. And that’s why you see the Syrias and all these things becoming so publicized on television without us taking any action.
So I think we’re going into a period of probably the next ten or fifteen years, where more of the initiative has to come from the private sector, who, quicker will see in their own P&Ls, the effect of dysfunction. A company like Unilever has three of four hundred million euros extra cost now already because of climate change. The cost in the US because of the hurricane Sandies or the shipping routes to the Philippines or the floods in the UK, they all cost money. And what you see is a period probably in the next ten or fifteen years, businesses will take these initiatives and even more so than governments, and then form coalitions around. But you do need these governments. You need these frameworks. And you do need civil society I think, to be sure that it’s all done in the wishes and to the benefits of the people we’re trying to serve, and these coalitions have been happening in an increasing amount.
DULANY: Can you give an example of one…?
POLMAN: I’m very happy to do that on many different fronts
One of the things we are passionate about - and Jeff Horowitz is here in the audience - is the Tropical Forest Alliance we have created. I see Jeff sitting there. It’s very clear that the world has a problem with deforestation which is 15% of global warming so it’s a big issue. 30% of the world’s forests are gone, 20% of the land is degraded. Half of the deforestation is actually driven by the demand for food. As we’ve lifted people out of poverty people going into the middle class, changing their dietary habits, enormous demands on food so if your partly a food company like ours, you have to take core responsibility.
So we created a forum, the Consumer Goods Forum of the biggest retailers and manufacturers, such as Walmart included in the US and many others, Kroger and many that you know - the Cokes and the Krafts and other companies. We said by 2020 we’re not going to sell any products anymore that come from what I would call illegal deforestation. So you talk about soy, pulp, palm oil, beef and the many other of these commodities. That sends enormous signal up the supply chain.
In our case palm oil is a big ingredient we use. We’re working with Indonesians, Malaysians, the growers - and what you find if you bring the right group of people together - about 30 or not more is actually needed - and you get to a tipping point.
One of the biggest palm oil growers is Walmart - about 45% of the palm oil market. We got them to agree on no deforestation, carbon capture, and then actually livelihoods is very important. This is galvanizing the industry. Others are coming in. So that’s an example of tipping points.
Food security in Africa- we’re working now on the Grow Africa or the New Vision for Africa. One of the projects in Nigeria on cassava.
Bringing coalitions together across the whole value chain starting with the smallholder farmer to creating livelihoods and doing that in a sustainable way. Bringing in things like nutrition at the same time. Then you discover indeed it is about women, it is about land rights so these issues come in. Then it’s not only about food, it’s about nutrition, so you get into those things and the circle enlargers. And if business is not an active part of this, this issue simply will not be solved.
Philanthropic organizations or money coming from the private sector now far outweighs the overseas development aid which frankly has given a limited level of return. So that’s the real thing we have to change.
DULANY: Thank you.
You just mentioned philanthropy and we were talking before that you founded the Nigerian Philanthropy Forum. I wonder if you could comment what role you see philanthropy playing in Nigeria and in your experience around the world. We have here many members of the Global Philanthropist Circle and I’m sure they’d be very interested in your answer.
OKONJO-IWEALA: Thank you very much Peggy. I really do think that that while it’s changing so much in terms of the actors in this space - in the financial space and the capacity-building space for development, especially for sustainable development and philanthropy is becoming ever more important. I think you’ve been with philanthropy here in the U.S. and other parts of the world may be much longer.
We’ve found that in our country too and in many African countries you have people who have recently become wealthy, millionaires and billionaires, who also want to give back. But [the issue is] the way to do it. We found them working in pockets: doing good but from our estimate when we stand back, the totality of what they’re doing is not really being felt. You have companies, some with foundations, you know -Shell, Unilever, ExxonMobil, the big companies.
But then you have families and individuals - the Tony Elumelu Foundation, the Dangote Foundation, the TY Danjuma Foundation. These are people who have made money in business and have become millionaires and billionaires and they want to help. So when we look strategically we found that what they were doing even though good, was not strategic, was not maybe fitting into the space where government was absent. That led to the idea of why don’t we bring these philanthropists together into a philanthropy forum where we could just share with them where we thought that government was deficient or there were gaps and where we thought strategically they could fit in. Not just now but thinking through to the future. And then see how their interests - because it’s their money, it’s their time, it’s their vision for the organization - how would those interests fit into this space.
It was a very interesting meeting, this first forum. We actually have only had one, about 35 people in the room both from organizations - the companies I spoke about as well as these foundations. And they found it very, very useful because when you are a small foundation or philanthropic organization, you have a sense at an individual level that you’ve made an impact on someone’s life, a family’s life, but overall are you really having that kind of result systemically that you would like to have. So many of them were grateful to see that the government had taken the trouble...you know we hired McKinsey to try and help us of course….
[LAUGHTER]
OKONJO-IWEALA: …to try and scope out where these spaces were where that we thought it could fit. In education: we have great difficulty in our education system and we’re trying to change. What are the gaps and where can people work? In the health area - very popular with many organizations - where can they work.
And so I think the advice that I would have is that if you’re a small foundation you can still make a difference if you can find that missing gap between what the government is trying to deliver and what you’re doing. Or if you can enhance what is already underway and be part of it. But working in isolation is probably not an option these days.
POLMAN: Yes, because I think these foundations can actually move faster, they actually have more money now than the governments do with the U.S. and Europe [ODA] actually shrinking if you believe it or not and they actually can bring that credibility that is often missing if you only would have the private sector or the government.
We work for example with the Moore Foundation in the UK with smallholder farmers in Africa. We have 2 million smallholder farmers that work for us many in the tea business. We don’t want them to be 100% dependent on us. That would not be right. Getting a foundation in there is very helpful. We do hand washing in schools for sanitation, with the Bill & Melinda Gates Foundation or the Children’s Investment Fund in the UK- big charitable institutions.
What you find working with them is usually that money comes from or has its origin in business in the first place. Many of these people that run these foundations also try to look at it in terms of investment and return and making it truly sustainable. So it’s actually easier for us to work with them. And at the same time they have a bridge that has more credibility or is better with the government, which you need to include as well, than the private sector alone can do. So increasingly they play an enormous role.
That is the same with the government foreign development aid be it Russia, USAID, with Lilianne Ploumen in the Netherlands or Justine Greening in the UK. increasingly these countries require this aid to be linked to sustainable projects….
DULANY: Yes.
POLMAN: ….and getting these partners on board in many of the things we are working on I think is absolutely instrumental not only to keep us honest which I think is absolutely important but also to be sure that it is about individuals you’re trying to support and also to avoid a total dependence in a commercial relationship that never will be balanced. So they play an enormously important role.
OKONJO-IWEALA: May I add something? I also believe that the philanthropic sector can bring a dynamism and innovation and use of new tools which maybe the government and maybe even the private sector may not be able to bring because they’re smaller, they’re more nimble, more agile. They can also bring to bear technologies and new knowledge that you may not be aware of and they’re willing to try them faster. So I think they are really a complement to what government and private sector are able to do. But if they can somehow, you know, be able to strategically support what is ongoing, or fill in a space that is a void, that’s very, very helpful.
DULANY: Yes. We sometimes say that the best philanthropy is like the venture capital of the social sector...
OKONJO-IWEALA: Yes.
DULANY:...so that it can take risks, it can afford to fail, it can test out new possibilities.
So turning to a less pleasant subject, we know that corruption is growing in all sectors and in all countries and I’m I would love to have you speak about ways in which you think we collectively as human beings but also as institutions, as governments, as businesses can offset what appears to be a very nefarious and growing trend.
POLMAN: For every person that is corrupted there is a corrupter. It’s on both sides and in Africa it’s obviously a big problem. 50 billion goes in to development aid and 70 billion leaves. And the capacity building to collect some of the revenues or tax systems, etc. is not there. So it’s a big problem.
Ultimately responsible business understands that as well. So we have a very clear policy that we would help governments build this capacity. The UK Bribery Act which we fall under 100% square and fairly is actually very good in my opinion because it makes you globally liable for things that might happen in other parts of the world. As a result, in many of these countries we can be catalyzers for change.
There’s no doubt that the work we’ve done on the Millennium Development Goals, if we want to create this better world that we’re all talking about, is first and foremost about having the right governments, having the institutions work, access to legal systems. Obviously fighting corruption is a big part of that and it shows up in many different ways. In our business, counterfeiting is another form of corruption for example. So we will do our utmost.
And the good thing is in places like Africa because we have a long colonial history with the Dutch and the British being a dual-nationality company, we’ve been in most of these places for 100 years or more and I think I we’ll continue to play that role of trying to set the standard.
And contrary to what you say where you have a feeling that it’s actually getting worse, I would say that it’s actually is getting better.
DULANY: Oh?
POLMAN: The data that were picking up or what we’re seeing. I think that increasingly people are starting to understand that things need to be done differently and one of the reasons I believe why you see Africa coming up and why it’s a continent that is now increasingly en vogue (we’re one of the bigger companies in Africa), is that growth is being unlocked and that is because a lot more people are looking at operating under principles that provide the right climate for that.
DULANY: Minister?
OKONJO-IWEALA: Thank you. I think it’s a very difficult but very important subject and I think it’s a global phenomenon…
DULANY: It is.
OKONJO-IWEALA: …as you said from work that I’ve been doing.
Very recently the finance ministers of Africa set up a panel, headed by former president of South Africa Thabo Mbeki, to look at the issue of illicit flows of funds out of the continent. As Paul mentioned, there are numbers like 50 billion leaving the continent or more. But we found out that there are three or four sources.
One is of course corruption by officials of money that goes abroad but one of the biggest sources is transfer pricing- that is multinational companies and others that don’t pay their fair share and find a way of transferring their profits to very low tax jurisdictions. So they mine natural resources for instance, but they don’t pay the tax that they should. This is a very big source of the illicit funds leaving the country. Of course they are perfectly legitimate tax loopholes, so it’s not that all the money that escapes through companies is illegal - no. If you can make use of the loopholes and taxation of the country to send your money, fine but we are talking of illegal means of over-invoicing, under-invoicing, and deliberate evasion of tax.
What is showing up is that this is a huge amount of the problem. So like Paul was saying, we really have to work with companies to make them responsible taxpayers within the jurisdiction in which they do their business because this is one of the big forms of corruption that we find.
The other is of course, officials and one that is more popular, you know, taking assets out of the of the country.
And there I believe on both counts our countries need strengthening and capacity building. Transfer pricing and all this are very sophisticated business and if you don’t have the proper training of other tax administration and tax authorities, we cannot [control it].
The other issue is negotiating proper contracts for natural resources where there’s a complete asymmetry of information: you know on the one side of the table you’ve got lawyers with the companies and so they’re very sophisticated. You’ve got governments with weak capacity who cannot negotiate good contracts. This is a problem that is solvable and has to be solved.
On the part of corrupt officials, the first port of call is within the country itself. We must take our own responsibility to also do more to stop this: less impunity. In my country we’re struggling with how to grapple with that.
But at the same time we’ve also found that there’s a global dimension where this money is going. As we said there are two sides of the equation and you know in my country, as I speak, we have identified and been able to recover $2.5 billion dollars of money that was corruptly taken out of the country under the former dictator Abacha, the military ruler. We have discovered another billion. Luckily the US has very stringent laws that now allow you to freeze money and they just froze $458 million dollars across various jurisdictions.
But some countries in Europe...maybe I should name them…
[LAUGHTER]
OKONJO-IWEALA: …are keeping our money. You know Liechtenstein and Luxembourg. What the hell, let me name them.
[LAUGHTER AND APPLAUSE]
OKONJO-IWEALA: They’ve been keeping this money for 15 years and they won’t let go. Even though we’ve identified that this is our money that was taken, but despite the laws - even the UN Convention Against Corruption, which everybody has signed that should enable you to send the money back - they still find every reason to keep these monies.
And you know, if you get this money back, you don’t need people to send you any aid. Nigeria is a very smart recipient of aid so we are not dependent. But I’m saying there are other countries that have this. Why do you give aid on one hand and then keep the money on the other hand. So just send the money back.
[LAUGHTER AND APPLAUSE]
OKONJO-IWEALA: These are some of the things I think we need a global partnership to make it work. We must take our responsibilities in our countries starting from scratch.
Then the last point I want to make is on institutions. As I work increasingly in this space, I find that the weakness or absence of institutions sometimes drives ordinary people who would want to do things right to doing the wrong thing.
Let me give you a very concrete illustration of what I mean by absence of institution. You know in the US you monitor housing starts like a hawk because they are drivers of economic growth. In my country of the 170 million people we don’t have a truly functioning mortgage system. We have maybe 50,000 mortgages in a country of 170 million. What does that mean? If someone wants to buy a house, if a young couple working both of them want to buy a house, it’s almost an impossibility. They have to wait their whole working lifetime to save. No human being is different from the other- everyone wants a roof over their head. So you find that people are looking for all ways and means to try and save money. As I looked into it more I found what was missing - that one of the things we need to do is set up a mortgage system where people walk in and borrow money and they don’t have to desperately be looking for money in every which way, which leads to petty corruption.
So that’s one of the things that we have launched in the country: for the first time we have set up a mortgage finance institution to pump liquidity into the economy. We’re working with multilateral partners to set up PMI’s - primary mortgage institutions - to pump more mortgages for young people. It also gives them hope. It gives them ownership in the country and in what is happening. It makes them feel like they don’t have to do anything other than the normal- go to work, earn their salaries and fulfill their dreams. So this is one of the missing pieces.
People don’t realize what an obstacle it is - if you look around and you want to buy a house or build a house and there’s nowhere to go, what do you do? So we should also focus on institutional weaknesses, missing links and capabilities within our countries that make people behave in untoward ways. Thank you.
DULANY: Thank you very much.
[APPLAUSE]
And I love the term that you ended on looking at what are the missing links - and I think actually that’s a great way for us to end here discussion tonight because we have a lot of people of goodwill, of intelligence with a lot of connections, with a lot of international reach here in this audience and if we assigned ourselves each the task of looking for the relevant missing links where we could make a difference I think the people in this room could make a big difference in the world. So I want to thank our honorees and our panelists and we’re going to be moving on to dinner.
So thank you.
[APPLAUSE]