The Challenge for Business and Society: From Risk to Reward

The Challenge for Business and Society: From Risk to Reward


(piano music) – And I welcome you all. Thank you for coming in on such
an absolutely beautiful day. It could be a little
cooler, but nonetheless, the sun is out, the skies
are blue, so I’m happy, though I would be happier
if it were a little cooler. Stan Litow, I’ve known
Stan for a number of years, I think almost since
he first went to IBM in about 1990?
– 3. – 1993, and he was recruited from being the Deputy Chancellor of Schools in New York City, not an easy job to manage,
and the CEO of IBM, with whom he worked very
closely, decided that he wanted Stan to come and work at IBM and one of the major focuses of the CEO at IBM was education and
one of the first major projects that Stan had to
put together were these three, I think, three successive national, how would you describe, conferences? – Education Summit.
– Education Summits that attracted governors,
mayors and lots of people in education and made a
very significant difference, I think in the dialogue about
the problems of education. I can’t honestly say that
problems have been solved in the interim, but they
seem to recur and just simply morph into other problems, but any event, Stan has worked on them
and not only did he start, run, envisioned the Education Summit, but since then, he has done
a number of other things that have marked out IBM
as being one of the most creative corporations working on trying to solve social problems. The young lady here talked
about the P-TECH Academy was Stan’s idea and developed with IBM in partnership locally with
school Boards of Education with other corporations
and foundations to create a four-year basically, a four-year education
program that runs through the 11th grade and.
– Two years of college. – And two years of college. It is now in how many states?
– Eight states. – It’s now in eight states,
developed and spread on a model basically
which Stan put together. He developed the Peace Corp analogy, IBM Corporate Service Corp,
in which over the course of the years that Stan has been at IBM, some 4,000 IBM employees
have been assigned jobs in teams with nonprofit
organizations and local governments in Africa and other continents to work on the problems there, putting people with
practical skills that IBM basically helped develop and nurture at the service of these
nonprofit organizations and public entities. That just basically scratches the surface. He can talk a little bit,
I don’t know what exactly, whether you’re gonna talk about the work that you all have done in
putting computer capacity into the hands of doctors
and school teachers and all of that, but
when you look at Stan, he’s now retired from IBM
and we seized on his leaving IBM as an opportunity
to get him to come here and do some teaching here
in the Sanford School. So, he’s teaching two
courses this semester, one of them on corporate
social responsibility and one of them on education. Some of you, I think, are in maybe one or more of those classes. In any event, it really is a
privilege to have Stan here because when I look at the
field of corporate philanthropy, I seen many corporations
that are not doing anything strategic, I
see many corporations that are basically still
doing what they did when their founders were alive, and doing checkbook philanthropy and very few corporations like IBM or like Gold and Sachs with it’s 10,000 women now sort of morphing into 100,000 women but in any event, which
are carefully planned, documented, data-gathered
to try to understand what’s happening and what
the consequences are, and that’s what Stan has been doing. So the opportunity to get
him here to talk further about that and both his
experience in education and in corporate social
responsibility was something that I was looking forward
to and this is the first time I had a chance to welcome you. I do welcome you to Sanford.
– Thank you. – As well as to our
audience this afternoon, and thank you very much for coming. – Well, thank you Joel very much, and I’ve considered
Joel a very dear friend ever since we met and we meet for dinner and I always learn something
new and I always learn something that I can actually act upon. So that’s even better
than just learning it. So I wanted to talk to
you a little bit about some of the content in a book that I wrote that came out in May called
The Challenge for Business and Society, From Risk to Reward, and I tried to put in this
book some of what I learned during my career and some
of what I intend to teach and am teaching at Duke and first of all, I’m very honored to be teaching at Duke and I really enjoy the opportunity and the experience a great deal. – I should also say,
excuse me for interrupting, that I meant to say it,
that Stan is the first, I think, the first Newhouse
Innovator in residence at the Sanford School. Thanks to the Newhouse
family which provided the funds to install innovators here in the Sanford school to do the teaching.. – And at the end of this discussion, you can raise your hand if you
think it’s innovative or not. (laughs) So a little bit about what
I try to do in this book is to start off with what
is the history really of the role the corporations
have played in society, and I think we’re living
in a very toxic environment these days in the United States where for many people corporations are the cause of all ill in society,
whether it’s income inequality or the shredding of the social safety net or the problems with the environment or any problem if people
are looking for a focus or a target of what’s the problem, for some people, the problem
is the private sector and corporations and they’re all bad. Actually, nothing is all bad, nothing is actually all good, but if we look at the history
and if we look at the facts, we really can get from
rhetoric to actual reality and what role corporations
have played in society, well the history tells
us there’s ample examples of bad going back to the robber barons. We have lots of examples of bad ethics, bad behavior, bad for communities, and in some instances,
even some of the iconic people in philanthropy, Andrew Carnegie, who we rightly credit for
the public library systems and building a philanthropic
entity that has lasted for well over 100 years,
we know that when his employees objected to
having their wages cut, he hired Pinkerton guards and shot them. So there’s lots of examples of bad and in those days, it was really bad. It resulted in death, but against the bad, there are also examples
of progressive leadership and dawn of public-private partnerships in a way that people, I
think, need to be reminded based upon fact. So when we look at we’re
consumed these days with the problems of healthcare, in 1870 Macy’s offered
free healthcare to everyone of its employees, in 1870. It wasn’t regulated on a state level, it wasn’t regulated on a federal level, it wasn’t anything that was legislated, it was provided by a
company for its employees because the leadership
of the company believed that building loyalty among your employees and building productivity
of your employees involved a range of employee benefits that were significant and important. Most people don’t know that. In 1875, a company called American Express instituted the first pension
plan in the United States. Now in 1875, the only
other people in the US that got a pension were
some civil war veterans, but others, it didn’t exist, but 1875, American Express implemented
if you worked 20 years, at age 60 you retired at 50%
of your final year wages, and it led to dozens and
dozens of other companies following American Express’ model. In the first decade of the 20th Century, companies started to
invent something called a week of paid vacation. By 1905, there were over 450 companies that offered a week of paid vacation. If you worked for the
government in New York or in North Carolina, it
was closed on Christmas, but your employees didn’t get paid, but if you worked for those companies, you got a week of paid vacation. Those were progressive labor policies. They were instituted by companies and they made a difference
in society because they affected labor relations
across the United States. In the 1920s, IBM ended piecework. Before that, most
companies paid people based upon what they produced. A lot of people think that’s
what we should do today. I hope they don’t move in that direction, but people were paid an hourly wage, and they were paid a
competitive hourly wage, and that happened about 100 years ago, and that also was
something that influenced legislation, it influenced the behavior of other companies, it influenced America, it influenced American society. In the 1930s, we passed
a piece of legislation in the United States
called Social Security. We had a first woman Cabinet
Member of the United States, Frances Perkins, who was
the Secretary of Labor, and when Social Security passed, she was given the challenge of
implementing Social Security, and as most smart people would do, they called in every
smart consultant and brain that they could find about how would you implement Social Security. There were 26 million people
who would be in the program for about 2.6 million employers and every person that
she talked to told her it would take about three years
to implement that program, and she knew that the
President would be under pressure to deliver
results in a whole lot less than three years. She went to talk to somebody who she had a good relationship with,
his name was Tom Watson, and he was the CEO of the IBM Company, and he went to meet with
his engineers and research people at IBM and they
said that Frances Perkins was given the right information because it’s not possible to do it
in less than three years except we’ve been monkeying
around with this idea for a new machine, we call it a collator, and actually if you gave
us the money to invent it and implement it,
we could probably do it in less than a year and they said, but you should know it’s
a request for proposal, it’s competitive, and if you
invested in this machine, you couldn’t get paid for it. You’d have to take the risk and assume the entire
financial burden on your own, and he said, let’s go forward. So they invented the collator, they implemented Social
Security in less than 13 months, and within four years, he
doubled the size of his company, but it was a public-private
partnership in the 1930s that implemented something
that was of major benefit to a company but major benefit to society. The next decade of the 1940s, IBM had its research
laboratory in New York City with Columbia University and
he met with the leadership of Columbia because IBM
was developing something called computers, and
he wondered about what academic institutions could do to prepare the next generation of workers
to work in that industry and there were engineering programs, there were science programs, but at the end of what
was supposed to be a lunch that lasted almost four hours, he came up with the idea
that they would partner on the creation of a
new academic discipline, and when I wrote the book,
I went into the IBM archives and there’s a letter from
Mr. Watson to the leadership of Columbia that says,
these are the things I will do for you loaning adjunct
faculty, providing scholarships, providing assistance, and
let’s call it Computer Science. That was the development
of Computer Science. It was a public-private partnership. It was a company in their interest. It was a university in their interest, and it was something that
wound up providing significant benefit to society. In the 1950s, IBM opened a
plant in Lexington, Kentucky. It was the first integrated
manufacturing plant below the Mason-Dixon line. It wound up integrating the
schools in Lexington, Kentucky. It was long before the Civil Rights Act and it was done by a company
that liked the business deal that was offered by
the Governor of that state, but he also insisted
that it be integrated, and it was something that
he believed in passionately. He believed in diversity. He had implemented a policy
of diversity inclusion in the company, and it was
something that he extended and had an impact on public policy. So when we look at the history with all the bad behavior, we have
examples of corporations that really exerted an
enormous amount of leadership, and it wasn’t just one
company, American Express or Macy’s or Kodak. In 1920, George Eastman
gave one-third of all his personal stock holding to
his employees, $10 million. That would be a front-page
story in every paper in the United States today
if a CEO had done that, but these were examples
of progressive leadership. It was a combination of
what was good for business, but also what was good for society. So that’s the history. It’s not all bad, it’s not all good. It’s a combination of good and bad, but the progressive
leadership sometimes led to progressive action by others but often, it didn’t eliminate the bad behavior because the bad behavior
in history in the 1900s, in the 1920s, in the 1940s, in the 1950s takes us right to today. We are right back where we were before. We have best practices in
corporate responsibility. We have best practices in
corporate philanthropy. We have best labor practices and we also have the same bad behavior that we had historically. So, let’s talk a little
bit about some of the good because I think some
of the good is not only good but it’s exemplary. Joel talked about the P-TECH program. We have a skills crisis
in the United States, the likes of with we have not seen. Virtually all of the well-paying jobs that are being developed require
a post secondary education, but we haven’t made a
whole lot of progress preparing young people
with the post secondary education credentials and
skills that they need. In 1970, 6% of low-income 24-year-olds had a college degree
and in almost 50 years, it went from 6% to 9%,
hardly any progress. A lot of discussion about free college, but college readiness, college completion is probably one of the largest
problems facing the country. Working collaboratively
with education leaders, we created the P-TECH
program, which now has 100 schools across eight states and the college-completion
rate in the first school that is in year eight is 500% higher than the national average. It is an integrated grade
9 through 14 program. Students get a high school diploma and an Associates Degree at no cost and we provide mentors,
they get paid internships, they get structured workplace visits, they learn workplace skills, and the commitment by
a company is that they are first in line for any
available job in that company if they successfully complete the program. – (mumbles) all the partnership companies. – There are now 500 partnership companies and all offering the same
kinds of commitments. So we have with us Shadan
Brown who graduated from P-TECH in four years
with an Associates Degree and a high school diploma. She went on and got her
four-year degree here in North Carolina at
William Peace College. She’s now working at IBM
and concurrently completing her Master’s Degree and
that’s what’s happening with students all around the United States through this program and
it has led to a change in the federal law, the Perkins Act, which funds $1.3 billion worth of career and technical education,
what we used to call vocational education,
and it is now passing that money down through
the states with criteria that are modeled on the P-TECH program. So is that something that
is significant to try to change the problem of college-readiness and college completion? That’s better than writing a check that’s leading to some
significant, substantive, scalable, and sustainable change. I also talk about something in the book where IBM used a piece
of technology called artificial intelligence to build a scale of teachers and created
a free personalized coach for teachers available using
artificial intelligence where teachers can access
the best lesson plans, the best teaching
strategies, customized video of seeing teachers
teaching those strategies but do it in an integrated, customized way that becomes a personal coach for teachers and because it’s artificial intelligence, it’s quality improves based
upon your regular use of it. In one year after launch,
there are 12,000 teachers who have signed up for it. The state that has the
largest number of teachers, North Carolina. It has math curriculum and
math-teaching strategies from grades K through 8. It also has specialized content for English-language learners and specialized content for
general education teachers for children with have a
disability in partnership with the National Center for Children with Learning Disabilities. Another example of something that could be a game-changer by instead
of giving teachers no access to the best tools and winding up having them demonstrating and striking because they don’t feel respected, give them access to the best technology in a way that really
benefits their profession and does something that really gives them pride in their profession. Citizen Diplomacy, Joel
talked about the idea of a corporate version of the Peace Corps, the Corporate Service Corp. So when companies look at what makes them unique and special, it’s the
quality of their employees. It’s the leadership
quality of their employees, and how do you build leadership skills? One way to do it is through what we call the Corporate Service Corp. So each year, IBM selects 800 of our top emerging leaders, send them out in one-month team assignments
in the developing world to solve some of the most
pressing social problems that we are all struggling with. A team of Corporate
Service Corp volunteers paid for by the company went
into Cross River Province in Nigeria and developed
the Poor Healthcare Program for women and children
and it has benefited now 195,000 women in Cross
River Province in Nigeria, and it was a policy that
the government wanted to implement but it
lacked a management plan and implementation plan
that this team of people did and over a thousand
projects have been done over a 10-year period and
the benefit to society is about $200 million worth
of consulting projects done in the public
interest but the benefit for the company is the skill
level of the 4,000 employees who have been through
the program increased, the retention rate of
top talent increased, the managers, 90% of them felt that they got a better employee
back from this program when they sent them out. So it has provided
benefit for the company, benefit for society and
benefit for the individuals who described the
experience of the experience of a lifetime being able to have that kind of opportunity to make
a difference in society. So these are examples
of some of the things that some companies are doing. JP Morgan Chase just announced
$500 million initiative to improve our cities through
grants and special assistance, some of it modeled after
the Corporate Service Corp, American Express building
the capability of staff and non-for-profit organizations. We have examples of AT&T,
which has just invested $200 million dollars
to rescale its existing workforce so that instead of laying people off they’ll build the
skills of their existing workforce to do better. So they’re examples of
progressive behavior by companies similar to what we see when we go back into the past, but did it stop the bad behavior? Ask Bernie Madoff, it didn’t. We still have Enron, Worldcom,
examples of Volkswagen, examples of banks like Wells Fargo, but was it about the
private sector that was bad or was it about ethics
that was bad because we still have ethical
problems and challenges in the government at the federal level, at the state level, at the local level among civil society organizations. It’s ethics, it’s values,
it’s civic knowledge, it’s community experience
that builds high-quality leadership and performance
and it can happen in the private sector, it can happen in the public sector and it doesn’t have
anything to do with whether or not you work in the private sector. So we’re in a situation
today where while there are examples of really great leadership and progressive behavior,
innovative public-private collaboration and
partnership, there’s still the good and there’s still the bad and there’s still the ugly. That’s where we are today. Now if we’re gonna look into the future, it is time, I think, to break that cycle of looking at the good and the bad. If 40 years out we have a PowerPoint that shows the same examples
of the good and the bad, we will not have made progress. So the last thing is to
let’s try to figure out what could the future
look like if we operated differently?
– Is it changing? – Nope.
– Imani. – There we go.
– You got it, okay. – Okay, so the the bad practices continue. All the things that I’ve
talked about and now a different way forward. Let’s start with jobs and education. First, create a culture
of ethics and service. Now if you go to many higher
education institutions, a business school, for
example, they may have a course in ethics, but
ethics is likely not to be part of the finance course. It’s likely not to be
part of the advertising or marketing course but
ethics should be part of every academic discipline. If you go to a law
school, a medical school, any kind of professional school, ethics is something
that needs to be taught at every academic level, and by the way, in high schools and elementary schools and middle schools as well. Now before people get
nervous about changing curriculum and how
difficult that would be, it isn’t to change the curriculum, it’s to change how the
curriculum is taught. Project-based learning
is the way that people learn most effectively,
math and science and history and every subject matter
and part of that can learn the academics in the context of building strong ethics and not just
in the education sphere, in the workplace as well. Very often when you come
to work for a company, they’ll be educated around the Foreign and Corrupt Practices Act, and everybody will take a course and sign that they’ve learned the
course to protect you from any kind of lawsuit. On the other hand, ethics
is not how we educate and improve the skills of our employees. It’s not how we evaluate
skills when people get promoted. It’s not part of the compensation process and it should be because if it is, it will both prevent risk to the company and it’ll maximize reward to the company. The kind of community
service that I talked about in the Corporate
Service Corp should be part of how we give everybody
a sound education. Community service will
build not only skills but it’ll improve people’s ethics if they have an opportunity
to understand how they can make life better
for people in society more broadly. So those are ways that we
can change the paradigm of ethics and values
in the education system and in the workplace, but
then we have government, and what can government do differently? One of the things that
government has learned to do is to regulate bad behavior, and that’s not a bad
thing, that’s a good thing. It’s not a bad thing
to have Superfund sites when people abuse the environment. It’s not a bad thing to have regulation around Foreign
and Corrupt Practices Act, but it’s not just regulating bad behavior that government could do,
it could actually value and incent good behavior. So if companies like AT&T
spend their own money on improving the skills of their workforce and not laying people
off, that’s something that doesn’t only benefit AT&T, it benefits society more broadly, and there’s a role that
government could play in providing incentives
and it doesn’t only have to be financial incentives. It can be recognition to be able to incent companies to behave more positively. You could have an incentive to have people have their employees use solar technology. You could have incentives for people to spend more in their communities, both community service time,
financial contributions. This is something that government could do to provide incentives to
create better behavior not just to penalize bad behavior, and we need more leadership and we need more
cross-sector collaboration. Virtually all of the work
that gets done in the business community is by business
trade associations, business associations. There are not good
opportunities where business working with civil society
and working with government can work together, plan together
to solve problems together and what they could do is to produce a higher level of leadership
and people recognizing the fact that we can’t make progress if we blame each other. We can’t solve problems by
companies operating alone or the private sector operating alone. We need to work in collaboration. Business is a major
supporter of civil society, serving on the boards of
not-for-profit organizations, providing financial support for them. There are ways that we could work together to solve these problems, and the book, the challenge for business in society from risk to reward is to get people in the business community to understand, to provide a higher level of leadership, provide a higher level of philanthropy, provide better labor practices, provide better environmental practices because it will benefit
your company because the millennial, the
current population wants to work with companies
that have higher ethical standards and you will
benefit if a company exerts that kind of leadership, but government can also support that and civil society can also support that by agreeing to some
common set of standards for a higher level of performance. So that’s what my experience at IBM, my experience working for the Mayor of the City of New York, my experience running a think tank, being a community organizer,
as Deputy Chancellor of Schools, in my career,
I have an opportunity now to educate the next
generation here at Duke but I have an opportunity
to write about it and hopefully spend some
time trying to influence people’s behavior. It may take a while for
us to get a receptive ear on the federal
level, but this November, we will have 34 new Governors
in the United States. States and state leaders can implement the range of recommendations
that have been identified and we have an opportunity to go from risk to reward,
reward for the companies, reward for society and really do more than just get the word out. I mean whenever somebody studies something and comes up with a set of solutions and they talk about it, people say, well get the word out. Well, I wanna get the word out, but I also wanna get the truth out because the truth is that some of what we’re hearing about finger-pointing and identifying problems
as being one sector or the other is just
not the right way to go, and on the federal level
to eliminate regulation and free companies of regulation, that’s not the right
way to go either because every time that has been done, it has created a reaction against it and has changed the dynamic. In the 1970s, we instituted regulation. Then Reagan came in and
we stripped them away and then we brought them back. So we need to learn from history and I think that’s what
I wanted to talk to you about and that’s what the book is about, and I really appreciate the
opportunity to talk about it and now I would be delighted
to answer any questions. Thank you very much.
– Thank you. (audience applauds) This has been a great
session, and I thank you very much, Stan, fascinating,
what you’ve told us, and I hope that you will
be around the school, you can drop in from time to time. – Yeah, happy to.
– Thank you all for coming. (audience applauds)

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