Developing a “Corporate Foreign Policy”: The Urgent Need for Boardroom Geopolitics Strategies
An era of pervasive geopolitical tumult means that companies, and the executives who run them, must begin formulating and following coherent strategies for global engagement. In the first piece of a series on the intersectionality of geopolitics and global business, Colin Reed explores this growing need, and poses early recommendations for companies seeking to develop structures to navigate global uncertainty.
In 2016, Dr. John Chipman, the chief executive of the International Institute of Strategic Studies and a renowned corporate international advisor, penned an article for Harvard Business Review calling for international businesses to establish “Corporate Foreign Policies.” At the time Dr. Chipman was writing, Russia had invaded Ukraine for the first time only two years prior, the United Kingdom was in the midst of severing itself from Europe, and the United States was poised to elect a leader who advocated withdrawing from NATO. Amidst this tumult, Dr. Chipman wrote that “geopolitics is back,” and pointed to a biannual Bank of England survey of business executives which found that in 2014 for the first time business leaders regarded “geopolitical risk” as the single biggest threat to business operations. To address this crisis of confidence, Dr. Chipman called for global multinational firms to establish robust systems for understanding the tumultuous new global landscape, and to begin formulating proactive, long-term strategies for how best to engage with global events in ways that would advance their own interests. Crucially, Dr. Chipman noted that with the relative decline of the United States as a guarantor of the global free-trade environment, global multinationals were on their own in navigating the international order, and that success or failure in that arena would be up to their own internal ability to formulate, and then follow, coherent strategies for global engagement.
After almost a decade, many companies are still struggling to create cohesive corporate foreign policies for engaging with the world, and are suffering reputational damage and profit loss as a result. At time of writing this article, the topic of the day is the public controversy surrounding perennial lightning rod Elon Musk, who garnered public plaudits for his initial decision to provide Ukraine’s government and army with satellite internet terminals from his Starlink service, only to state in early October that continuing to provide the service was too costly. The reversal in Musk’s public-facing posture came after he was publicly castigated by Ukraine’s ambassador for proposing Kyiv accept a peace agreement perceived as insulting by Ukraine’s government. Following the rift, reports of mysterious outages of the service emerged, amplifying concerns that Musk’s personal feelings could be influencing the service’s continuity. Speculation has circulated that Musk’s real motive seems was to transfer the burden to the US government for the tab of continued service, which Starlink says runs the company $4500 per terminal per month to supply. After weeks of damaging headlines, Musk said that he had withdrawn the request that the US fund Starlink and reassured Ukrainian officials that Starlink service would continue “regardless” of payments, returning everyone back to the status quo. The public damage to both Musk and Starlink as a result of the episode, at a time when US and EU public opinion continues to support Ukraine wholeheartedly, will be lasting.
In addition to the reputational damage Musk and Starlink suffered as a result of the episode, the financial and ethical challenges of the situation paint a picture for observers interested in how global multinational companies engage with geopolitical events. Starlink sending its terminals to support Ukraine was a risky move; not only did the US government believe Russia would be able to take over the country in several days, but many experts posited that Russia might consider targeting Starlink’s satellite networks with cyberattacks, electronic warfare, or kinetic missiles in retaliation. And yet, at a time when public opinion was solidifying around the heroics of Volodymyr Zelenskyy and “Slava Ukraini,” the potential upsides were obvious as well; a huge propaganda victory for Musk and another of his moonshot startups, a test-bed project to demonstrate the worth of Starlink to investors and buyers, and another “first” to notch in the belt of a man who prides himself on pushing the boundaries of what private enterprise is said to be capable of. Given eventual Ukrainian battlefield success, enabled in large part by Starlink internet, this view appears prophetic. It is instructive, then, that Musk followed on this wild success by blundering in such a public and futile way. If Starlink truly were hurting for cash, Musk might have made private overtures to the US government to secure additional funds via channels already well-established with the defense-industrial complex via SpaceX’s massive national security business. Why make a public about-face on his policy, and for what reason? What goal were Musk, and Starlink, seeking to achieve?
On the face of it, the answer appears to be “none.” Instead, Musk and Starlink seem to have fallen into that perennial bugaboo of modern multinational capital; short-term thinking, panicked crisis management, and quarterly blinders. An inability to measure, assess, and decide on a coherent, sustainable foreign policy for Starlink’s engagement in Ukraine meant that the company was at the whims of the moment; first tacking one way in response to events, then hastily jibing back the other direction in response to subsequent happenings. This, in a word, is the opposite of what Dr. Chipman called for in 2016. It’s the absence of corporate foreign policy in action; corporate tactics failing to elucidate or achieve any larger goal for a company within the global environment.
Global Businesses Continue to Stumble Over Geopolitics
Musk and Starlink are hardly alone in their struggle to adjust to the new global environment. Despite business leaders once again rating geopolitical risk as a top concern in the 2022 edition of the same Bank of England survey Dr. Chipman cited 6 years ago, the list of geopolitical casualties in the business world in recent years speaks volumes about the inability of some major firms to realize their new responsibilities as actors in the global community. In March, entertainment behemoth Disney found itself under fire from employees and the public for failing to respond to Florida legislation that aimed to restrict teachers from discussing LGBTQ+ matters in schools; after the company chose to quench employee unrest by speaking out publicly against the law, Florida’s government, funded and elected in part by Disney campaign donations, attacked it, castigating the company publicly and eventually revoking the special tax status of its premiere institution, Disney World.
In 2018, following debate over increasingly vocal basketball stars speaking on public issues, National Basketball Association commissioner Adam Silver staked the league’s position on free speech by telling players to embrace their role as drivers of the discourse; this position solidified during the Black Lives Matter protests in 2020, but quickly curdled when the NBA found its games banned in China after some players took up Uighur issues, eventually costing the league millions in lost revenue. Many of the league’s owners remain heavily exposed to China via their other businesses and investments.
Besides lost revenue and reputational damage, firms are also running afoul of global events in more sinister ways; French cement manufacturer Lafarge SA pled guilty in October 2022 to paying ISIS terrorists nearly $10 million dollars in payments to keep its cement factories in Syria open; it will now pay a $777 million dollar fine as restitution, marking the first time a corporation has been found guilty with providing material support to a terrorist organization. In statements about the case, Deputy Attorney General Lisa Monaco said: “Since returning to government, I have warned that companies are on the front lines in confronting today’s geopolitical realities….we expect far more from companies…investing in compliance and promoting corporate responsibility is good business.”
Avoiding business with terrorists is a fairly low bar, but as Starlink, Disney, and the NBA show, risks and opportunities are increasingly complex and nuanced in a global environment characterized by uncertainty, retreating nation-states, and constantly shifting political incentives. Indeed, the role global multinationals have to play not as subordinate participants in the international system, but as coherent actors engaged in setting their own conditions and destinies, is a new reality, and one that hearkens back to a pre-Westphalian time when nation-states shared the stage with merchant-republics, wealthy oligarchs, and early joint-stock-companies. Now, as then, political and economic power in the global system are shared between nations, non-state actors, and the private sector. Today, Apple’s yearly income would make it the 39th largest GDP on the globe, more wealthy than Malaysia and just behind the Philippines. If we include market capitalization value to revenue, Apple is wealthier than Russia, China, and Italy, while Amazon rates as richer than 92% of the world’s countries – and those figures are not including debt, where the globe’s nation-states owe far more than the globe’s tech firms. For his part, Elon Musk was, in April 2022, worth more than the yearly GDPs of, among others, Colombia, Finland, Pakistan, Chile, and Portugal, and may have been the richest person ever to have lived according to Forbes at the time.
As governments cede ground, companies are increasingly deciding how the world works via their tremendous ability to impact the global economy, supply chains, and security situations based on purchasing decisions, board announcements, and corporate realignments. We expect that the halls of power in Washington, Moscow, and Beijing are heavily staffed with policy experts of all stripes, who leverage decades of education and experience to offer systematic guidance to help leaders make sense of a confused and chaotic global environment. Why would we not also expect that the leaders of the new geopolitical titans would not also benefit from such structures of reality-framing and consensus-building? Expecting a Fortune 250 CEO to be able to navigate the geopolitical complexities of a war half a world away is like asking the Secretary of Education to chair a National Security Council meeting – with all due respect to both educators and CEOs, their primary competencies simply lie elsewhere. Yet increasingly, that is exactly what companies are expecting.
Toward an Actionable Corporate Foreign Policy
Back in 2016, Dr. Chipman offered some excellent guideposts setting out why companies should be investing in foreign policies, and recommending the things they should consider tackling when they form them. And yet the lack of coherent foreign policy strategy on the part of most major global firms shows few have heeded his advice. Increasingly, the logistical and organizational complexity of global multinationals puts them at much the same disadvantage as early governments, which struggled to establish professional civil services to provide them with the kinds of insights and policy planning essential to establishing coherent strategies like “foreign policy”. In order to help bridge this gap, I offer three new organizational strategies to help companies make progress toward “foreign policy” formulation. The hope is that, by updating Dr. Chipman’s thesis with new action items, I will help spur the development of this brand of thinking at a time when the lives and wellbeing of millions depend not just on governments, but on the megacorporations they interact with on a daily basis.
Invest in Formal Systems for Policy Creation
The single biggest failure preventing companies from adhering to Dr. Chipman’s advice is the failure of most major multinationals to move beyond the “business unit” organization of bureaucracy toward a more cohesive body for scoping global strategy. Internally, most corporations are chaotic and less aligned than often expected. That is why I argue that the best way to begin moving toward success in “corporate foreign policy” is to create, and systematize, the structures needed to bring together leaders from across the company who have a stake in its foreign policy. Each company must build a structure that creates and advances its foreign policy, as no two solutions will fit all. Still, a potential example of a successful model follows the National Security Council structure used in the United States executive branch, where a council of senior principal leaders of various defense, intelligence, and civilian agencies convene on a regular basis to discuss topline issues while “back bench” staff support the outcomes, research, and needs of this group. Instead of staffing a “Corporate Foreign Policy Council” meeting with generals and spy chiefs, companies might choose to staff it with the Chief Procurement Officer, the Chief Security Officers (both cyber- and physical), the Chief Medical Officer, the head of Government Affairs, and so on. Regardless of the final structure of this body, or of its outputs, the valuable work is in the process of scoping and creating the structure itself. In pursuing this process the business will find it is breaking down barriers between business units with shared global goals, while systematizing the process of thinking strategically among its own leaders and managers.
Staff with Seniority and Focus
Strategy formulation requires rigor and attention from senior leaders in the company. This means staffing the foreign policy creation apparatus with senior representatives of each business unit who have both sufficient visibility to understand needs and sufficient power to make authoritative decisions. These representatives must have the time and access to make policy recommendations accessible to executives, to ensure commonality of intent and direction on a regular basis, with an eye toward tweaking the company’s foreign policy constantly as a result of changing international conditions. Finally, these efforts need leadership which emanates from the most senior level if their recommendations are to have the force of law upon the actual operating decisions of the business. Little more than 20 years ago companies regarded “Chief Technology Officers” as subordinate positions, rather than Leadership Team class; placing “Chief Geopolitics Officers” on those same teams may seem premature today, but may look much the same in another two decades. There is already advocacy for “Chief Intelligence Officers“, albeit with a more security-focused remit. Broadening this position out to include geopolitical risk- and opportunity-spotting seems only logical.
Find Expertise Within
International relations, geopolitics, and macroeconomics are hardly accessible topics, and the temptation for business executives to turn to expert external advisors or consultants to “solve” the foreign policy problem will be strong. I advise against this temptation wherever possible, for much the same reason I think a systematic, formal process for internal foreign policy formulation is necessary. By finding the expertise to fuel a foreign policy strategy from within a company, executives are doing the hard work of ensuring that the assumptions and conclusions of that planning body will take into account the company interest first. Few know the supply chain constraints faced by a global firm better than its Chief Procurement Officer, and despite all the expert research in the world, no one can better explain the legal exposure of a firm to its CEO than the Chief Compliance Officer. What impacts a technology company is unlikely to resemble what impacts an oil company, but external consultants are required to serve both through being generalists on the business side. Additionally, by engaging key leaders in strategy formulation, the business is building a deeper and more resilient understanding of the sum of its business-unit parts, a value which creates institutional knowledge, shared vision, and common purpose. While expert outside voices offer context, points of discussion, or support red-team strategies, they cannot decide the goals and tradeoffs that best suit the long-term plans of a global multinational; only the people who make up the multinational can truly do that.
Winners and Losers
For many years, executives have known that financial and legal compliance, while costly, are necessary and valuable investments in the future of a business that cannot be evaluated merely on spreadsheets alone. Similarly, they’ve come to see security (physical and cyber) and business resilience efforts not as overhead, but as vital elements of responsibility and governance necessary to modern market conditions. After nearly a decade spent in a tumultuous global environment where multinational corporations have both the power and the responsibility to fundamentally alter the systemic conditions around them, it’s past time for business to plan for their global foreign policy strategies as a serious element of Environmental, Social, and Governance (ESG) criteria.
As a chaotic global order continues to metastasize, the difference between those companies which make the investment, and those which do not, will likely become all the more stark to investors and the public. Governments have recognized the importance of a coherent foreign policy, and they go bust far less frequently than corporations.
Suggested books for in-depth reading on this topic:
- Political Risk: How Businesses and Organizations Can Anticipate Global Insecurity (Amy Zegart and Condoleezza Rice)
- Guide to Country Risk: How to identify, manage and mitigate the risks of doing business across borders (Mina Toksöz)
- Prisoners of Geography (Tim Marshall)
- Venice’s Secret Service: Organizing Intelligence in the Renaissance (Ioanna Iordanou)
Additional geopolitical reading suggestions can be found on our 2022 reading list
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This article was originally written and published by Colin Reed on Encyclopedia Geopolitica on November 3, 2022.