Transcript
Michele Crymes: Welcome to the Democracy That Delivers podcast. I’m Michele Crymes, program director for anti-corruption and governance at CIPE. In today’s episode, we’re focusing on how businesses navigate periods of political and economic volatility and what that means for collaboration with civil society. At CIPE, we often talk about windows of opportunity for reform. These are moments where rapid change creates space to advance transparency and accountability. But those same moments look very different from a business perspective. For companies, they often mean uncertainty, disruption, and increased risk. To explore this a bit, I’m joined by Rick Johnston, managing director of global government affairs at Citibank and chair of Business at OECD. Rick, thanks for joining us.
Rick Johnston: Me, too, Michele. Thanks for inviting me.
Michele Crymes: Great. To start, I want to ground this conversation a bit in how these moments, or windows of opportunity, are actually experienced on the business side. So we say windows of opportunity for reform, but from your perspective, how do companies experience these periods of volatility? And what are the first priorities when conditions really become uncertain?
Rick Johnston: That seems to be a question that’s probably posed to virtually every board of directors and managing director of any company you can imagine right now. I think that when things become a bit tumultuous, when it’s not business as usual, that’s when your leadership really is tested. And if you’ve been on autopilot for too long as a company, where the whole process of whether it’s manufacturing or services seems not really challenged very often, then you’re going to find yourself in a fairly soft spot where you’re going to have to start to think for yourself. By the way, I like to use that phrase in today’s AI world. My mantra lately has been, think for yourself. In any event, in today’s world, when we are hit with these questions of fragmentation and heightened risk, the first question that you have to ask is to define what is actually happening. As you can imagine, with literally the cacophony of information that is now available to us, it’s sometimes hard to actually define the problem or even the opportunity. And as you rightly point out, sometimes in these changing times there are opportunities there that don’t necessarily hit you right in the face, but they are there if you’re looking for them and trying to determine whether they’re real or not. So I think the first thing that we do in the corporate world, and this is true of Citibank, but it’s certainly true of most companies that are looking at avoiding risk and also looking for opportunities, is to really define it. Once you’ve been able to get as much real information, credible information, about what the problem or the opportunity is, then you really have to go through an exercise of defining for yourself how you’re going to address it. And that often can be something that’s very time-sensitive, particularly in a crisis situation, or it can be something where you can really plan it out. If it’s a crisis situation, then you’re hopefully going to have leadership in place that’s already gone through a crisis-management exercise. Very often, let’s just make it simple, the CEO has got to make a call. The CEO has to determine, not whether or not, but how to react to the crisis and who within the company will be addressing the crisis, not just the CEO. If it’s something where it’s a developing kind of problem or a developing kind of opportunity, then obviously leadership is very well advised to bring in several other people from the corporate management team and any other relevant stakeholder within the company. But then the real trick, if you can do it, is to reach out beyond your own borders of corporate thinking to determine how best to address the crisis. I know here in Washington we’re almost overwhelmed by the amount of consultants and other third-party advisors that you can tap for advice and information. And there, I think it’s incredibly important, and we’ve learned this over time, to make sure that you’ve got the right kind of people that you’re asking for their opinion about it, or help, and, very importantly, that you can trust them, you have confidence in them, and that they will perform. That’s something, unfortunately, where too often it is trial and error. But for most corporations, they do have, I think, a cadre of people that they can rely upon for addressing these kinds of crises or opportunities. Ultimately, for many corporations, one of the key factors in these types of situations is managing the messaging and managing the media profile. Because if you get that wrong, you can scramble for literally weeks, if not months, to try to correct that. And that can be incredibly important, in other words, your communications outside the company and how you conduct yourself with those external stakeholders in order either to mitigate the problem or encourage them to think of you as a possible participant in taking advantage of an opportunity.
Michele Crymes: Thank you for really taking us inside what happens when you’re trying to make decisions. One of the things that you said that really stuck out to me, or that’s standing out to me, is this idea of gathering yourself internally, figuring out what’s happening, perhaps turning to external consultants, but really taking in multiple sources of information for solutions. And that’s exactly what we’re trying to do with this podcast here. As you’re describing how it is that folks in the private sector work through crises or through volatility, we’re hoping that our colleagues who are in the democracy space can learn or glean something from your processes and apply them to the volatility and some of the fragmentation that we’re also experiencing as part of the democracy sector. Part of what we focus on a lot as part of the anti-corruption governance team is really thinking about how you can make decisions, especially when you’re thinking about corruption, when all of this happens. So I’m wondering if you can shed a little bit of light on, as you’re making these decisions, bringing in consultants, trying to figure out what it is that you need to do, likely with imperfect information, how do you weigh governance and corruption risks as you’re pushing through these sorts of concerns and making decisions?
Rick Johnston: Well, of course, for a corporation, and we’ll probably get into this as we talk more about interaction with civil society, but the one difficulty that perhaps the outside world too often does not grasp is companies exist to make money. They are there for profit. And therefore, to the extent that a given challenge, in this case let’s say corruption, is being presented, you have to be very careful that whatever you do, you’re going to minimize the impact on the revenue stream, you’re going to minimize the impact on your profitability, and not just in the short term, in the context of a particular, we’ll call it, corrupt event, but also in terms of your reputation going forward. How did you handle it going forward? Because it can bleed out into something much more difficult to contend with than just that one isolated event. In the context of making money, if you will, your reputation, your credibility as a company, are critical. And if you somehow undermine that by virtue of mishandling a corruption event, and I can tell you that from a Citibank perspective, it’s amazing how you can have one notable item that occurred. But we’ve experienced, for example, in the LIBOR issues of several years ago, where that kind of impression that’s created by virtue of that one individual, who was frankly not in compliance with our policy manual. And that’s something also, by the way, as we’re talking about this, internal policy manuals are really useful for management. It makes management think in terms of policy, but also makes management know they can refer back to that when it comes to dealing with employees and trying to keep everybody on the same page. But in terms of dealing with a corrupt situation, one, of course, you look at your own internal policies, but two, obviously very importantly, you ascertain whether or not you’re violating any kind of laws or regulations in the countries that you’re operating in. And that takes me back to this fragmentation problem, because when you’ve got varying laws and regulations and, frankly, enforcement policies from one jurisdiction to the next, let’s say the United States versus the U.K. or Indonesia or China, you are really running the gauntlet of, are we OK here in terms of what we’ve done, or are we not OK in some other jurisdiction by virtue of the impact or the consequence of what we did? It can become, even though a seemingly isolated instance, an incredibly complex problem to tackle from a corporate perspective. And obviously, the bigger the corporation, very often the larger the consequence.
Michele Crymes: I really identify with what you’re talking about in terms of running the gamut of different regulatory environments. We’ve had lots of conversations like that. Maybe we’ll invite you back. But I often refer to it as multiple due diligence realities. You live in this multiverse of due diligence realities, and it can become a bit complex to figure out what goes well in one universe maybe perhaps does not go well in the other, right?
Rick Johnston: I’m going to correct you on that. It’s not a bit complex. It’s very complex.
Michele Crymes: Yes, understatement of the year. A bit complex. Thank you.
Rick Johnston: And the other thing you hit on just now, which is so true, because of this fragmentation that unfortunately we are now living in, in many respects in terms of business regulation and laws, is that the small- and medium-sized enterprise just simply doesn’t have the horsepower and the talent and that ability to deal with these types of issues, even if it’s isolated to only one or two jurisdictions. It takes an immense amount of time and energy and, frankly, real serious management concern to deal with some of these types of issues. It’s something that I’m quite concerned about in the context of the OECD, where I can sit there and listen to how complex all these regulations are. And I know full well that at Citi, we have the resources, we have the talent, we’ve got the reach to be able to deal with this kind of fragmentation much more effectively than other companies that have limited resources. And I really have to wonder, when we talk at Business at OECD about policy statements that the OECD is preparing or the kinds of analyses they conduct, how we try to help them consider always the impact of government policy on small- and medium-sized business. Because, as we all should recognize and remind ourselves constantly, the backbone of the U.S. economy, the backbone of virtually every OECD economy, is small- and medium-sized business. Notwithstanding how much we read about Nvidia or any of these other monster companies, Citi even for that matter, it’s the employment, the revenue generated, the taxes paid by medium-sized enterprises that actually hold these economies together and also create prosperity.
Michele Crymes: But I want to tie this to what we’re talking about here because this is a perfect lead-in. Often at CIPE we think about small- and medium-sized enterprises in exactly the way that you do. And what are the tools and resources that they can reach out to? What can they do? Because they might have fewer resources, or not they might have, they have fewer resources than larger companies, as you’ve already said. One of the things we think is interesting, and which is the connection I want to make, is how SMEs and the private sector collaborate with civil society. I wonder if you can, thinking about civil society a bit as an entry point or a way for SMEs, and even larger businesses, to think through fragmentation, what do we do to go forward? Are there places or are there times when engagement with civil society really makes sense? And what are times when maybe companies decide it doesn’t make as much sense?
Rick Johnston: Yeah. Well, to engage with civil society, I’m going to interpret that as meaning dealing with, let’s say, trade associations or groups like CIPE and others. And understanding it that way, I think is critical for, I mean, I’m a small-business owner, too. I’ve set up an LLC for property management, things like that. But fortunately I’ve got two hats, if you will, so I’m not quite as troubled by finding the right resource to assist in a given problem. But obviously for a small- or medium-sized enterprise that can’t internalize that ability to deal with a crisis, then you are incredibly well advised to establish a network. Let’s say the CEO of the company establishes a network of contacts, whether it’s with a CIPE or maybe the Chamber of Commerce, although you can get lost in the shuffle there, to be honest about it, because it’s such a big institution. But finding some sort of external entity, an association of like-minded companies, not just like-minded, but similarly endowed companies with smaller employment rosters, things like that, the kind of product you produce, whatever. Finding that external resource can be quickly tapped to help on a given problem — the biggest problem, of course, being the ones you didn’t see coming. And you’ve got to respond to it quickly. And you don’t want to exacerbate the problem by either failing to respond or responding in an inappropriate way. So it’s that external source with, as you say, civil society. And then, very, very important, I go back to it, you’ve always got to have that sense of trust and confidence in these external stakeholders that you work with. And that either is based on personality, it’s based on performance, it’s based on a variety of criteria that, I’ll be honest with you, really becomes almost a very human thing. Even wanting to ask AI about how to handle a problem is just fine, but do you really trust the AI model to give you the right answer? And ultimately, to be able to have that interaction with somebody who can, I think, give it deeper thought than possibly what AI could pull out of what’s posted on the internet.
Michele Crymes: So you led right into the next area that I wanted to talk about, which is sort of — I’m not intending to do this.
Rick Johnston: No, but this is —
Michele Crymes: No, it goes really well because that means that, one, we talk about the topic that we want to discuss, but also you’re going into the questions and not in a bad way, because then it allows me the opportunity to dig a little bit deeper. Because we want to talk about how business associations and networks can really help in this fragmented time that we’re finding everyone is traversing at this moment. So I think it’s good that you talked about what that could look like. And I think the key there is — and we’ve talked about this with someone who’s on the NGO side — building the relationships. And how do we build those relationships? It’s really key and it’s important because, of course, we don’t collaborate out of thin air because there’s a crisis. There has to be lots of trust between two different types of organizations. So I wanted to ask you perhaps if you have an example of a time when you’ve seen relationships being built, and then it’s worked to collaborate through some volatility or some sort of crisis between the private sector and NGOs and civil society.
Rick Johnston: I will say it is a crisis. Let me be a bit more positive about it in the context of, let’s say, an opportunity, right? The U.S. government once upon a time decided that it wanted to negotiate a trade agreement with the Asia-Pacific countries. This was the Trans-Pacific Partnership that had been conceived, and it was perceived there were going to be great opportunities there. For a company like Citi or anybody else, to try to engage with the government and to try to help motivate not only pursuit of that kind of an agreement that would be of benefit to our company, but also to avoid certain topics that could in fact not serve our interests, to do that alone would be silly. We were far better off by using associations, our trade associations, whether it was the Chamber of Commerce, the Business Roundtable, U.S. Council for International Business, but using these trade associations as a forum where not only Citi but other banks, other financial-services institutions, could come in, but also to help develop the negotiating posture with other sectors of the U.S. economy. So that’s sort of an example, a very large-scale example of collective action that ultimately serves your company’s interests. I can think of other situations where, for example, I’m a recovering lawyer, and once upon a time I would get calls from clients saying, my God, there’s this crisis. I would get the call because fortunately I developed a certain amount of credibility, confidence, and trust. Sometimes a client would call and say, my God, I’ve got this horrible problem. I would say, sometimes, I’m sorry, I don’t have any expertise in that topic, but let me find somebody who does, who I think would be a good person or a good group to help you handle that. So again, it’s all about this networking thing. You really do benefit your company, your interests in business, by networking beyond just the scope of, let’s call it, your narrow sector. So it’s something to deal with civil society in a broad way because what you find, and this is one of the drawbacks, frankly, of a company interacting with certain groups in civil society, civil society groups generally tend to be pretty narrowly focused on a particular issue, a particular kind of problem, or developing an opportunity. They don’t necessarily think in the broader context of a company’s — and I’ll revert back to the earlier reference to the fact that, as you’re a corporation, you’re a profit-making enterprise, so you have to think about a lot of other things, not just that one particular issue. And I think that civil society and corporate mentality, that’s where the test comes. Is there understanding on both sides that there are certain needs there, there are certain issues that that group is focused on? Sometimes that group, if they’re complaining about what you’re doing, you have to obviously listen to it. But whether or not you respond to that problem has to take into account, if you’re on the corporate side, all the other factors that go into your doing business and being profitable. Sometimes, unfortunately, the corporation cannot respond in a manner that a civil society group would like you to do it. But, you know, sometimes you have to agree to disagree. Other times, what civil society is bringing to you is information that is actually quite helpful in helping your corporate profile and your presence in the community be more positive, be more appreciated. And in that context, sometimes, in fact very often, the participation of the company in that particular civil society entity can be quite beneficial.
Michele Crymes: So first of all, also a recovering lawyer here. So it’s good to be in good company. I know exactly what you mean. But some of the themes that you just went over, or the points that you’ve made, particularly the one about credibility, confidence, and trust, that you build up between a corporate entity and an NGO, these are really sort of the heart, the bread and butter, of what we’re trying to do as part of the ACG team, is bringing together folks to have conversations where we start to build the credibility and the trust. And so hopefully our listeners are listening to this podcast, they’re picking up on that a little bit. This is part of a conversation to be able to have with the private sector on this topic: How do we do this? I’m going to steal some more of your language here and talk about opportunities as opposed to crises, and think about, as we’re in, right now we’re dealing with a lot of fragmentation and we’re all, civil society, I think probably as individuals, corporations, trying to navigate this. I wonder what you see as the greatest opportunity for civil society and the private sector to work together, and what would be some of the things that could really help us get it right and maybe lead us toward success?
Rick Johnston: Well, I’d answer that with an example of walking into a room for a negotiation on a topic that the two sides obviously may have different positions on. But one of the greatest things you can do as a negotiator is to sit down and establish what your common ground is so that you build off of that. And I think that one of the things that is really essential in working together, corporate and civil society, is to find those types of topics and issues where there is a common objective, then work on that. From there, once you’ve again developed that trust and confidence in the interaction between the two, you can find other areas perhaps that are a little more controversial. But I would point out, and one of the reasons why I really wanted to do this with you, is on the question of corruption. I mean, dealing with corruption, particularly demand-side on the government side, is an incredible problem for many, many companies. And that is something where what CIPE offers, I think, is one of the better avenues for not only talking through what are the various methods that are used, but how do you address that effectively, not only on a day-to-day business-operating basis, but also how do you address that in terms of really trying to help a government understand what tools it can employ, and you as a private sector, what tools you can employ in order to promote an anti-corruption mentality in a given market, particularly in the emerging markets? So I think that frankly that’s a really good example of where corporates and the civil society entities can find common ground and work together on it.
Michele Crymes: So you’ve really just given a great narrative to the work that I’ve been doing as part of CIPE’s ACG team for the last six years. And a big part of it is this exact process that you’ve just laid out. We find that common topic, it’s anti-corruption, and then we go a little further, we dig a little further, and see how far we can get in collaborations together. So it’s one of the ways that civil society and the private sector are working together quite well. So thank you for that, for in a lot of ways helping, I hope, our listeners to understand what it is that the CIPE ACG team does, but a bit of the mechanism of how we’re doing it. That was my last question for you. I’m really grateful that you were able to join us this afternoon, or whenever folks may be listening to the podcast. And I hope that folks who are listening are learning a bit more about how we at CIPE hope to see civil society and the private sector come together and collaborate on really important issues. Thanks so much, Rick.
Rick Johnston: You’re welcome. And any time. This is a topic very near and dear to my heart, so I appreciate the opportunity to talk with you.
