Main Content

From the Editor | Smart Power, Winter 2017

UNTIL RECENTLY, THE MODEL OF INFLUENCE in society was based on the belief that the interests of those in power were connected to those of the broader public — and that if someone worked hard enough, it was possible to ‘climb the ladder’. But today, rising income inequality, high-profile corporate blunders and the democratization of media have flipped the classic pyramid of influence — to a point where people now trust their peers more than they trust those in power.

That according to the 2016 Edelman Trust Barometer, which asked 33,000 people worldwide how much trust they have in four institutions — government, business, NGOs and the media — to ‘do what is right’. The results: in more than 60 per cent of countries, the general population’s trust in institutions is below 50 per cent.

What exactly do people expect from today’s business leaders? A whopping 80 per cent of respondants expect them to increase profits while at the same time, improving economic and social conditions. Among the ‘most critical’ issues for business to address: access to education and training, healthcare, the environment,human rights, income inequality, maintaining infrastructure and reducing poverty.

A new breed of CEO has emerged to embrace this challenge. They include Paul Polman at Unilever, with his focus on the environment; Howard Schultz at Starbucks, who is working on youth employment; Cyrus Mistry of Tata, who is making strides in education; and Jack Ma of Alibaba, who is tackling inclusion. In this issue we put the ‘smart power’ displayed by these and other leaders in the spotlight, and present some of the key approaches and mindsets that are fueling this trust-enhancing movement.

We kick the issue off on page 6 with Shareholder Activism: This Changes Everything! where the head of the Rotman School’s Clarkson Centre for Business Ethics + Board Effectiveness, David R. Beatty, argues that a revolutionary phenomenon in global capital markets is about to change everything in the boardroom — and no publicly-traded company is immune.

Societies the world over are being fundamentally challenged in ways we have not seen for decades — with nationalistic rhetoric and agendas from the far right and a deep distrust of business, globalization and technology from the far left. On page 20, Boston Consulting Group CEO Rich Lesser and his co-authors look at the road ahead in Tackling Inequality: The Challenge for Corporate Leaders.

If Walmart were a country, it would rank 28th in the world in GDP — right behind Norway and ahead of Austria. Its stores use five times as much electricity as the state of Vermont, and emit more CO2 than the 50 lowest-emitting countries combined. On page 26, Rotman Professor Sarah Kaplan interviews Walmart’s Chief Sustainability Officer Kathleen McLaughlin, to see what the retail giant is doing about it.

Elsewhere in this issue, we feature Rotman MBA alumnus Mark Wiseman in our Thought Leader Interview on page 12; and our Idea Exchange features PwC leadership expert Jesse Sostrin, good-governance pioneer Claude Lamoureux, and Rotman faculty members Claire Celerier, Craig Doidge, Alexander Dyck and Ole-Kristian Hope.

As Dan Markovitz points out on page 126, when power is used poorly, it exacerbates the distance between the top and the bottom. The good news is, many of today’s leaders want to exercise smart power. Increasingly, they recognize that trust will no longer be granted automatically on the basis of hierarchy or title. In today’s world, trust must be earned.

Whether you are just getting started on this path or are on your way to making it a reality, we hope you will find some useful tools and ideas in this issue.

Karen Christensen, Editor-in-Chief