S2 Ep 19: Talking to Alice Korngold about her new book A Better World, Inc.
Transcript
Michael Young:
I am thrilled and honored to have Alice Korngold back on the podcast. Alice is a consultant, advisor, trainer, educator, author. She's a noted global expert on the issues of sustainability, diversity, inclusion, board governance, and E S G. We are here to talk about Alice's new book, A Better World, Inc, Corporate governance for an Inclusive, sustainable and prosperous future, which is out now. Alice is a good friend and a returning guest to the Purposing Podcast. Alice, thank you so much for coming on today.
Alice Korngold:
Michael, thank you for having me back. You're my favorite interviewer. You actually read the book, not just the book Flat and have wonderful insights and questions. So thrilled to be here today. Thank you so much. And as you said, we're here today to talk about, it's actually a new edition of A Better World Inc. But with a new subtitle, which as you said, is Corporate Governance for an inclusive, sustainable, and prosperous future with the concept that prosperity is dependent on inclusion and sustainability, which we'll talk about, and all of this in the hands of corporate governance, which is where the power lies. So in the first edition, it was a Better World, Inc. How Companies Profit by solving global problems where Governments cannot. We established some evidence and case studies that companies have the power to find innovative solutions to our biggest social, economic and environmental challenges.
The new book reinforces that – companies have the global footprint, the vast resources and market incentives to address our biggest problems. They're most effective when they do so in collaboration with nonprofits. They're effective at stakeholder engagement and they have an effective board of directors. So we're building on that. And in this book, the three major themes are inclusion, sustainability, and board governance. And I'm going to take each of those one at a time, but starting with inclusion. So the concept is that businesses, our economy, society in our world focuses on a small group of people, and around the outside are people of color, women, LGBTQ plus people with disabilities, refugees, asylum seekers, migrants. And we let one or two in sometimes, but they are not really fully involved through our doing in the global marketplace, in society and to their detriment. But my case is that to the detriment of our economies and our society, and to give some evidence, and as you've said to me before, a lot of evidence in the book that we know from the World Bank and other valid resources that we are squandering hundreds of trillions of dollars by leaving people out of our economies, women alone with equal access for women, that alone would add $160 trillion to the global economy.
We also know in the US we have a shift in demographics, and by 2045, white people will be in the minority. So by leaving out people out here, we are really limiting, first of all, there's a moral imperative to be inclusive, but beyond that, we're limiting ourselves economically. Our businesses are really limiting themselves. In Africa, for example, where there's a lot of evidence and case studies, according to the council and World Affairs, 420 million of the 428 million of people of prime working age entering the workforce globally through 24 will be people in Africa. So we're leaving them out of the equation if we don't think more inclusively. So what I focus on in the book are the tremendous opportunities for companies, and some are already leading the way in finding innovative ways to be more inclusive. And this is often, I think, always in partnership with NGOs.
An example would be tent partnerships, which was founded by Hamdi Ulukaya, who's the founder, and CEO of Chobani, a multimillion dollar global company. And what 10 partnerships does is they provide the research, advocacy, guidance, resources for multinational companies worldwide to include people, migrants, refugees, immigrants in their workforces. And their studies show that this is a positive branding experience in terms of consumer relations, access to tremendous talent and also improves employee retention. So there are many case studies in the book of companies. They have hundred member companies that they're working with, and when companies become part of them, they actually link them to local nonprofits in communities where the companies have a presence. So those local resources, those local nonprofits actually provide the training and job placement. And in fact, Airbnb helps find housing. In the book is a case study of Sodexo, which is a based in France, French food services and facilities management company, over 400,000 employees, 55 countries, a hundred million customers daily.
And they say that by employing migrants, refugees, asylum seekers, and working in partnership with tent and local organizations, this is good for their brand, their customers love it, and they see it as a skill play. Another example is Microsoft, which is developing innovative technologies to promote accessibility for people with various disabilities, including hearing loss, vision loss, which with an aging population will continue to escalate. And they employ people with disabilities including people on the autism spectrum, some of whom have extraordinary skills in technology innovation. They call it a skills play. And HP has an ambitious initiative to accelerate digital equity throughout the world. And for 150 million people by 2030 with a big focus on Africa. And we know many other nonprofits, girls who code per Scholas, who advance girls, people of color, people from marginalized communities in tech jobs and the tech workforce. I'll stop before I move on to sustainability because it looks like you have a comment or a question, correct? Exactly.
Michael Young:
Well, yeah, and I just really wanted to underscore the point that you make in this section of the book that really it's a waste of human capital and that inclusion, if we just take a business case, the moral case is clear. If you take a business case, this is a waste of human capital and it's also, it's an opportunity to diversify the workforce but also the customer base and the inclusion of everyone into a brand's experience is hugely important. And that's truly one of the things I really liked about the book is that there's a real connection and correlation between all of these topics, inclusion, sustainability, with a strong business case. And unfortunately the business case of the status quo is really what everybody keeps coming back to. And I think the time has come that we start to look for that new business case. And I do think it's happening. It is happening. And I think large companies in particular are really on the front foot in terms of that. So anyway, please continue on. Are we going to dip into sustainability at this point?
Alice Korngold:
That's right. Thank you. Thank you. We will indeed. But as you say, it's a matter of access to human talent and vast markets and our traditional concept of society. This limited view is really strangling opportunities economically for business and certainly for society as well as perhaps most importantly, the moral imperative, although that might be harder to sell. The business case is an important part of that sustainability. In the original edition of the book, which came out 10 years ago, each book has a chapter on education, healthcare, human rights, economic development, and climate and environment. And in the book that came out 10 years ago, providing evidence of the threats of climate change was new for people. And as we know, a lot of people didn't take that very seriously. Now it's very clear to all of us that climate change is an existential threat, and there are companies that understand in their case studies in the book that this is an opportunity. So one of my favorites is trained technologies because it's just crystal clear, they're decarbonizing buildings worldwide, and this is a profit move, this is revenue generating. And what's especially good about the case study is that the opportunity is recognized from the top down and the bottom up through and through, including with the board of directors that is diverse in terms of experience, expertise, networks, relationships, having experience and expertise in terms of our global social and economic challenges, including climate change. So this is the case for effective boards. And before I continue onto the topic of boards, I'll stop for a minute again.
Michael Young:
Well, and thank you. And I think the climate and environment section in particular, I think is one that really truly speaks to why corporations are going to have and are going to have and will play an outsized role in this particular area because there is a clear economic case for decarbonization and especially those companies that are on the forefront of those technologies. And so they can just literally slipstream in behind what must become a systemic and societal change and build new businesses. And I think that's what the Trane case study in particular highlights. And maybe just, you talked a lot about in the book or you mentioned the C D P, the Carbon Disclosure Project extensively, and I just wanted your thoughts on globally there is not a price for carbon that everyone has really agreed to, but I think one of the things that we are seeing is private capital in the investor class and capital allocation starting to punish companies that are not significantly oriented toward a low carbon future. So what are your observations and thoughts and in that dynamic between capital and management around decarbonization? Yeah, absolutely. Alright. Onto board governance, which is I think again, in the book is clearly where the pivot point is around
Alice Korngold:
Yep. The companies and investors I spoke to, the idea of a price, they say it's much easier than to calculate the threats, the value U and very measurable. And you and I talked about the opportunities for renewable energy. I mean decarbonization of buildings is just one aspect, but on the reverse side, the threat side, insurance companies are racking up 50 billion of losses from natural catastrophes in this year alone. And it's estimated that it will grow to a hundred billion a year quite soon, that that will be a regular matter. It's interesting to me that 10 years ago, this wasn't on their radar, but now no one can ignore this. Again, threats and opportunities and opportunities for businesses that find remedies.
Reaching this more prosperous future.
My favorite part, and that is corporate governance, and it's been apparent for quite a long time. Boards have the power in terms of the companies that they govern, but global economies are affected. It's the impact on pension funds, employment, just supply chains, every aspect of business. And therefore, society is really driven by decisions the companies make, which is in the hands of boards of directors. And the best news is that boards are changing. I think with the various issues, climate change, healthcare, education, economic poverty, we unfortunately are moving backwards because of covid and also the impact of climate change. And the really positive news is the boards are changing, and we see this in board composition. First of all, they're becoming more transparent and much more purposeful in thinking, who do we need on this board that will help us maximize our opportunities in the global marketplace while mitigating risks, reducing costs, and then adding value. So what we're seeing in the book, as you know, I compare board composition in 2014 around the time when the last book came out to 2022. And I just looked at some 2023 data from Spencer Stewart, board indexes. And what we see is more women, in fact, the S&P companies have two or more women, more diverse racial and ethnic board composition. It's now 22% overall, but 46% of new board members are from diverse racial and ethnic backgrounds.
I think it is kind of disappointing that the board members of non-US origin are only 15% among the S&P 500, but it is an improvement over 2014 when it was only 8%, and that was only among the 200. So if you're looking into moving into new markets, especially in low middle income countries, you need people with that lived experience on your board and who bring extraordinary qualifications and boards who do. So I think we are seeing the benefit in terms of board members 50 years and younger. There's only 6% overall, but 18% of new board members. And that is, I think, because of the emphasis on technology innovation and threats like cybersecurity. So that is a positive change in the average age of new board members is 58, where the average age of boards has been steady for many years at the age of, well, 63.1 years. So we're seeing diversity of age as well as gender, racial, ethnic background, et cetera. So boards are focusing on composition that will help them be qualified to address the greatest threats and opportunities from cybersecurity, climate change, human rights opportunities in emerging markets. And then the bottom line is that boards have the authority, responsibility, and accountability to grow the value of the companies they serve. But this affects worldwide economics and society, so it's extraordinarily important. And building boards with the most relevant experience and qualifications is the most promising news of the day.
Michael Young:
And I think those demographic composition things also really, and you mentioned this in terms of lived experience, where they point to a diverse point of view of people who think differently. And that's probably what really underlying it needs to change. And I think there are plenty of examples where if the board composition is all white men, you may come to the same conclusions repeatedly about topics like you've mentioned and some just don't have lived experience. Especially those in their seventies and beyond are just not going to be as tuned into it. So it's not just about checking a box and saying, okay, we've got this many women and this many people of color and this many non-US born. It's really about do we have the kind of thinking on the board that will protect us from future threats, whether those are climate or economic or cyber, whatever they are. Environmental, it's really about new thinking and new ideas and new attitudes and new points of view that come with board diversification in particular. Right. Yeah. Alright. And can we spend a few minutes talking about the corporate N G O nonprofit connection, symmetry opportunity? Yeah. Yeah. All right. Well, the book is a Better World Inc. Corporate Governance for an Inclusive, sustainable, and prosperous future. I will link a link available at fine bookstores and I will put a link to the Amazon page for this in the show notes. And then just lastly, Alice, I was, well, two things. I was looking at our first episode, which was in April, 2020, if you can believe that. That's right.
Alice Korngold:
Board members who are in their seventies, eighties, who have been CEOs of companies, they were not dealing with these issues of cybersecurity and climate change. In fact, the internet was commercialized. If you think about the average age of 63 on boards, the internet was commercialized when they were in their forties. So this is not something that they've grown up with. We all know that our children and grandchildren are doing better than we are, and it is the younger board members. And that's why I think the under 50 is an important number that our most adept, most expert can be most innovative. And those perspectives, questions, voices on the board in imagining a company's opportunities in the global marketplace bring great, great value.
I've been doing this work for 30 years, including sustainability, E, S, G and DEI, before we had those terms. And over that time, and others who've been working in that timeframe will probably recognize this. Companies and nonprofits were in two different worlds. Never the twain shall meet, and companies were about profit, nonprofits, about mission. And as we've seen over the past 30 years, coming closer and closer together with companies beginning to understand the value of mission and purpose for employees, for productivity, for retention, and nonprofits, recognizing the importance of having a highly effective revenue model and certain business practices, while not by any means sacrificing mission. And that pattern is also apparent in terms of working together. So as you know, one of the things that I and my team have been doing first as a nonprofit that I built and ran and now is my own firm, is training and matching business executives to nonprofit boards globally, nationally, regionally, again, for 30 years.
There was a foundation person who said to me 25 years ago, an esteemed person who's still a big person in the philanthropy world. He said, but they're Republicans. You're putting Republicans on nonprofit boards. And I was pretty speechless because that wasn't the point. The point is that there are people who care about missions and bring value and resources and useful perspectives to the table. And we see that, and fortunately, board matching is becoming much more, many more sources of those services, which is a great thing. Again, though, I'm actually working with a board that is all corporate executives and having a mix of people and perspectives of course is really important to add in there. But we're seeing nonprofits and companies beginning to understand each other and to be able to work more collaboratively. In the first edition, I wrote a case study of Dow and the Nature Conservancy and the engineers working together, and I spoke to all the sources involved, and they said it was really tough going at first, the engineers at Nature Conservancy didn't trust the corporate people. The corporate people didn't trust nature, but over time, they found common ground and accomplish what they set out to do, which was to value nature so that it becomes part of business decision making. That really happened 15 to 20 years ago. And I think we're seeing both nonprofits and businesses much more adept at working together to achieve common purposes.
Hold it up. We actually taped it in February, 2020, which is important because I talked a lot about social justice and equity and the rest of the world started talking about those issues in May, unfortunately.
Michael Young:
That's right. Little did we know, and I really was thinking that same thing about wow, that conversation was so far ahead of its time. Probably long overdue, but at least that's right. We did record it and you're absolutely right. We published it in April. And I think here again, we'll look back on this book and this topic and this discussion, and I know I'll remember how prescient you were here today and you've always been in your thinking. So thank you. That's it. Yeah, good luck getting fire insurance in California, flood insurance in Florida. The chickens have come home to roost in that regard. Yeah, absolutely. Well, Alice, we're going to have to leave it here. Thank you again. It's such a delight and a pleasure to have you on and to talk to you again. Absolutely. Let's do that soon too. Alright, Alice. Thank you.
Alice Korngold:
Thank you. It's just by talking to the right people and learning from the right people along those lines. When I researched the book 10 years ago, the issues of education, economic development, and healthcare were familiar to me through my work, but the chapter on climate was tricky for me. I was not familiar. And I talked to brilliant sources and people like Eric Roston at Bloomberg and All Points of Experts. And I saved that chapter for last because it was less familiar. And as I went through my notes and started to write it, I thought, no, I am not understanding this right, because it's just not possible that this disaster is right in front of us. And I don't see it in the media. I don't see businesses. I don't see insurance companies talking about it. And I called my sources back and I said, so this is what I think I heard, but I know I am not getting it right. And they said, oh, you're getting it completely right. And now of course we all know. We all know, unfortunately. Yeah. And it was all predictable if you talk to the right people. Thank you for having me. Always a pleasure to talk with you in the interviews or over lunch.
Great. Thank you. Bye-Bye.