Eamonn Walsh, Dean, Smurfit School of Business, University College Dublin Walsh: "An equity culture has many benefits"

Why do you go to the World Economic Forum?

Smurfit School has been privileged to participate at the WEF events in Davos over the last four years. We have also worked with the WEF on a number of occasions to promote the role of the Forum among leaders of the Irish business community and have worked to include them in the Forum, as representatives of Europe?s most dynamic economy.

This year I was most interested in how recent world events would shape the Davos agenda and on what implications lay ahead for business. I was involved primarily in two of the WEF sessions: Renewing Trust in the Middleman and What They Don't Teach in Business School.

What did you strike most at this year's Davos?

Happiness and blind faith in the New Economy were absent at this year?s World Economic Forum in Davos, Switzerland. Current geo-political uncertainties and the continuing poor performance of global stock markets contributed to the gloom. However, there were more subtle forces at work. The arrogance of the new economy appears to have been displaced by a new humility - 'listen' rather than 'they just don't get it'. Short-termism was firmly rejected in favour of a concern with the long term. This concern was evident in discussions of financial markets, healthcare and poverty in less developed countries, and building trust in governments and corporations.

The treadmill of quarterly earnings announcements was a recurrent theme. The solution - to firmly institutionalise a concern with long-term performance. This process of institutionalisation will require managers, media organisations and financial analysts to align their efforts and their incentives with long-term value creation. This approach acknowledges that many stakeholders are likely to contribute to the success of an enterprise and hence increases in long-term shareholder value.

A renewed sense of the importance of economic development was also evident. Perhaps it reflected an awareness of the potential relationships between economic marginality and geopolitical stability. Nevertheless, there was significant dissatisfaction with the glacial pace of international trade negotiations. The issue was starkly demonstrated by the stylized statistic that an EU cow receives a subsidy of 2$ a day, more than the daily income of one third of the world's population. There was widespread agreement that both corporations and NGOs should take further actions to address these problems.

Building trust in corporations and government was a central theme. Many proponents of greater regulation believe that by creating more elaborate rules and disclosure requirements, systemic trust will result. While these approaches may appear sensible, recent experience suggests that they have perverse consequences. A culture of exploiting these new rules and disclosure requirements becomes a possibility. The paradox of greater regulation may be unfulfilled expectations and a consequent decline in systemic trust. Rather than advocating more rules and greater disclosure, a return to basic principles may be appropriate. Examples of these principles include the British accountant's conception of a 'true and fair view' or the economist's conception of comparative advantage. These over-riding principles may be a viable alternative to a quagmire of rules and an overly legalistic approach. A focus on principles might also serve as a sound basis for principled behaviour and embedding that behaviour within corporations and governments.

Lessons learnt. Davos is also about new insights and ideas. What did you learn at this year's Davos?

The intoxicated optimism of the New Economy may have an inescapable aftermath - an aftermath characterised by pessimism, cynicism and calls for greater regulation. Greater regulation may erode trust in corporations and governments when citizens' expectations of that regulation are unfulfilled. A more sober assessment would acknowledge the many benefits of an equity culture. For example, the rapid adoption of mobile telephony and the Internet has transformed our economic and social milieu. The equity culture has played a key role in these developments. Would these transformations have occurred in a Europe dominated by state-owned telecoms monopolies? It is all too easy to use recent events to dismiss an equity culture and to defer the important decisions that Europe must take in order to restore competitiveness. A renewed sense of long term corporate performance, corporate social responsibility, and principled management will provide a firm basis for an environment that embraces technology and fosters innovation.

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