is better to influence the creation of
new rules proactively than have inimical rules imposed.
Conclusion
Many people might agree with Ronald
Reagan’s quip “the nine most terrifying words in the English language are:
‘I’m from the government and I’m here
to help.’” Efforts to keep the government at bay can create a blind spot with
respect to corporate diplomacy.
Business leaders must negotiate
with governments to influence rules
that affect their environment to their
advantage. In doing so, they do well to
recognize that as corporate diplomats,
they establish norms that legitimize
the conduct of business. Thus, business leaders participate in building institutions, which are both formal rules
and social norms.
2
Corporate diplomacy happens in
areas where governments are present
as regulators, service providers, and
owners of assets. Corporate diplomacy is equally needed where governments are absent due to deregulation
or weak law enforcement capacity. It
is also required in new markets with
new technology where rules are yet to
be made. Creating new rules requires
tactics somewhat different from conventional lobbying. Corporate diplomacy is a mind-set that sees the role
of business as working with
governments to create societal rules that
govern the conduct of business. Corporate diplomats should not scare
public officials by stating: “I’m from
the corporation and I’m here to help.”
Keeping governments at bay does not
guarantee business success, nor will
keeping corporations at bay lead to
successful regulation. Corporate diplomacy is a promising way forward
for understanding how to create and
change rules for better outcomes.
References
1. Matthews, J. T. Power shift. Foreign Affairs (Jan./Feb.
1997).
2. North, D.C. Institutions, Institutional Change and
Economic Performance. Cambridge University Press,
New York, 1990.
3. Sako, M. The business of the state. Commun. ACM 57,
7 (July 2013), 28–30.
4. The Washington wishing-well. Schumpeter column,
The Economist (June 13, 2015).
Mari Sako ( mari.sako@sbs.ox.ac.uk) is Professor of
Management Studies at Saïd Business School, University
of Oxford, U.K.
Copyright held by author.
ing3 is rife with corporate diplomacy.
Business corporations such as G4S and
Serco bid for and negotiate the terms of
the outsourcing contracts, and engage
in subtle but important corporate diplomatic work to create rules to define
the respective responsibilities of the
government and the private sector. For
example, rules on decent treatment of
detainees and asylum seekers are prescribed in international human rights
law, the signatories of which are nation-states. Yet, when a government out-sources the management of immigration detention services to private sector
firms, as the Australian government has
done, those firms become responsible
de facto for enforcing the law.
Corporate Diplomacy
in the Digital Economy
Digital technology creates a significant corporate diplomatic hotspot.
Information and communication
technologies have challenged existing rules for intellectual property,
privacy, and data security. It has also
challenged competition policy with
network externalities, giving rise to
charges of monopolistic behaviors by
Microsoft, Amazon, and Google. No
wonder, lobbying by corporate America has spread from the old economy to
the new economy. In 2012, Google was
the second biggest corporate lobby
in Washington D.C., spending $18.2
million. (GE was first, spending $21.4
million.
4) Technology firms now have
a significant presence in Washington,
D.C. Corporate diplomacy has become
important in this sector.
Technology startups used to disre-
gard corporate diplomacy. Uber start-
ed in 2010 offering an online chauf-
feur service that enabled customers
to book a ride quickly using a mobile
device. Uber did not own the cars but
contracted with private car owners and
drivers. Uber was neither a taxi service
nor a limousine service. Its business
did not fit the conventional regulatory
framework that usually regulated taxis
and limousines separately. Uber often
ignored regulations in a city and just
started operations to avoid lengthy
regulatory approvals. It built a pres-
ence and proved its value to users, rely-
ing on citizen support for its commer-
cial success. It is useful to explore the
case of Uber to see why and how corpo-
rate diplomacy became important.
Peer-to-peer collaboration can make
consumer choice and sovereignty para-
mount. Uber and other companies claim
that the “sharing economy” they are
building can self-regulate. Consumers
‘vote with their money’, making regulato-
ry oversight redundant. Ratings by users
are a transparent self-regulatory mecha-
nism to make the market function well.
Irrespective of whether these claims
are true, service professions (including
medical, legal, financial) have self-reg-
ulation that operates in the shadow of
government regulation to be effective.
Self-regulating professions operate only
as long as they are seen to be acting as
trustees of public interest. Ignoring gov-
ernments is not sustainable.
Uber’s growth has been impressive:
it now operates in over 300 cities in 67
countries. However, it failed to thwart
bans or partial bans in cities in Aus-
tralia, Germany, India, and Thailand.
In 2015, Uber hired David Plouffe (po-
litical strategist and former campaign
manager for President Obama) and Ra-
chel Whetstone (Google’s head of com-
munications), to boost the company’s
public policy team and to maximize
smooth sailing with city regulators.
Uber’s political strategy must deal with
important vested interests, notably li-
censed taxi drivers. Consumer groups
who benefit from more convenient and
cheaper rides can help thwart bans.
Supporting the green ‘low emission’
agenda of some cities can help as well.
Corporate diplomacy is required to
manage these stakeholders.
Because of experiences like this
Silicon Valley startups are taking
corporate diplomacy seriously. Uber,
Airbnb, and other firms with the
“sharing economy” business model
must create new rules of the game. It
It is useful to explore
the case of Uber to
see why and how
corporate diplomacy
became important.
