Shared Prosperity: The business groups’ response to inequality and the pandemic

A historic event in the annals of Philippine Business happened on Nov. 5. In that event, 26 of the country’s largest business and professional associations signed a Covenant for Shared Prosperity. The signatories to this covenant included the Management Association of the Philippines (MAP), the Makati Business Club, the Financial Executives Institute of the Philippines, the Philippine Chamber of Commerce and Industry, the Bankers Association of the Philippines, the American Chamber of Commerce of the Philippines, the European Chamber of Commerce of the Philippines, the Institute of Corporate Directors, the Institute for Solidarity in Asia and 17 other associations. They are called the Philippine Business Groups (PBGs). Combined, they represent thousands of businesses and an even greater number of individual member-professionals committed to national development.

Even before the COVID-19 pandemic, many in the local business have been struggling with how the country, in general, and the Philippine Business, in particular, should respond to the Global Problem of Inequality and Inclusivity. As if this was not enough, the COVID-19 pandemic came and has shaken the very foundations of the global society and economy with the Philippines being one of the worst-hit countries. In the country, hundreds of thousands had been affected and thousands have died because of COVID-19.

Just as bad, if not worse, tens of thousands of businesses, particularly MSMEs, have closed down, millions have lost their jobs and the economy received a terrible beating, contracting by 16.5% in the second quarter alone. There are reports of 40% of Filipino families going hungry and the poverty line going back up to the high 20s (and may have already breached 30%). Homeless people and beggars can now be seen in certain streets of Makati. Petty crimes, like phone and bag snatching and car break-ins, had likewise been reported. The Philippines is sitting on a social volcano waiting to erupt.

The PBGs realize that the country, like many other countries around the world, is suffering from gross inequality, not only in economic and financial terms but also in the social, environmental and political aspects of our national life. This gross inequality in the global society has been there for generations fueled by greed; illegal and unethical practices; callousness to the needs of the communities, especially those at the bottom of the pyramid; and indifference to Mother Earth by some.

Oxfam, a confederation of 20 independent charitable organizations focusing on the alleviation of global poverty founded in 1942, has come up with the disturbing report on the global disease of inequality summarized as follows:

1. The world’s richest 1% have more than twice as much wealth as 6.9 billion people combined.

2. Almost less than half of humanity is living on P275/day while 735 million people are living in extreme poverty on less than P50/day.

3. Only four cents out of $1 of tax revenue comes from taxes on wealth. The super-rich avoid as much as 30% of their tax liability.

4. 258 million children will not be able to attend school while for every 100 boys, 121 girls are denied the right to education.

5. Every day, 10,000 people die because of lack of access to affordable healthcare. Each year, 100 million people are forced into extreme poverty due to healthcare costs.

6. Men own 50% more of the world’s wealth than women and the 22 richest men have more wealth than all the women of Africa.

7. The unpaid care work of women is estimated at $10.8 trillion/year. Inequality is sexist.

It is safe to assume that, proportionately, our country is not very far, if not worse, from the terrible global problem of inequality. Our poverty incidence, for one, is among the highest in the region.

The PBGs believe that a way to address inequality in all its forms in society and to enhance the dignity of human beings and thus achieve inclusive development is for Philippine Business to collectively mobilize their human, technical, economic and financial resources to ensure ethical wealth creation and the sharing of prosperity with all their stakeholders.

Colleges and universities offering business and business-related courses are also encouraged to inculcate and emphasize among their students — current and next generation of managers — the principles and practices of sharing prosperity.

In the Covenant for Shared Prosperity, the PBGs then pledged and signed the commitments to the following stakeholders:

1. Commitment to Employees: Recruit, train and develop employees and managers to be the best that they can be irrespective of gender, alma mater, age, ethnicity and religion; provide just compensation and benefits; promote meritocracy and encourage work-life harmony;

2. Commitment to Customers: Provide only quality products and services that are of continuing value to customers;

3. Commitment to Suppliers: Treat the goods, service, and funds providers fairly, ethically and with respect as they, in turn, are expected to treat their own suppliers in their supply chain the same way;

4. Commitment to the Community: Be actively involved in the communities where they operate in, with particular attention to the needs of the disadvantaged in those communities;

5. Commitment to the Environment: Protect and preserve the environment for the benefit of current and future generations by employing environment-friendly technologies in all aspects of business operations; and,

6. Commitment to Stockholders: Deliver reasonable and just returns to and fair treatment of the controlling and non-controlling shareholders.

Many are probably asking: After the signing of the Covenant, what’s next? How will the PBGs operationalize the Covenant that they signed?

Four suggestions were offered:

1. Right after the Nov. 5 Convocation, each association which joined to sign the covenant, shall, in turn, ask their thousands of member-companies and individual members to also sign the Covenant. They can use the remainder of the year to do this. By the first week of January 2021, the PBGs will submit the names of companies and individuals in their associations who have signed the covenant to the Secretariat for Shared Prosperity for consolidation.

2. In the next five months or on or before March 2021, the signatory-associations and their member-companies shall issue six policy statements that embody the commitments of these member-companies to their respective six stakeholders, namely: employees, customers, suppliers, community, environment and shareholders.

3. By June 2021 (or in eight months), all the signatory-associations and their member-companies shall develop metrics to measure how they are performing against their commitments to their six stakeholders. The suggestion is to study for adoption the 21 metrics on shared prosperity as developed by the World Economic Forum (with the help of PwC, Deloitte, EY, KPMG).

4. By December 2021 (or a little over a year from today), each signatory shall report on how each of them have performed using the said locally adopted and adjusted metrics.

It has been said that the ultimate end of corporate governance advocacy is Sharing the Prosperity; that is, to help companies create wealth ethically and to share that wealth, like good stewards, to eradicate poverty. The greatest problem of our country, with apologies to President Duterte, is NOT drugs nor corruption. It is poverty — poverty of the stomach, poverty of the mind and poverty of the spirit — as MAP member Oscar Torralba defined Philippine poverty. Almost 30 million Filipinos are living in subhuman conditions below the poverty line. This is criminal. This is not acceptable.

We all know that the ultimate solution to poverty is jobs, jobs, and more jobs. Corporations can help create more jobs — by governing well because good governance enables companies to earn more and grow bigger faster, thereby creating more jobs.

When people have jobs, they don’t go hungry.

When people have jobs, they can afford to go to school or send their children to school.

When people have jobs, they don’t despair — they can hope, they can dream.

Jobs feed the stomach, jobs feed the mind, and jobs feed the spirit.

Rex C. Drilon II is member of the MAP Shared Prosperity Committee, Chair of the Institute of Corporate Directors (ICD) and Vice-Chair of the Institute for Solidarity in Asia (ISA)

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