[SOUND] This is Mike Rosenberg and we're back with strategies and sustainability. We're in session three on strategic options and in this segment I want to talk about the first two of those strategic options. One which, I think is completely legitimate and the other which I do not recommend. This is take the low road and break the law. So if you remember the framework and the ideas to look at the environmental sensibility to which a firm is subject to on one side. This is the combination of government regulation, shareholder interests, consumer response, partners, our communities, civil societies as a whole. How much are people are looking at a company? And what is the level of awareness inside the company in term of its managers and its employees unto that concern? This is environmental sensibility, the other access is the level of compliance. And if you remember one approach is to just do what the law requires, there's nothing wrong with that. Another approach is to do less than the law requires, to go over the line, as it were and break the law. So I'll talk about these two in this segment, then talk about the other different options in other segments in this session. So take the low road essentially says, if the government is not looking your company, if your shareholders are not terribly interested. If your customers, your employees, your partners, the communities and civil society as a whole basically, is not worried about a companies environmental footprint then, a reasonable option is to obey the law. The law is what civil society has decided they want to impose, and there is nothing wrong with that. A dear friend has a chain of fast food restaurants in the United States, about 100 and some odd restaurants. He's not terribly worried about these issues, his franchisees are not worried, his customers don't care. The kids who make the sandwiches don't seem to care but he does obey the law perfectly well. He disposes responsibly of cooking oil. Tracks the temperature in the different shops. Uses a food and packaging in a responsible way and there's nothing wrong with that. Now this businessman does not have any restaurants in California. It's a choice. Why not? He doesn't have any restaurants in California because he feels that the regulations in California are too many. And to do business in California would require him to change too much of his business model and then, because it's a relatively small chain. He would have to have the same level of response all across the country. Now, of course the environmental sensibility of a restaurant chain like this, with one hundred restaurants, is not the same as McDonald's or Burger King or some of the other big chains because many more people are watching what they do. It's a difference situation. Now, break the law, [LAUGH] I do not recommend to break the law to anybody and there's really two different aspects to break the law. And the first one which you would say again deliberately breaking the law. The image of course, is Don Corleone from the 1972 film, The Godfather. I don't think there's lots of boards of directors anywhere, where people talk about which laws they're going to break. And they give people permission to do that, and they take a real think about, are we going to get caught, what's the cost. I don't think that happens very much. I really don't. I do think there is a much larger possibility that things happen by mistake. This is an image of Martin Wintercorn from Volkswagen and we don't know yet, what the whole truth is in the Volkswagen's emission scandal. I don't believe that Mr. Wintercorn approved, designed or maybe even knew about the software which was created to turn the emissions control system off on a large number of Volkswagen vehicles with certain TDI engines, mainly in the United States. What I do believe is that, he put so much pressure on the North American sales team. Setting sales targets which were two or three times as high as they've ever dreamed of before. That a bunch of people in the Volkswagen organization said, we've got to achieve these numbers any way we can. So they went over the line. Because of what he said, I don't think he told them too. Which to me is inadvertent entry into this space of break the law. So the difference between these two really is there malfeasance at the top? Are people really deliberately trying to do harm? In most cases, I think they are not. Now, however, that does not get them off the hook. Because, really what it is, it's about negligence or lack of controls. If you tell people to do something, and you don't tell them how, or you don't check to make sure they do it the right way, they may go over the line and surprise you later. Another example we have and it's a relatively recent example is this issue from Wells Fargo, where there is such an overwhelming profit focus, that to get your incentives, you've got to do what you've got to do. And John Stumpf says, we didn't tell anybody to break the law. Okay, but you created a culture at Wells Fargo, which later millions of people got false bank accounts, credit cards they didn't need. And Wells Fargo, up to date, has fired over 5,000 people for going over the line. So if you create a situation when 5,000 of your employees feel like they have to go over the line. Then you have to really think about the responsibility from the top. Now the problem if you break the law and increasingly civil society is paying attention. This interpool has what's called Operation Infra Terra. There's 139 people on the list. These are fugitives. They're looking for them in 39 different countries. Kind of the top most wanted list for environmental crimes. Now, most of the people are in smuggling endangered animals, doing very, very specific things. But the implication is, breaking the law can have serious consequences. So what's important in terms of take the low road, I don't want to talk more about break the law, and I don't recommend it to anybody. And the first is communication, you must have fantastic external communication to explain to the world that you're complying with the law, there's nothing wrong with that. But at the same time, tremendous internal clarity to make sure that everybody in the organization does not think that you're really giving them permission to go over the line. That you mean it when you say, we're going to obey the law and then as I said earlier, you must have systems in place to monitor legal compliance. And perhaps even environmental compliance built into the performance matrix on executives. If you tell people obey the law, but I'm only going to measure you for profit, then it's unclear that they're going to do the right thing in every case. So let's just take the low road. This is the first of these different strategic options. Which in my view, the company should consider. [SOUND]
