Diplomatic firestorm underlines why ‘foreign policy’ is key for corporates, not just countries

Google unintentionally sparked a diplomatic row earlier this month following its decision to change the name on its “Palestinian territories” homepage to “Palestine”. The move, which Palestinian President Mahmoud Abbas reportedly called a “victory for Palestine and a step toward its liberation”, provoked immediate complaint to the firm from Israeli Deputy Foreign Minister Zeev Elkin.

According to Elkin, Google’s action “pushes peace further away...and creates among the Palestinian leadership the illusion that in this manner they can achieve the result [of statehood]. Without direct negotiation with us, nothing will happen”. Israeli Foreign Ministry spokesman Yigal Palmor further asserted that “Google is not a diplomatic entity which begs the question why they are getting involved in international politics and on the controversial side”.

The episode underlines the potential for business decisions, whatever their motivation, to become intertwined with foreign relations among states and companies. In effect, blurring the traditional public and private sector concerns of public policy and corporate affairs, respectively, in sometimes thorny issues of political, human rights and/or legal issues.

To be sure, this is not a new phenomenon by any means, but nonetheless appears to be increasing in incidence and salience. Partly, this is driven by globalisation, and also the growth of key industries including new technology.

In the new technology area, alone, several firms other than Google have also been caught in controversy in recent years. For instance, during the Egyptian "revolution," which overthrew President Hosni Mubarak some companies, including France Telecom, were forced by the regime to temporarily shut down their networks. Meanwhile, Google and Twitter collaborated on a "tweet to speak" program which was used as a communications platform by some anti-Mubarak protestors

To be clear, new technology firms are not alone in experiencing issues from working with diverse political authorities across the world. Indeed, internationally-focused companies in many other industries, ranging from energy and extractives, to fast moving consumer goods, have long been confronted with challenges too.

In this complex (sometimes uncharted) territory, firms (and indeed entire industries) can attract high profile scrutiny. For instance, members of the European Parliament (MEPs) passed a resolution in February 2010, following the disputed Iranian presidential election of 2009, which called on EU institutions immediately to "ban the export of surveillance technology by European companies to governments and countries such as Iran." In subsequent testimony to MEPs during a hearing on human rights and new information technologies in June 2010, Barry French of Nokia Siemens Networks reportedly said that “we absolutely do find ourselves in a tricky situation and need the help of people in this room to help us navigate in these challenging times.”

To be sure, various international codes of conduct, including the UN Guiding Principles on Business and Human Rights already exist and reinforce the corporate social responsibility practices of individual firms. However, some of the most enlightened companies have recognized the need for a more decisive shift toward what has been termed strategic ‘corporate foreign policy’.

Corporate foreign policy aligns a firm’s external affairs activity, including media relations, risk management, corporate social responsibility, government affairs, and operational planning, in a clear strategic framework. Recognizing the need for an unusual mix of core competences (e.g. in advanced diplomacy) in some of these corporate functions, capability (including tools, training and infrastructure) can be enhanced where any gaps exist.

Other example areas of capability where firms occasionally have gaps include foresight and horizon scanning (disciplines originally pioneered by Shell) to anticipate and plan for social, economic and political opportunities and threats. Firms may also need clearer internal guidance for determining decision-making, protecting stakeholders (including customers), and/or remaining faithful to corporate values, especially in fast-moving, unpredictable, crisis situations in countries with weak democratic credentials.

The relentless march of globalization, with the interconnections this brings, means that few international companies will escape these pressures completely. And, at the same time, owing to proliferation of media, and the influence of NGOs and related stakeholders, the actions of firms are increasingly under the microscope.

For those companies which are pro-active and invest in their capability, the prizes (both in terms of mitigating risk and seizing opportunity) are potentially ever more significant. Yet for those which misstep, the fallout can be increasingly damaging, both reputationally and also for the financial bottom-line.

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