The Problem

Over eight years, Amazon paid $3.4 billion in taxes on $960 billion in revenues and $26 billion in profits. Some years, it paid zero. An NGO campaigning for transparency, Fair Tax Mark, labeled Amazon the “most aggressive” company in avoiding taxes, but also said many tech giants were nearly as bad. Facebook, Google, Netflix, and Apple, the Guardian reported, are “avoiding tax by shifting revenue and profits through tax havens or low-tax countries, and delaying the payment of taxes they do incur.”²

Tax avoidance is hardly just a tech company thing. Starbucks has been singled out often, and fought a court battle with the European Commission and Dutch authorities. The company threw a relatively tiny $28 million settlement at the problem to make it go away.³ The UK tax authority sued GE for fraud in 2020, demanding $1 billion in back taxes.⁴ With budget holes to fill after massive pandemic stimulus spending, governments will likely get more vigilant about lost revenue. But until they come down on companies systematically, rampant tax avoidance will remain common—and it is very common. In a 2018 analysis, of the 379 profitable companies in the Fortune 500, almost one-quarter paid an effective tax rate of zero percent or less. They paid no taxes or got money back.⁵ These ninety-one companies include many well-known names—AEP, Chevron, Deere, DowDuPont, Duke Energy, Eli Lilly, FedEx, IBM, JetBlue, Levi Strauss, and McKesson.

Judy Samuelson, the founder of Aspen Institute’s Business and Society program, talks about “blind spots” in business, including, prominently, taxes. As she told Fortune, “a reckoning on taxes” is coming. Advocates like Samuelson have sometimes supported policies that reduce corporate tax rates, but only “to make sure we brought everybody up to that rate.” Unfortunately, she says, international tax shelters and other games have continued to undercut that goal of fairness.⁶

What these companies are doing is generally legal. But is it right or responsible? How can you be a purpose-driven company when you don’t pay much to the society that makes it possible for you to do business? Whatever your opinion is about government efficiency, it’s undeniable that it provides immense public services—education, hospitals and health care, police and fire departments, defense and the peace, social safety nets, and a sprawling, modern infrastructure to move energy, water, waste, and people around. We need to transform the image of taxes as costs to minimize to thinking of them as investments in our health, well-being, and society.

Amazon literally depends on roads to deliver products. Those who don’t pay leave the bill for the rest of us who do, and that bill is not small. Countries make choices about the scale of services and protections the state will provide. In the Organisation for Economic Co-operation and Development (OECD) countries, the ratio of tax collection to total GDP averages 34 percent. The United States sits near the bottom at 24 percent.⁷ Sweden, a country with a larger safety net and better public services, collects 44 percent.⁸ Lower-income countries, the OECD says, need at least 15 percent to provide bare-bones services. But in thirty of the seventy-five poorest countries, tax revenues fall below that low bar.⁹ Meanwhile, an estimated 10 percent of world GDP is held in offshore accounts, and countries lose $500 to $600 billion of corporate tax revenue annually from profit-shifting.¹⁰ The OECD created a framework called BEPS, which stands for base erosion and profit shifting. The “base” here is the money that supports society.

There has been some progress. Janine Juggins, Unilever’s head of tax and treasurer, says countries are adopting the OECD’s recommendations, so many tax planning tools that relied on tax law mismatches—to create double deductions or nontaxable income—no longer work. What’s remaining are, in our words, games to play around where the business resides or generates profits. Ignore the calls for fiduciary responsibility that supposedly force a company to drastically minimize taxes. Dr. Robert Eccles, a leading expert on sustainability and finance, says that “fiduciary duty actually suggests the board should ensure the company is paying an appropriate level of taxes to avoid unnecessary reputational risk,” as well as operational risk in underfunded countries.¹¹

Instead, take pride in paying a reasonable amount of taxes and appreciate the infrastructure you helped fund. You’re contributing to society. Juggins says that environmental, social, and governance (ESG) rating methodologies treat tax as a governance issue. But, she says, “I think it should be part of the ‘S,’ the social contract.”¹²

Let’s be clear. A company can’t be net positive if it avoids paying taxes. It’s literally taking more than you give.

The Solutions

First, start with transparency. Unilever posts detailed tax principles, its effective tax rate (27.9 percent in 2019), and details on the facilities, sales, and taxes paid in dozens of countries.¹³ You can endorse a set of Responsible Tax Principles, such as those the B Team developed. A report from the sustainability nonprofit and consultancy BSR, The Business Role in Creating a 21st-Century Social Contract, recommends adjusting tax strategy so you pay taxes “commensurate with the amount of revenue in a tax jurisdiction.”¹⁴ That means no games, such as moving all profits to one low-tax region. Investors can help, Juggins says, by “taking notice of companies with unusually low tax rates” to assess audit risk or risk of reputational damage from irresponsible tax behavior.¹⁵

Second, to make profit-shifting less useful, support a mandatory minimum rate globally. The OECD is working on the idea, and supporters are pushing for a 21 percent floor on taxes. It looks more likely, however, that countries will support 15 percent, which the US Treasury and President Biden have called for. It’s not high enough, but it’s better than nothing. So, publicly advocate for this effort to level the playing field. Third, BSR also recommends using the standards and reporting guidelines from the Global Reporting Initiative and the BEPS program.

Being a good actor builds trust with tax authorities and governments. Companies with the skills and capacity can help countries develop their tax systems and broaden the tax base. As we’ve described, Unilever has trained tax inspectors in multiple countries. Part of that work leads right into the biggest source of tax loss, corruption.

The Problem

One of the toughest challenges a multinational faces is how to do business consistently and ethically everywhere. Standards vary greatly by country and culture. Transparency International’s ratings of corruption levels (low corruption = 100) range from Denmark and New Zealand at 87 to Somalia at 9. In some places, paying someone in the government to allow your products into port is expected. Giving someone money to accelerate a visa application is dubbed a “facilitation payment” and treated like a normal aspect of doing business (the UK Bribery Act made facilitation payments illegal, but they’re allowed in the United States).

Corruption, bribery, theft, and tax evasion siphon $1.26 trillion away from developing countries every year, enough to lift the 1.4 billion poorest people in the world above the poverty line.¹⁶ Corruption adds 10 percent to the cost of doing business globally, and 25 percent to the cost of procurement in developing countries. The “envelope of money under the table” is still a problem, but a B Team report, Ending Anonymous Companies, highlights a larger issue.¹⁷ About three-quarters of bribery and corruption cases involve companies whose ownership is hard to identify. Shell companies, the report says, are “getaway vehicles” for corruption and money laundering. The B Team and the World Economic Forum’s Partnership Against Corruption Initiative (PACI) are working to eliminate this problem.¹⁸

Corruption is not just a developing country issue. Half of foreign bribery cases since 1999 involved public officials from highly developed countries.¹⁹ The free flow of money to politicians in the United States is legalized corruption. Using unique access to the power of government is morally hazy. For example, when the United States threatened to ban the social media app TikTok during a trade battle with China, software giant Oracle ended up with a minority stake in TikTok. What didn’t go unnoticed was Oracle CEO Larry Ellison’s cozy relationship with President Trump or, as Ellison was moving to close the deal, his donation of $250,000 to support the reelection of Trump ally Senator Lindsey Graham.²⁰ For every corruptee, there’s a corruptor. Call it what you may, but as the old phrase goes, if it looks and quacks like a duck, it’s a duck.

The Solutions

There are structural and policy-based ways to fight corruption (the hardware) and ways to educate and influence people through culture change (the software). In both cases, transparency is the best antidote. One step is to join groups such as PACI and endorse efforts to enforce ownership transparency.

On the structural side, start with a strong code of conduct and business principles to hold employees accountable. It’s necessary but not sufficient. Unilever investigated hundreds of code violations annually, dismissing more than one hundred employees one year. The code gave everyone a defense against corruption. When Unilever execs were asked to do something for a community or company that felt wrong, they could say, “That won’t fit our global standards, and we would have to ask our shareholders, which would be in the public domain. Would you feel comfortable with that?” If the answer was no, the request was likely a bribe.

Preparing a response like that for employees to have ready is part of a well-thought-out resistance plan, according to David Montero, author of Kickback: Exposing the Global Corporate Bribery Network.²¹ To help someone who is asking for a bribe save face and feel respected, he says, find another way to do something for them that is legal. Create more jobs in their community, or provide training and technical advice. In Kenya, Unilever trained police on how to enforce a law on counterfeit products, a problem that was costing the company and the country money. Montero also suggests building the costs of avoiding bribery, such as delays at the border and additional bureaucracy, into the business plan. Identify places that he calls “moon markets”—so corrupt that you treat them as if they’re as inaccessible as the moon. In fact, despite many requests, Unilever never entered the Democratic Republic of the Congo (DRC) because of the level of corruption. DRC was Unilever’s moon market.

People are the software of fighting corruption. Find allies in countries willing to challenge the status quo. Support their efforts, which are personally dangerous. When Ngozi Okonjo-Iweala (now head of the World Trade Organization) was Nigeria’s finance minister, she refused to make payments to fuel importers. Her mother was kidnapped in an attempt to pressure her to quit—she didn’t, and her mother was released five days later in good health.²²

To protect your own people, create a “speak up” culture where everyone feels open to voice their concerns if something doesn’t feel right. Build in tools such as a complaint line and regular employee check-ins, like Unilever’s “dipstick” surveys (a quick measurement), every three or six months. Build a continuous feedback loop. Beware of creating a culture of financial performance above all, which can drive people to do the wrong things. At the bank Wells Fargo, the pressure of ever higher sales targets was so intense, salespeople created millions of fake accounts. At times, Unilever has experienced cultural disconnects like these, but at a much smaller scale.

It seems counterintuitive, but when Unilever’s enforcement rose and the number of code violations increased, it was a good sign—people felt they could speak up. Make it clear that every employee is expected to comply with the Code. Failure puts the company and the employee at risk.

Make sure everyone knows that success without integrity is failure.

The Problem

CEOs make too much money. In the 350 largest companies in the United States, CEOs made 320 times more than their average worker in 2019 (up from 61 times in 1989 and just 21 times more in 1965). CEO compensation rose more than 1,100 percent over forty years, while typical worker wages stagnated at 14 percent growth (not annually, but total).²³ In the United States, inflation-adjusted worker wages peaked in 1973 and flatlined since.²⁴ The trend isn’t stopping yet, and it got worse during the pandemic—in 2020, median pay for CEOs of three hundred of the largest US public companies rose $0.9 million to $13.7 million.²⁵

The United States may be the biggest offender, but other countries have seen large pay increases as well—Indian CEOs receive 229 times as much as the average worker, and UK CEOs get 201 times more.²⁶ Lynn Forester de Rothschild, founder of the Coalition for Inclusive Capitalism, says the creation of personal wealth for CEOs “became the objective, as opposed to [asking], What wealth have you left behind in society? How have you made the world better?”²⁷ If the top earners in the business world take all the salary growth, it makes inequality a lot worse. Without some change, executive pay will remain a flash point for issues relating to inequality, mistrust of elites and business, and economic insecurity.

Most economists agree that the core problem has been the rise of stock options as compensation. It was meant to align executive incentives with shareholders, which certainly worked—it made companies even more short-term focused and prone to abusing the system. GE has often awarded enormous pay packages for executives to hit short-term goals that haven’t necessarily helped investors over the long haul.²⁸ The pandemic brought out the worst in some companies’ cultures. A number of CEOs kept salaries and bonuses while shuttering parts of the business. After laying off thousands, GE’s CEO, Larry Culp, received a $46.5 million bonus (with potential for $230 million), largely because the board had dramatically lowered the stock strike price that triggered the bonus. It was adjusted, in theory, to reflect a bad pandemic economy … which then wasn’t as bad. Culp defended himself to the Financial Times, talking about the sacrifices he made (such as giving up his $2.5 million salary during the year).²⁹ It’s hard not to see a system with boards filled with fellow CEOs, adjusting the targets, as rigged.

The Solutions

Be prepared to lead, or prepare to be restrained—in recent months, shareholders have rejected management compensation proposals at AT&T, GE, Intel, and many more—and accept that this issue affects license to operate.³⁰ Only a few places in the world put a cap on salary, but eventually most governments will do something like taxing compensation above a limit. Be proactive and control top salaries. Pay the top exec less, and peg the ratio at a reasonable level (and maybe develop a sense of shame). Unilever did not actually have a set ratio, but Paul’s approach was unusual and, against the board’s wishes, he held his own salary flat.

Don’t just use a formula. Innovate. The traditional pay structure is too short term-focused and too complex. We need simpler structures that make executives long-term shareholders. The board should look at pay in context and apply discretion to ensure the outcome is fair. Focus on succession as well. Boards can get in trouble if they have to overpay for an external hire.

Most important, focus not just on top salaries, but on improving the living standards of employees, raising wages to fair, living levels throughout the business. It would be naive and counterproductive to advocate for absolute income equality, but at a bare minimum, the people regularly left behind should gain ground, not lose it. Be transparent. In its 10-K, Unilever was clear about linking performance criteria to pay. Slowing the growth of executive salaries and shifting funds downward to balance the overall ratio sets the right tone, and it goes further than you might think. When CareCentrix, a health-care services company, froze pay for twenty top execs, the savings from just holding those twenty high salaries flat was enough to increase the wages of five hundred entry-level employees from the US minimum of $7.25 to $16.50 per hour. It also offered profit sharing to all employees.³¹

A Seattle-based credit card processing company, Gravity Payments, took the idea of raising wages to a new level. In 2015, its CEO, Dan Price, took a $1 million pay cut and raised the minimum wage for a highly educated employee base to $70,000 a year. When Gravity bought a small firm in Boise, Idaho, where the cost of living is much lower, Price kept the minimum for everyone. He told Fast Company, “I struggled to understand how we could keep our integrity if we couldn’t find a way to do it.”³²

Large companies should also stop playing games with options or hiring remuneration consultants to design golden pay packages. At Unilever, Paul moved senior executives to just salary—no cars, no pension, no options. It was a take-it-or-leave-it approach. There was senior-level turnover as the company embraced its new mission, but rarely was pay the issue. As we said before, Unilever made sure that executives at the same level got the same salary after tax, globally, which made choices about international jobs easier. The company also matched any bonus the executive chose to put into Unilever shares. Execs were required to build their stock portfolio to three times their salary and hold shares for five years (which fostered long-term thinking).

Executives in successful companies can still enjoy high wealth generation without making inequality worse.

The Problem

Companies often use quasi-legal means to “manage” earnings to give Wall Street a good story of steady growth. For years, GE didn’t miss a quarter because it could turn the dials on profits from its financial division. In many boardrooms, it’s a sport.

Another tool for keeping the share price up, stock buybacks, has become the norm, and it’s sucking up an incredible amount of capital. From 2009 to 2018, the 466 companies that remained in the S&P 500 the whole time spent $4.0 trillion buying back stock and $3.1 trillion on dividends—a total of 92 percent of profits. In the early 1980s, buybacks were just 5 percent of profits.³³ What changed? Stock options and a focus on maximizing shareholder return at the expense of long-term growth.

Shareholders should do well—no argument there. But short-termism creates an ugly culture that sacrifices investment in the future. In a survey a number of years ago, 80 percent of CFOs admitted they would decrease spending on R&D, advertising, maintenance, or hiring to ensure hitting a quarterly target.³⁴ The buybacks would be fine if companies were first funding investment in the business or in their people, but they’re not. Trillions of dollars that could have enhanced the business—raising its value and the stock price more over time, and thus serving long-term investors, such as pension funds—paid off short-term investors instead.

In their article “Why Stock Buybacks Are Dangerous for the Economy,” three economists found that, in some years, 30 percent of buybacks were funded by corporate bonds. Companies are taking on debt to finance buybacks, they observed, not to create “revenue-generating investments that pay off the debt.” They called this out as bad management. Meanwhile, corporate R&D spending has gone nowhere, with 43 percent of the S&P 500 companies spending zero on the future.³⁵

This strategy can take companies down a dangerous path. From 2013 to 2018, Boeing spent $43 billion to retire stock, and just in that same period, spent $20 billion on R&D.³⁶ In an industry where a new plane model also requires many billions of investment, it seems like a strange allocation. Is it surprising that Boeing ended up taking major shortcuts on design and safety, resulting in grounding the 737 Max after two crashes? In a highly unusual move, David Calhoun, the Boeing CEO who took over after the debacle, publicly criticized his predecessor for chasing stock price above the company’s future.³⁷

Most analyses on buybacks show that they’re not good for business. Paul was a founding member of the organization Focusing Capital on the Long Term (FCLT), which calculated that companies that “reinvest greater portions of their earnings back into the company outperform their peers in ROIC by an average of 9% per year.”³⁸ The companies in the S&P Buyback Index (the hundred companies buying back the most stock) have significantly underperformed the market in one-, three-, and five-year periods.³⁹

In the end, who does it serve to send all the profits back to shareholders? Certainly not long-term investors. It just pays the speculators, gamblers, and instant traders that make the market irrational.

The Solutions

The simplest answer is for companies to reduce buybacks and special dividends, and instead invest more in making their businesses fit for the future. There are many better uses of capital: increase R&D to pivot your portfolio to more sustainable products and services, accelerate the move to 100 percent renewable energy and zero-carbon operations, invest in employee development and training, or fix human rights challenges and pay workers living wages in the supply chain.

Slowing buybacks is important, but we should also address the underlying problem, the continuing obsession with short-term performance. A two-year hurdle rate on investments is arbitrary. Some things may pay back more quickly, but many important investments pay out after a few years or more. So, as we’ve discussed, help the organization extend time horizons and create the needed space for people to make longer-term decisions by, among other things, pushing back on quarterly guidance and shifting compensation to incentivize long-term thinking. Extend reporting and strategy timelines to three to seven years or more, rather than single quarters. It would encourage companies to define corporate purpose and objectives, and set long-term strategy to build resilience and create enduring value.

A core problem is that many investors have a short time horizon (weeks or months, not years). The average holding period of stocks has plummeted from up to eight years in the middle of the twentieth century to about five months in 2020.⁴⁰ To combat this unhelpful trend, companies can cultivate longer-term investors, which Unilever did for years. Financial institutions can also adopt stewardship codes, an emerging governance tool that the asset management firm Robeco defines as “requiring institutional investors to be transparent about their investment processes, engage with [their investors], and vote at shareholder meetings.”⁴¹ By focusing on longer-term measures of success, stewardship codes can help companies and investors think differently about value. The codes can guide asset owners to seek long-term value creation for their investors, communicate more, and develop rigorous monitoring practices.

Investors can create their own stewardship principles to emphasize the issues that are important to their organization and ensure that stewardship codes around the world are harmonized. If short-term pressure from markets is the monkey on company’s backs, and the thing forcing poor decisions about where to direct capital, let’s get rid of the monkey.

The Problem

In 2020, mining giant Rio Tinto made a huge mistake in Australia. It excavated a mine and destroyed two ancient caves—significant archaeological sites—over the opposition of the Aboriginal people who had owned the land. A few months later, the CEO and some other senior executives were forced out.⁴² The board chair also stepped down, saying he was “ultimately accountable” for the scandal.⁴³ This kind of executive ousting, and especially repercussions for the board, hasn’t happened over ESG issues often, if ever. They are almost never held accountable for how the company serves (or mistreats) the world. It’s a new day.

Today’s boards are unprepared for the rising expectations of the outside world. They have shockingly limited knowledge of ESG issues. A study from the NYU Stern Center for Sustainable Business reviewed the bios of 1,180 Fortune 100 directors. While 29 percent had some relevant ESG experience, it was almost entirely in the “S” category. Only five directors across all one hundred companies had climate knowledge, and a paltry two in water.⁴⁴ (Dow Inc. alone had three of the people with serious qualifications in environmental issues, such as a former administrator of the US Environmental Protection Agency.) Study author Tensie Whelan said that boards without relevant knowledge “won’t know the questions to ask, or understand what potential risks might exist.”⁴⁵

Many boards have corporate social responsibility committees, but the people on them generally aren’t qualified. Imagine putting people who haven’t looked at a balance sheet on the finance committee. Most directors don’t really care about ESG. In a report by the NGO Ceres, 6 percent of US directors chose climate change as a focus area for the coming twelve months, and 56 percent thought “investor attention on sustainability issues is overblown.”⁴⁶ They may even feel that talking about ESG issues is a risk, but it’s the opposite.

Given their role as safeguards of the business, board members are remarkably short term in their focus. Boards are applying significant pressure on senior executives to hit short-term profit goals. And more than half of boards globally, and 70 to 80 percent in some EU countries, do not have succession plans in place for the CEO, even as tenures have dropped from eight years in 2000 to just five years today.⁴⁷

Boards are also low in diversity and lack perspective. In the Fortune 500, just 23 percent of board members are women, and 16 percent people of color.⁴⁸ In sum, few boards represent the world around them, most don’t know what ESG means, and very few can tie it to strategy or long-term value creation. They’re grossly out of touch with what’s happening out there.

The Solutions

Boards need more people of color, more women, and younger members. That diversity will help the company navigate the world. But there’s also diversity in perspective and knowledge. Having one person who may look different, but who understands the world the same way as the rest of the board, doesn’t help enough. You need a critical mass of members with diverse knowledge and interest in the world’s social and environmental challenges. A new batch of people will bring a different and broader understanding of governance and fiduciary duties.

For current board members, we recommend mandatory training in ESG and on climate change specifically. Both of us have worked with Competent Boards in Canada, which trains executives and board members. Other organizations, such as Ceres, produce educational resources, like its paper Getting Climate Smart. Boards must also become familiar with rising standards and guidelines, such as the Task Force on Climate-Related Financial Disclosure (TCFD) and the Global Reporting Initiative (GRI).⁴⁹ It’s also important to get board members thinking more about purpose. Programs like the Enacting Purpose Initiative out of the Saïd Business School at Oxford can provide perspective and training.

In short, boards should meet certain qualifications—just as lawyers and doctors do. Portfolio traders have to go through training. People working at hair salons need a license. Board members should no longer be driving companies without their own net positive license.

The Problem

Imagine you’re a migrant worker who pays an employment agency a “finder’s fee” of $5,000 to get a job in a factory or farm. You then make $250 per month, too little to ever pay back the debt. You have zero rights in the country you’re working in, and the agency took your passport. That’s what forced labor looks like today, in the 2020s.

It’s been twenty-five years since Life magazine ran a story with a picture of a boy sewing a Nike soccer ball (for which he was paid 60 cents a day), and eight years since the devastating Rana Plaza collapse killed 1,132 apparel workers in Bangladesh. Yet the number of people in horrific working conditions remains outrageously high. The International Labour Organization (ILO) estimates that 150 million kids, 1 in 10 worldwide, are working in conditions that are dangerous or deprive them of schooling.⁵⁰ Over a five-year period, eighty-nine million adults experienced modern slavery—forced work or forced marriage—at some point.⁵¹ And taking a broader view of human rights issues, 1.6 billion workers are vulnerable; they’re part of the “informal economy,” with few protections or rights.⁵²

Rosey Hurst, founder of ethical trade and human rights consultancy Impactt, describes the harsh reality: “the global supply chain is based on the use of forced labor.”⁵³ Unilever’s global VP of integrated social sustainability, Marcela Manubens, adds that billions of profits have come on the backs of people making poverty wages, which contributes mightily to inequality.

Companies have done shockingly little to address this tragedy. The Corporate Human Rights Benchmark (CHRB) assesses and ranks the two hundred largest companies in high-risk sectors—agricultural products, apparel, extraction, and ICT. Overall performance is abysmal. The average score out of 100 is 24.

Steve Waygood, the chair of CHRB and chief responsible investment officer at Aviva, concluded that the report paints a “distressing picture,” given how few companies are even trying—most “have not taken part in the race.”⁵⁴ A large part of the assessment scores companies on how much due diligence they conduct in supply chains—that is, are they even looking for human rights problems? Almost half the companies got a zero. In contrast, the top three ranked companies, Adidas, Rio Tinto, and Unilever, scored full points on due diligence. Close to half of the companies had at least one allegation of a serious human rights violation, and almost none had remedied the situation—less than a third met with stakeholders and only 4 percent of cases resulted in a satisfactory outcome for victims.⁵⁵

In one rare piece of recent good news on human rights, some big investors are applying pressure on companies to do better. In 2021, BlackRock and CalSTRS (the California pension fund) voted against the directors of the large manufacturer Top Glove after a quarter of its workforce got Covid-19.⁵⁶ But companies should not wait for stakeholders to force them to fix this.

The Solutions

It’s hard to face, but you know that slave and child labor are wrong. Don’t behave like an ostrich. Sharan Burrow, the general secretary of the International Trade Union Confederation, says, “If you don’t know because you don’t ask, does that absolve you? No. It makes you even more guilty.”⁵⁷

Learn what laws are in place and advocate for more. The UK’s Modern Slavery Act cracks down on slavery and trafficking. After some political wrangling, it included requirements on transparency (reporting) and supply chains.

Find organizations, such as the Fair Wage Network, to help educate you, and share what you know publicly. When Unilever issued the first stand-alone human rights report, it was scary, but it didn’t hurt the company. It helped Unilever identify the human rights issues it needed to focus on, including forced labor, discrimination, harassment, and working hours. Once you have a handle on the scale of the problems, become an active part of eliminating modern slavery from your value chain.

Another solution, in theory, is audits. There are many international standards and firms that audit factories for violations. Human rights advocates are skeptical, because audits have a mixed reputation for efficacy. Hurst from Impactt says that off-the-shelf audits don’t work: “You have to do something far more engaged, with the worker voice at the center.” Workers need a way to speak honestly, without fear of retribution. Better technology—mobile, anonymous surveys, video feeds—can help get closer to the reality on the ground and improve traceability and transparency.

Rather than rely on audits, you should build deeper relationships. The Gap, after releasing detailed supply chain data, reduced the number of major supplier relationships from two thousand to nine hundred, allowing the company to focus, build trust, and fix problems together.⁵⁸ The culture of procurement needs to change to make these better relationships the norm.

Companies can work in partnership, precompetitively, to get better information from shared suppliers, or raise wages and improve job security by reducing contract labor. Burrow believes that living wages help solve child labor issues, saying, “If people were paid enough for their family to live on, they wouldn’t need the income from their kids.” Putting a survival floor of living wages under 250 million people in the world, Burrow says, would cost about $37 billion (less than 1 percent of the $4 trillion increase in the wealth of the world’s billionaires during the pandemic).⁵⁹

The Problem

All the good work a company does on climate—setting science-based goals, issuing public statements in support of the Paris Agreement, buying renewable energy—is undermined if its trade associations lobby against climate action. If the policies they push are not consistent with a company’s own statements, how can governments, NGOs, or employees take the company seriously?

The gap between company statements and industry lobbying has been large, especially in the fossil fuel business. Most oil and gas companies say they support a carbon price, but when there’s an actual policy in the works, the groups representing them mobilize to oppose it. A proposed carbon tax was on the ballot in Washington State in 2018, and it was leading in the polls. The Western States Petroleum Association poured $30 million—$13 million from BP alone—into convincing people it would be bad for them.⁶⁰ The ballot initiative failed.

For many years, the US Chamber of Commerce, the top-spending lobbyist in the United States, fought hard against environmental and climate policy.⁶¹ Through some hard work by a few dedicated companies, in particular DSM North America and its president, Hugh Welsh, the chamber admitted that climate change is a real problem caused by humans. Still, late in 2020, the World Resources Institute (WRI) wrote that the chamber was at odds with the Business Roundtable (BRT) over climate. The BRT laid out climate policy principles that the WRI said, “go further in addressing climate change than any other major trade association to date.”⁶²

Companies still hide sheepishly behind organizations, with execs saying something like, “I don’t agree with them on climate, but I need them for lobbying on trade.” This is cowardly and it undermines trust. Stakeholders will ask: Who are you funding? What do associations or PR firms do in your name? How much are they fighting policies that slow climate change or reduce inequality (such as minimum wages)? Be prepared to explain any disconnects.

The think tank InfluenceMap has gathered extensive data on corporate and trade association lobbying on climate and environment. It consistently highlights how trade groups, especially in fossil fuels, try to weaken environmental regulations. Some climate change deniers, who may have moved away from directly funding candidates or campaigns, have weaseled their way into trade associations to assert their influence. Nobody is fooled.

The Solutions

Sometimes engaging with trade groups to hash out disputes over policy is worthwhile. DSM’s work to nudge the Chamber of Commerce was important. So, first try to shift their thinking. Make the argument that you want to work together on multiple issues, but since climate change is the biggest crisis, industry has to speak with one voice in support of action. After trying to change their views it may be best to break ties from groups that hold on to antiquated ideas. More than a decade ago, Apple, Nike, Unilever, and others left the US chamber over its climate stance.⁶³ As we said earlier, Unilever also left BusinessEurope and the notorious American Legislative Exchange Council, which lobbies at the local level for lower environmental standards and regressive social policies. Similarly, health-care colossus CVS Health exited the US chamber over its efforts to ease regulations on tobacco, a position in direct conflict with the company’s commitment to take cigarettes out of its stores.⁶⁴

It’s never too late to have a “Road to Damascus” moment and realize you’re on the wrong side. Sixteen months after funding the campaign against a carbon price in Washington State, BP left the Western States Petroleum Association. BP said their policies were no longer aligned. The company then started advocating for a price on carbon.⁶⁵ French oil giant Total left the powerful American Petroleum Institute over its opposition to carbon pricing or subsidies for electric vehicles, and for its donations to American politicians who supported the United States’ exiting the Paris Agreement.⁶⁶

Besides the nuclear option of leaving these groups, companies can pressure associations to change their ways. Call on them to be open about their stances. Unilever forced transparency by commissioning a study on trade association positions on climate and releasing it at the 2018 climate summit in Poland. The company asked its trade associations to assess if their views were consistent with climate science.

Going public is a good way to force their hands and find out what the associations really believe. As early-twentieth-century jurist Louis Brandeis famously said, “Sunlight is the best disinfectant.”⁶⁷

The Problem

In 2010, the US Supreme Court case Citizens United v. FEC declared political donations as a protected form of free speech. The decision unleashed billions of dollars and gave companies enormous influence over policies and politicians. Legislators desperately need the money to fund campaigns that go on for much longer than in other countries. Representatives in the US Congress spend hours every day, begging for money to fund their never-ending campaigns.

Companies can influence the political process in other countries as well. An OECD report, Financing Democracy, warns of the risk of “policy capture” by well-funded vested interests. Among the OECD countries, only 35 percent ban corporate donations to political parties and candidates.⁶⁸ Still, the problem is noticeably worse in the United States. For companies, the return on spending on influence is high—every dollar they use to get that big tax break can yield hundreds of dollars of savings.⁶⁹ The legalized corruption doesn’t stop there. More than half of the politicians who take a job after leaving Congress immediately become lobbyists and see their salaries go up dramatically.⁷⁰

Companies are not using their influence for good. In InfluenceMap’s report on the 50 most influential companies, 35 were named as negative influences, while 15 multinationals played a positive role, including Iberdrola, Phillips, Royal DSM—and Unilever in the top spot.⁷¹ It’s time to reset the private sector’s relationship with US politics to ensure the government runs on the will of the people, not the power of the dollar.

The Solutions

A century ago, IBM decided it would play no role in politics. In 1968, CEO Thomas Watson Jr., the son of the founder, said a company “should not try to function as a political organization in any way.”⁷² Even without political donations, as a corporate leader, IBM still holds a seat at the policy table. Companies should follow this example and commit to making no political donations and being much more transparent. Publish any and all donations to any cause, political or not. Companies should also dissolve corporate political action committees—which Unilever stopped donating to many years ago—to separate policy from politics. Don’t wait for events to force your hand. The attempted coup in the United States was a moment of clarity. Dozens of companies paused all donations to politicians.

The Brennan Center for Justice, League of Women Voters, and People for the American Way have all created similar lists of ways to get money out of politics. Disclosure and transparency are their top choices as well, but they also suggest moving to public financing of elections. We need to think even bigger and advocate for a constitutional amendment to overturn the absurd Citizens United verdict. Unilever’s Ben & Jerry’s is trying to foment a grassroots movement to support such an amendment. The maker of cookie dough ice cream has been a vocal advocate of “Getting the dough out of politics.”

The Problem

Everyone has experienced the frustration of speaking on a video conference and realizing they were on mute. Imagine being on mute permanently, and you get a sense of what it’s like for groups that are systematically excluded from the economy.

In this global age, diversity is our greatest asset. Look around the world and see a rich, vibrant, and diverse world with many languages and cultures. This brilliance is good for business. The business case for diversity and inclusion is overwhelming. It’s a multitrillion-dollar opportunity. A McKinsey study found that top quartile companies in ethnic and cultural diversity outperformed the bottom quartile by 36 percent in profitability.⁷³ A BCG study concluded that companies with more diverse management teams have 19 percent higher revenues from innovation.⁷⁴

But business is underperforming on inclusivity, especially in its own senior ranks. Women fill 47 percent of entry level jobs in corporate America, but they occupy only 21 percent of the C-suite roles.⁷⁵ Underrepresented groups fare worse. Women of color make up 18 percent of entry-level positions and just 3 percent of the C-suite. White men hog two-thirds of the top positions. This reality has created a small challenge for us in writing this book. We focus on large companies and quote many CEOs. We want diverse voices, but the Fortune 500 CEO pool is anything but. A few years ago, there were more CEOs named John than there were women.⁷⁶ Today, there are only four Black CEOs (and only nineteen in the history of the Fortune list since 1955).⁷⁷ The third Black female CEO ever, Roz Brewer of Walgreens, started in 2021.

Companies are embracing diversity and inclusion (D&I) rapidly, increasingly tracking performance, and setting quantitative targets, such as HP’s goal to double the number of Black executives by 2025.⁷⁸ But companies are generally not looking at the full world of inclusion: differences in culture, race, socio-economic background, gender, sexuality, disability, neurodiversity, and more. It’s a holistic view, not a siloed project of addressing, say, gender balance this year, LGBTQ another, and race when the Black Lives Matter movement applies pressure. We need consistent efforts across all groups to bring more perspectives into business.

Without a total inclusion mindset, companies overlook people. Only 4 percent of companies have focused on inclusion efforts for the disabled.⁷⁹ In countries with legal obligations to hire the disabled, a report from the World Health Organization found, many companies would “rather pay a fine than attempt to fill their quotas.”⁸⁰ The results of that attitude are clear: only 29 percent of working-age Americans (between ages sixteen and sixty-four) with disabilities were employed versus 75 percent of those with no disability.⁸¹ It’s a big mistake. Disabled employees have equivalent or higher productivity, lower absenteeism, and lower turnover—the opposite of the stereotypes.⁸² The one billion people making up the disabled community, along with their families, control more than $13 trillion a year in disposable income—about the size of household spending for the entire EU.⁸³

A workforce that looks like the world will better serve the world. Apple’s CEO Tim Cook has said, “An inclusive workforce will make the next generation of innovation possible … the best products in the world will be the best products for the world.”⁸⁴

The Solutions

Start by speaking to everyone. Recognize underrepresented groups in corporate marketing and communications, and acknowledge everyone’s humanity and dignity. This is an important foundation, but language only goes so far.

Use the business to support diversity in your business ecosystem. Spend money with minority-owned suppliers. Buy businesses started by disabled people, people of color, or from the LGBTQ community. Invest in geographies with diverse communities. Set standards for who you’ll do business with—Goldman Sachs, the top underwriter of initial public offerings (IPOs) in the United States, will not take a company public unless it has one diverse board member today, and two starting in 2022.⁸⁵

Change policies internally. Look carefully at who is being promoted. Is it weighted toward majority demographics? Are you implementing hiring quotas to get more people from underrepresented groups? Hire people not like you. Keep an eye out for groups that are falling behind. The global pandemic was a disaster for women in the workplace. The McKinsey report concluded that the Covid-19 crisis “could set women back half a decade.”⁸⁶

Unilever’s pursuit of gender parity has been a case study in driving diversity. The company created a committee under the CEO, and Paul purposely included some executives with bad records on diversity hiring. In 2010, women made up 38 percent of company management (and none of the board). With new targets to make women 55 to 60 percent of all new management hires, the ratio increased, and in March 2020, Unilever reached 50 percent women at management level globally.⁸⁷ In a survey of UK companies, Unilever was the only one that paid the same or more to women. It made even larger progress in regions with extremely low representation. In North Africa and the Middle East, the ratio of women in promotions to manager level jumped from 9 percent to 48 percent. Unilever also made half of the board women, and added three Black members.

You can help change the system by advocating for smart government policies, such as California’s requirement that companies headquartered in the state have underrepresented groups on their boards.⁸⁸ We also need policies that build the social infrastructure to support inclusion. Universal child care and parental leave laws can reduce the number of women driven out of the workforce. Consider also what laws might make it easier for the disabled to work in your business.

Join a movement. Ursula Burns, the former CEO of Xerox and first Black woman to run a Fortune 500 company, cofounded the Board Diversity Action Alliance. Companies that have signed on to diversify boards include Dow, Mastercard, Mondelez, PepsiCo, PNC, Starbucks, Under Armour, and UPS. Another group, OneTen, has gathered large companies “to upskill, hire and advance one million Black Americans over the next ten years.”⁸⁹

For disability inclusion, look to The Valuable 500, the largest collective of CEOs and brands creating lasting change for people living with disabilities. Founded by Caroline Casey and chaired by Paul, the group (with a combined 20 million employees) will innovate together to incorporate disability inclusion into recruitment strategies and product designs; improve accessibility; and transform business systems to ensure nobody is left behind.

When Paul retired, he requested that they avoid the normal corporate celebratory jazz. As a more meaningful good-bye present, the company surprised Paul with a commitment to hire eight thousand people with disabilities. They knew the way to a net positive CEO’s heart.