After Davos, the world needs a new business model

There is a story of catatonic patients who briefly wake up after being injected with a trial drug, before returning to catatonia.

The same awakening could be true for the gathering of elite business leaders every year in Davos at the World Economic Forum.

For one week a year business chiefs are injected with enthusiasm to tackle the moral imperatives of our time – inequality, climate, poverty, security – risks that impact on their bottom line.

This year’s Davos pairings found former US vice-president Al Gore and music legend Pharrell Williams announcing a Live Earth concert to help close a global climate deal in Paris.

Thomas Bach, President of the International Olympic Committee, put FIFA, propping up slavery in Qatar, to shame by backing new criteria on human rights and the environment in the bidding process for each Olympic Games.

The B Team business alliance began talks on Plan B with unions and civil society on rights, decent work and climate action.

These acts signal a change. But ultimately the global system remains broken.

The world needs a new business model. The one we have is corrupted. It puts workers at risks, families at risk, economies at risk – the very nature of capitalism is at risk.

The global economy works well for 100 million people, but it isn’t working for six billion people.

The ITUC Global Poll found only one out of two people believes that the next generation will find a decent job. Demand and jobs are falling, and deflation in Europe will cost only more jobs.

Investing in infrastructure, along with co-ordinated wage increases, could create 33 million jobs in G20 countries alone.

One in two working families cannot keep up with the rising cost of living. In the United States, over 40 per cent of the workforce will be earning less than US$12 an hour in five years from now. The outlook for 2015 is bad for growth and jobs.

Economies are burdened by an increasing number of risks not yet measured by the ratings agencies and the bond markets. Democracy, trust and tolerance are pillars of the global economy, and decent work, fair wages and social protection are foundations of the security needed for the global economy to flourish.

We need a business model where companies don’t pay people poverty wages.

We need a business model where supply chains ensure decent work and fair wages, not poverty wages and insecure, unsafe and informal work.

We need a business model where all businesses pay tax where they earn their wealth.

Instead, the incentive model that drives too many businesses today is withering companies from within. It is destroying the very investment needed to build a strong stable economy on which capitalism rests.

The new trend of share buybacks is a perverse incentive whereby CEOs spend trillions on share buybacks rather than investing in employees and capital. It is withering away the workers that business needs in order to grow.

The CEO package of stock options and bonuses is destroying the very investment needed to build jobs, businesses and economies.

Share buybacks by companies reached record levels last year, US companies spent nearly US$2 trillion in the last five years buying back their own shares, and similar numbers were reported in the UK.

The share buyback binge leaves workers in the cold, damages economies and shows the true cost of CEO pay packages.

Davos awakenings may shock investors, business leaders and politicians with new ideas, but the changes to our business model need to take place in the boardrooms.

Returning to catatonia is not an option.


This article was first published on Huffington Post US.