IBDE

By Jacques Couvas: Visiting Professor of Management at Ozyegin University, Istanbul and Senior Lecturer of Strategic Management at Bilkent University, Ankara; Exchange Associate Editor

EXCHANGE: The Magazine for International Business and Diplomacy    No. 3 March 2011

THE RECENT EVENTS that set on fire the Arab World have focused analysts on what we all cherish in the West: Democracy. Lack of it, it would seem, leads to revolution. But when you go away from the TV screen, you begin wondering whether democratic deficit is the cause or, rather, the effect of social imbalance.

None of the Arab countries, with the exception of Lebanon, ever had a democratic regime since their independence from their colonizers—British, French, Italian, Ottoman—although the label of “republic” has been used in many instances to give an illusion of shared power between the people and its autocratic rulers. In the Economist Intelligence Unit’s 2010 Democracy Index no Muslim country in the region, Arab or not, ranks above 82^nd out of 167, with the vast majority spreading between the 117^th and 160^th positions. In the Freedom House 2011 classification, three of these countries pass with the grade of “Partly Free”, while the remaining 13 are graded “Not Free”. So, why are our politicians and media surprised when people go to the streets to protest and ask for freedoms?

When unrest began in Tunisia, the reasons given were high unemployment among an educated youth, food shortages and high cost of living for the average citizen. The same diagnosis was promptly applied to uprisings in Algeria, Egypt, Yemen, and Jordan. This rationale was, however, quickly switched to aversion for the respective heads of state or government, cronyism, corruption, and lack of democratic rights. The question thus became: “Which was the real cause for the explosion?”.

The answer to this will take time to become clear, and for the moment is anybody’s guess and in the hands of skillful media and mass manipulators. Popular wisdom suggests that one should not worry about what one cannot influence. So this commentary will deal with observations on leadership during the December 2010 - February 2011 slice of Arab history, which is still being written and edited.

It is leaders who shape states, or great corporations, and governance systems. Their ethical standards and personality guide their vision and decisions, and the acts of the people around themselves. Transparency International (TI), an independent global civil society organization that monitors corruption in almost 200 countries, insists in its 2010 report that there is very strong correlation between state and business corruption, as well as between corruption and national and international security. We have had a proof of both claims in the past few weeks.

But corruption practices have existed all along the history of most societies, in the region and elsewhere. People have accommodated themselves with this reality for thousands of years. It is when bribery becomes kleptocracy—money destined to the state treasury that is diverted to one or very few private pockets related to the rulers—and leads the majority to poverty and despair, that populations lose patience and turn to revolt. This is a universal phenomenon, admonition against which, and attempts for remedy, can be found in the holy books of all monotheistic religions. Men and women, independently of faith, when in power are tempted to break the rules, especially when controls are weak, or when they can buy their way around them.

The business world suffers from a similar disease, but the consequences are less dramatic, save for extreme cases like Enron, Tyco and a few others, when tens of thousands of lives of workers and small investors were ruined. Legislators in the U.S. and the EU have been quick to pass legislation that makes corporate governance more transparent and democratic. Industry bodies and large multinationals have also applied self-controls. Managers are aware that “executives get hired thanks to their qualifications and fired because of their behavior”. It used to be considered a fad invented by academics, but it is now a fact.

On the other hand, public governance, especially in emerging markets which attract huge amounts of foreign capital, has been unaltered, in spite of all evidence of kleptocracy and wider corruption, reported by TI and other global watchdogs. The United Nations has remained shy and ineffective in the face of recent events. The SOS signals by its Secretary General only confirm the organization’s ignorance of the magnitude of the problem and its impotence, or unwillingness, to seriously get to grips with it. White papers and commission reports are poor substitutes to proposing concrete public governance measures for adoption by all member states.

In addition to lack of leadership qualities by many Arab statesmen, Western heads of government and their close aids have failed to pass the test. President Obama’s “late-mover disadvantage”, State Secretary Clinton’s “change-as-you-go” statements, or EU’s disparate positions have disappointed public opinion at home and abroad. Diplomatic blunders, such as French Defense Minister’s proposal to help the Ben Ali government to control protests by sending French gendarmes to Tunisia in full crisis, Italian Prime Minister Berlusconi’s  initial support both to Hosni Mubarak and Muammar al Qaddafi, have exacerbated the impression of the ordinary man and woman  that economic interests, not people, matter only. Without national strong leaders, citizens everywhere, whether directly affected or not by the Arab unrest, are waking up to the appetite for an international new order. When they will be craving for it, it may be too late to control their anger.

The UN would be the right venue for undertaking such an endeavor. But the majority of the members of its General Assembly have a vested interest in the status quo. The alternative could be for countries with Western-style democracies to apply one of the cardinal rules in leadership—leading through example.

Jack Welch, the legendary CEO of General Electric (GE), in the 20 years he was in command of the corporate giant introduced many innovative processes, including in managing people. One of them divides managers into four types:  (1) those who share the company’s values and achieve their job targets: they are the stars; (2) those who share the values but underperform: they may have another chance; (3) those who don’t abide by the values and miss their targets: they become history; and (4) those who are high performers and bring results, but don’t live by the values. These are the most difficult to judge and evaluate. “But we have to remove these Type 4s”, says Welch, “ because they have the power, by themselves, to destroy the open, informal, trust-based culture we need to win today and tomorrow”. Former military heroes, generals, colonels, kings, and revolutionaries in the Middle East and Africa have become Type 4s, in all evidence.    Executives, statesmen, diplomats --“même combat”! They all aspire at satisfying stakeholder expectations. Under normal circumstances this is feasible. When, however, immensurable ambition and greediness take control, there must be mechanisms for correction. Power corrupts, absolute power corrupts absolutely, as we know. If Western democracies showed the way to a new model of public governance, many suigeneris democracies would adapt to it as closely as possible, even if it were just for reassuring foreign investors and trade partners. In such reform, the West should consider enshrining in the statutes of its constituents concepts like Direct Democracy, through referendum, for the adoption of new constitutions and laws affecting freedoms and human rights, and the Right of Recall – the right

for the people to cancel an executive or legislative mandate before its term, for incompetence or misbehavior by the incumbent . The Recall would be a more representative and transparent way to oust utterly selfish, ineffective or perverse leaders, than massive protracted demonstrations, whose motives and roots are often difficult to fathom, and whose economic implications are always disastrous.

Too drastic, naïve, impractical? Maybe. The monarchists said the same about democracy after the French Revolution of 1789. But sense of justice, fairness, and balance of power are universal principles and, as a result, they conquer hearts and minds everywhere.