Globalization's Next Frontier

Today, billions of people in developing countries are deciding who to follow. Those people hunger for more than food. They want good health and a safe environment. They want work, a decent wage, and respectful working conditions.

But, for some time now, the question for all of us has been clear. Will developing nations continue to give globalization a chance — especially if unprincipled economic conduct enriches the wealthy at the expense of the poor? Governmental institutions, non-governmental organizations, and, yes, multinational corporations — all of us are in this together, and all of us must be part of the solution.

I am not talking about socialism. What I am talking about is ethical behavior that will promote globalization as an ever-growing force for peace and prosperity.

Make no mistake — multinational corporations have brought great value to the world economy. They have exported free enterprise, training, capital, and much, much more. Multinational corporations also have many incentives to act ethically — from building a brand to building the bottom line. You've seen the studies. Perhaps my favorite is one from the Harvard Business School. It found that "ethics-based" companies increased their net income 756 percent — versus just 1 percent for companies who put profit first.

It would be a mistake, however, for corporations to view ethical behavior solely through the lens of financial return. Like yours, Deloitte's view is more balanced. We believe that financial results are just one indicator of a company’s success. So much so, that we are currently developing a tool to help assess sustainability — holistically — across such dimensions as a company's core values and leadership, people practices and community impact, to name just a few. We call it "IQP," which stands for "Integrity Quality Performance."

Our premise is that many factors other than financial success contribute to sustainability. And that strong governance and ethical behavior contribute significantly to corporate well-being. That is why, tonight, I want to talk about something new. Tonight, I want to focus on bolstering the rule of law as an important motivation for implementing voluntary codes of conduct.

As the foundation of civilized society, the rule of law fosters democracy, and makes it possible to have highly efficient markets. Yet, today, the rule of law is under sustained attack. From Bali to Baghdad, from Manhattan to Madrid — we have seen dramatic instances of the rule of law under siege by terrorism (and, in all of those places, Deloitte has people).

Terrorism is a visible threat to sustainability, and the rule of law. But there are other, less obvious assailants. One of the least visible yet most dangerous is unprincipled economic conduct. Wherever it occurs, unprincipled conduct extracts a price. Sadly, those who pay the most are those who can afford the least. It's been estimated that if India were "almost free of corruption" by 2010, the average Indian family would earn 22 percent more. Such an increase would enable 125 million people in India to escape poverty.