Corporate Social Responsibility: The Key to Global Business Success

2:00 P.M. EST

Real Audio of Briefing

MR. BOOKBINDER: Good afternoon, and welcome to the Foreign Press Center. Today we are very pleased to have Dr. Angel Cabrera, the President of Thunderbird, The Garvin School of International Management for a briefing. He'll be speaking about corporate social responsibility this afternoon. Dr. Cabrera will make some introductory remarks, and then we'll throw the session open for questions. When it is time to ask questions, I will ask you to identify yourself and your news organization.

Dr. Cabrera.

DR. CABRERA: Thank you so much. It's a great pleasure to be here. I actually feel very much at home. Those of you who are familiar with Thunderbird, it's a school that, since it was founded in 1946, has been dedicated to training international managers. We have students from absolutely all over the world. In fact, 60 percent of our students are from every corner in the world, really. It feels great to be surrounded by journalists that cover affairs for audiences around the globe. In fact, I just heard about some of the countries where you're from -- Korea, Japan, China, those are places where we have a great, great tradition, and Brazil, so this is fabulous. So let me just make a few remarks and then I'll be delighted to engage in a discussion with you.

If you check Fortune magazine -- I think it's this week. I don't know if it's this week or last week when they issued the most admired companies. This is an issue that is very widely read every year, eagerly anticipated. This year, if you look at the top 10 most admired companies in the U.S., you find Dell, General Electric, Starbucks, Wal-Mart, Southwest Airlines, FedEx, Berkshire Hathaway, Microsoft, Johnson and Johnson, and Proctor and Gamble. Those are the top 10.

In addition to being the most admired, if you go to their websites, you'll see that these companies have something in common that immediately jumps out. They all have a section, a very visible section on their pages about their identity that covers social or environmental issues. If you go, for example, to Starbucks, they still have a section where they're trying to raise funds in support of relief efforts in southeast Asia. If you go to Southwest Airlines' web page, you'll find Operation Hope. If you go to Microsoft, you'll have information about their engagement with educational institutions. And if you look at Johnson and Johnson's page, you'll see a link to what they call their "credo," with some of the principles that they intend to act based on those principles.

Now why is this happening? Why are some of these most admired companies in the world and some of the biggest names in the world all of a sudden taking into consideration and giving so much attention to social and environmental issues?

If you go back to the '70s and '80s, some economists would say that's actually a waste of time, a waste of money and waste of resources, and in fact, it could be irresponsible. And the argument was, businesses exist to deliver products to clients and make money for shareholders. And if you're utilizing your shareholder resources to do something else other than your business, maybe you're not being a responsible manager. That was the dominant view.

How come, with that background, all of a sudden businesses are engaging so actively in some of these actions? If you look at the Fortune 100 best companies to work for, another listing of where people would rather get jobs and where our graduates from Thunderbird want to work for, again you see some similar suspects. You have Starbucks, Microsoft, Cisco, cited among the top three.

If you go to the United Nations -- some of you might be familiar with the United Nations Global Compact, a list of 10 principles of social and environmental responsibilities. You'll see that there are companies around the world that have voluntarily signed up this declaration of 10 principles, including about eight large American companies, those are Cisco, DuPont, GAP, HP, Johnson Controls, Nike, Pfizer and Starbucks.

So why is this happening? And does it make sense that it is happening? Is it a fad that is going to go away, or is this something more profound that is happening?

There are several things are happening. One is, pretty much every non-government organization in the world and every aid organization in the world and every international institution has made it very clear that some of the biggest problems, the biggest issues in the world -- all the issues, for example, in the United Nations, millennium development goals -- none of those can be tackled without participation from the private sector. Most of the solutions are in the hands of the private sector. Now that doesn't explain that companies would actually take the lead. The fact that NGOs expect businesses to do something, that doesn't meant that businesses are going to go ahead and do it.

So what else is happening? Well, something is happening which is our customers have more power than ever before. I think the Internet has empowered customers to self-organize, to find one another, to boycott products, to put pressure on suppliers when they're not receiving the products they want, or when the companies that they're buying from actually behave in a way that they don't agree with.

What's happening also is that investors are putting pressure, increasing pressure on companies. The whole movement about socially responsible investment and shareholder activism (inaudible) still very small. When you look at the numbers, the percentage of money that is invested through socially responsible funds is still relatively small, but the rates of growth are huge. All the big pension funds are now under big pressure from their stakeholders to really have strong principles of governance and the like. So, that's also putting some pressure.

But all that is not enough. Although there are pressures that may incline some companies to do this, a major force behind all this is the idea of growing and developing global brands and global reputation.

In the last few years, we've seen how some of the strongest brands in the world like Arthur Andersen, the number one accounting and tax firm in the world, just vanished within months because of a mishap that happened in one of their practices with one client in the United States. Building a global brand can build lots of vulnerabilities. If you have a global brand, something wrong that happens in one part of the world can upset your operation all over the world.

The companies that are really battling in the global field, that are building global brands, that are trying to take their product to all over the place, they have become extremely sensitive to their issues about their social role. And now, even in management schools and research, we talk about social strategy. The leading companies not only have a business strategy, how they're going to position their product, how they're going to sell it; they also have a social strategy because brands are built not just around good quality of a product; brands are built also around emotions, around values that people ascribe to those products. When you see, for example, Starbucks offering coffee from free trade suppliers or offering coffee from sustainable development coffee fields or the like, that is not just a nice added thing to their operation, it's becoming, really, a core of what they do.

So one of the questions that is raised and that we are now dealing with in management education is, well, if engaging in social and environmental issues is becoming a more central and less peripheral part of managing a business, then how is that done and how are we supposed to train people so they can do that better?

This is a complicated question, but I think we are already seeing some clarity. One of the things that we know for sure is that companies are not charity. Companies do not exist to take the shareholders' money and turn it over to charities and good causes. The Economist had a very interesting special report about two or three weeks ago, where they talked about borrowed virtue, where managers take their shareholders' money and use it for charities. That's not what companies are for, but there are things that companies are entitled to do and things that are actually good business for them.

For that to be the case, several conditions have to be met. One of them is that whatever those companies do is related to the core business. It's not just throwing money at good causes. It's actually utilizing what the companies are good at. Is Microsoft providing free software, for example, to schools, or is a food company utilizing sustainable agricultural techniques, or is a supply company or a transportation company applying their logistics to take food to those who need it -- it's really something that takes advantage of the core skills and competencies of the companies.

The second condition for this type of social behavior to make sense is that whatever the company does help to create a more competitive environment. In other words, it's an action that is going to allow the company in the future to do better business. So it makes sense that you use some resources from your shareholders to do that because it's going to create a more competitive, a better environment for you to do your business.

We have lots of examples. A lot of people are talking about bottom of the pyramid. The next billion personal computers are not going to be sold in the U.S. and Western Europe. The next billion personal computers will be sold in the developing world. That's where the growth is. That's where the volume is. And if companies actually become active players in helping the development of those communities, helping to create a big middle class, they're the first ones who are going to profit from them.

The third condition that companies have to take into consideration when they engage in these things is, again, it's not something management does. It's got to be something that is central to the company, that engages the organization, that permeates through the organization, and really that is, makes employees be part of that. That's the only way in which really makes it believable proposition for a company.

And we see lots of these examples. For example, I just mentioned the best companies to work for, the list that Fortune produces every year. How many companies that you see here -- for example, Starbucks, Microsoft and Cisco, some of them, the fact they engage in some of these programs makes them a lot more attractive for specific groups of talented potential employees to work with them.

So, basically, in summary, in looking forward to your questions, I think my main message is that corporate social responsibility is not a fad. In fact, there are structural reasons why this is happening and this is happening so widely. It's actually some very fortunate reasons, at least some very fortunate effects the companies are reacting, and it makes this not only for the well-being of people and societies around the world, but it also makes good business sense.

And I hope that, not only at Thunderbird, but in the management education establishment, we take a note of this and incorporate this idea into the curriculum in the education of the people that we train. And with that, I would be delighted to engage in a conversation with you.

MR. BOOKBINDER: Let me just remind you to identify yourself and your news organization. Okay. Why don't we begin with Germany in front.

QUESTION: Michael Backfisch from Germany's Business Daily, Handelsblatt, which you know because you wrote the op-ed in July 2003.

I have a question regarding the social responsibility. There was a big debate in Germany when Deutsche Bank laid off or announced to layoff 6,400 people. Although the company had big gains. So how would you weigh a social responsibility vis-à-vis job creation? Does your notion of social responsibility also apply to that field or is it more this overall overarching goal which you just described a few minutes ago?

DR. CABRERA: Well, if you look at the Global Compact, for example, which is, I think, a very universal and encompassing declaration of good corporate behavior, about a third of the principles have to do with employment and employee rights. Now the mention they make is, it is your responsibility as a business to respect the rights, the human rights and the labor rights of your workforce.

Now, and this part I do agree with, the most liberal economic position, to be responsible to actually, just for the sake of creating employment, building a company that is not financially sustainable because at the end, everybody's going to pay.

So the idea is when a company creates employment, they engage in the contract with that person that goes beyond what's specified in the papers that you sign. You have a responsibility with regards to those people, with their future, their training, their development as people, their right, their working conditions. Now companies, single companies, are not in charge of employment issues in their society. And I don't think single companies should be held accountable for employment issues that have to do with countries and societies at large.

So I think that when companies sometimes, unfortunately, because of their evolution, need to downsize, that's what they have to do to survive as company; otherwise, they might be endangering their future. I'm not saying that in the specific case that you're mentioning that that was the only way out. You also know in management that there are many other alternatives that you are capable of implementing other than downsizing. The impact that you have in productivity, the impact that you may have in organizational commitment and the like, is superior than you actually do to cut down on your size.

MR. BOOKBINDER: Okay, why don't we go to Korea in the back.

QUESTION: This is Chong Hyuk Kim, working for Joong-Ang Ilbo in Korea.

What kind of role can advertisement play between has -- corporate reputation? I mean, if a company runs the advertisement very aggressively without really paying attention to the social reputation they can improve their social -- their reputation?

DR. CABRERA: I think the company's global reputation is based not only on the qualities of their product but also on an emotional attachment of people with those products. By advertising heavily the qualities of your product, you're doing one part of that. And yes, part of your reputation is related to the fact that the cars that you sell or the electronics that you produce are high quality.

But if you want to build a sustainable and global reputation, you have to add other emotional components to that. And that's when having at least a clear social strategy is helpful. And it does not mean that every single company has to aspire to solve the problems of the world, but at least to know what is your strategy, what is your contribution to world problems, that can help tremendously to build that reputation, in addition to whatever you do through your advertising.

MR. BOOKBINDER: Okay. Shall we go to Brazil?

QUESTION: I'm Lara Lima, Revista Expressao.

When being socially responsible means less profit and less competitiveness, how do the business managers make up their minds? Which is their priority? For example, when they would have to adopt the environment practice which their (inaudible) ignore.

MR. CABRERA: That's a great question. I guess the most traditional, pure economist view is that you have to choose A or B, and you have to choose always A, making profit over B, because that's what you're there for. That's why you exist. That's your mandate from your shareholders.

What we're seeing in the last years is that you don't have to choose between A and B in most cases. Sometimes introducing innovations that are environmentally sound, that actually create savings in your operation, and sometimes there are different side effects that make your operations more competitive. Engaging in some socially responsible practices with your employees might yield a better, stronger relationship, higher commitment, higher productivity.

So I think this whole decision of, do you want to make money or do you want to be good, I think we've overcome that fortunately. And now the question is, how can you do both? Because you cannot -- and I think that's absolutely clear -- you cannot sacrifice being profitable and competitive to the other causes. Because if you do, you will not survive.

MR. BOOKBINDER: Okay. Yes, let's go to Japan in the front.

QUESTION: My question is -- I am coming from Nikkei newspaper. My name is Kaznaki Fujita.

I am interested in the possibility of the investment side. There are lots of social responsibility investment funds, but not all the funds outperform, for example, the -- for example, the S&P 500 or such kind of index. From the viewpoint of social shareholder side, social responsibilities not always make profits for their investment. How do you feel?

MR. CABRERA: Well, the great thing is, is sometimes they do. The great thing is that there are funds. There are socially responsible funds. They do a lot better than the index. There are some that don't, but there are some that do. Now, if you look at the general funds the same thing applies, some beat the index, some don't. So I think what's been clear is that, again, you can be responsible as an investor and make money; it is possible.

The question is: How do you do that? But it has been proven that it is possible and there are lots of studies. When you look at, you know, the Dow Jones Sustainability Index and funds that are based on that index or the FTSE4Good Index and funds that are matched with that index, some of them are doing fairly well. The universe of companies in which you can invest that meet the criteria of socially responsible investment is pretty large.

The other side of what is happening is that it used to be the case that managers of the big pension plans felt like they could invest and basically vote by selling. You could be one of the major owners of a company, and some of the biggest pension funds happen to be the major shareholders in many companies. If they didn't agree with the position of management, they could just sell their stakes and leave.

And what's becoming clear is there is a lot more pressure from, actually, the investors, individual investors -- we want you to engage, we want you to play a role, we want you to actually vote by voting, not by selling. I mean, be an active player and make sure that you have an impact on what's happening.

So it's not just a question of, you know, social investment bringing money to those companies that behave better, but it's also a question of more engaged investors that are putting pressure on those who make the decisions.

MR. BOOKBINDER: We'll go to Korea first, in the back.

QUESTION: You mentioned some good companies which are playing a very important role in terms of the social responsibility. My question is, how much they are spending for that activities? Which person or property they are paying for that, average, in average?

MR. CABRERA: Well, it varies tremendously. I mean, in most states, it's very hard to assess because the ones that do the best job are not necessarily putting money outside of their operations, but they're integrating them within their operations. Companies, for example, that are working very hard to solve child labor issues in manufacturing, it is very hard to put a price tag on that, and that is social responsibility. They are going beyond their legal requirements in many cases to try to deal with child labor issues. So how do you prioritize that?

The thing that we're moving away from is writing checks that you can account for, into more of how you integrate these practices in what you're doing. So I'm not sure that the amount of money that is spent in some of these programs is necessarily the best proposition for it.

In Japan, the case of Toyota, the most profitable automobile company in the world, also makes it on the list as one of the most admired. Interestingly, one of the things that has helped the brand and the reputation of Toyota is their leadership in the hybrid cars. They play a huge role and they might be part of the future to tackle restrictions in emissions and so on. That is part of environmental responsibility. Here's a company that is a global company that is taking the lead in some of the research that might help reduce greenhouse gas emissions. It's hard to put a price tag to that.

MR. BOOKBINDER: Okay. I think we'll go to Brazil and then Germany next.

QUESTION: How do you analyze the situation in Latin America, and specifically in Brazil where many enterprises don't respect their labor rights of their employees and cause damage to the environment? Could you speak a little bit --

DR. CABRERA: If the question is, there are companies that do bad things, the answer is, yes, absolutely. If the question is, do multinationals tend to misbehave, the answer is, no, by no means. In fact, in many of the studies that are conducted, multinationals tend to bring higher standards with them of employment, for example. If I'm talking about general trends, you can always find specific cases where companies have misbehaved and some of them have paid highly for it.

But multinationals, because of what the risks they have, because of what they have at stake, they tend to be a little bit more sensitive also because they're bringing practices from their other operations. Sometimes the employment they're generating locally, tends to be higher than the local employment conditions. So, actually, I'm a believer in direct investment. I'm a believer in the impact that foreign businesses can have in really helping communities come out of poverty. Overall, the impact is very good.

I'm sure you're familiar with all the work of Professor CK Prahalad who has focused on the bottom of the pyramid, which is that one of the best ways in which you can actually help a poor society pull themselves out of poverty is actually doing business with them, not doing charity with them, actually doing business with them and producing products and distributing products for them and the like.

So I think, overall -- and I think that this is a condition that most everybody engaged in aid now has reached-- businesses have to be part of the solution because government by itself is never going to solve all the issues.

MR. BOOKBINDER: Okay. So we'll go to Germany in the front.

QUESTION: Yeah. Michael Backfisch, Germany's Business Daily. Handelsblatt, again.

You touched off a huge debate in July 2003 when you wrote the op-ed in Handelsblatt, requiring that future managers swear an oath upon their social responsibility. Could you describe a little bit how this idea developed, how it unfolded? Was it just a nice idea or did it develop into something tangible? And how does your school handle this?

And secondly, a general one, do you think that business ethics have become better after Enron?

DR. CABRERA: Yeah. About the business oath, that was a very interesting project and Handelsblatt played a key role. It came out a task force at the World Economic Forum by a group of young leaders and our idea was, well, if you accept that management is a true profession, just like medicine or law, then those who practice the profession of management ought to be trained not just in the techniques and the methodologies of practicing but also in some principles of how to use those techniques.

If you go to medical school, not only are you learning biology, anatomy and surgery, you're also learning the principles of practicing medicine. And when you graduate and get your diploma, you take some version of the Hippocratic Oath where you say these are things I'm going to do, these are things I will not do.

If you look at management, we're great at teaching the technique and we're great at teaching the methodology, but we're not so great at teaching the values and the principles of management, per se, and we, by no means, require students to take an oath when they get their diploma.

Well, we pushed the idea. We wrote an oath. We drew principles from different parts of the world so it could be a universal oath. We wrote an op-ed piece for the Handelsblatt. They started getting so many letters from different parts of the world that finally Handelsblatt had to put a website to post all the letters from deans from business schools from different parts of the world and from business leaders, even from some religious leaders and other parts of society.

What was amazing is that I didn't realize at the time that such a simple idea could create such huge debate. When you look at the oath, all it said is, "I'm going to respect the rights of the people that I employ. I'm going to be careful with how I use the environment and natural resources. I'm going to be truthful with my clients and my suppliers and I'm not going to steal from my shareholders." I mean, really, so if you ask anyone which ones of these things you disagree with, or they say, "Well, none." Well, there were people that were totally upset by the whole idea that we would even require management students to take an oath. There are some people that love the idea, some people didn't.

So what happened afterwards is right at the time I moved from my business school in Spain to Thunderbird, so now basically I brought the project with me. There's a group in Thunderbird, a group of students, the Honor Council, that are now taking the project. They're very excited. They're writing their own oath based on the principles of United Nations Global Compact, based on the draft that we elaborated for the Handelsblatt story, and they're drafting the Thunderbird pledge and we're going to start utilizing it in our April commencement ceremony.

Now, some of the arguments were, "That's very nice but it's totally useless. Do you think that by having a bunch of students taking an oath when they get their diploma that's going to change the world?" Well, you know, it might not change all the problems in the world but it might help. And I'll tell you what. When we started this project in my prior school, the fact of having this symbol of the oath makes everybody in the school -- all the professors, all the program directors -- to then take the issues of business ethics to heart. They say, if our students are going to have to take that pledge, we need to prepare them for that, we need to incorporate this knowledge into the program.

So the oath is actually having an impact backwards into what happens in the program, so I do believe that it will make a difference. So we're utilizing that at Thunderbird this year and we are working with the students. They're very excited and I am very excited. There were other schools that we used parts of it, in addition to Empresa in Madrid, and schools like MIT and Sloan. We worked with them closely and they utilized the oath in some exercises with their students. It's still not implemented. My hope is that eventually one day there will be some version of that oath taken around the world. We're not there yet by far, but we're still working on it.

QUESTION: (Off mike.)

DR. CABRERA: Ah, the Enron thing is, "Did it help?" It did help. I think business schools have taken -- for example, I'm on the board of directors of the ASCSB, the Association of Business Schools that issues the accreditation, the most important accreditation that all the business schools want to have. Well, now if you want to have that accreditation you have to prove that you're treating ethics in the curriculum. So it's no longer a choice: You have to conform, you have to deal with ethics. And all that -- the Enron and other corporate crises in the U.S. and in Europe and in other parts of the Europe, they had a big influence on that. So there have been, I think, lasting effects of those crises.

MR. BOOKBINDER: Okay, why don't we go back to Korea.

QUESTION: I wonder how the consumers are able to judge which companies are doing their best of social responsibility. Are you saying that they cannot but depending on -- cannot but depend on the advertisement or newspaper reporting or something like that? How consumers judge?

DR. CABRERA: Well, consumers are now more informed than they have ever been. And as I said earlier, I think the Internet has played a huge role in this. So part of it is the consumers do get that information. The other part is, some companies are very good or are becoming very good at sharing their beliefs and their practices with the consumers, but especially those companies that have embedded responsible practices in their core, that can be translated very easily to the consumers. And, you know, the issue about the Toyota case is a good case in point, but there are many others. So I don't think it's a question of advertising how wonderful you are.

But if there is a true and a core and a coherent responsible way of acting, at the end that inspires the consumer in a number of ways. If you are faking it, if you are just setting up some nice program to appear that you are -- consumers are not stupid. This is only going to help you build a reputation if it's core and if it's constant.

MR. BOOKBINDER: I have a question. Would you, Dr. Cabrera, would you address the role of government, that's the U.S. Government, in bringing about corporate social responsibility? What role does government play?

DR. CABRERA: Well, I mean, government plays a huge role setting up the rules of the game, and dictating what is acceptable and what is not acceptable. For example, the issue of bribing, which has huge and negative consequences in many parts of the world. Parts of Asia, Latin America also suffer greatly from bribing; bribing has awful consequences on all levels of society. Well, bribing has two sides, the briber and the bribee, which tends to be a government official.

So there are many issues that you cannot separate corporate behavior from government behavior. In any case, in many parts of the world because the institutions are not too solid and are still being developed, you can not operate under the old pretension that as long as I don't break the law, I'm fine, because in many parts of the world, the law or the law enforcement does not take care of those issues. So you have to go way beyond what's required by law to fall into the kinds of behaviors that we're talking about here.

MR. BOOKBINDER: Excellent. Do we have any final questions from the audience? Yes, Germany in the front.

QUESTION: A question regarding the quality of Thunderbird. I think --

DR. CABRERA: Wonderful.

(Laughter.)

QUESTION: You're great in international business and these kinds of categories, I think, among the top five, or maybe even top, number one overall in the U.S. What's the ranking in general? I think in April 2004, Thunderbird was tested rank 46 by the Financial Times. Where do you stand today and where do you want to go in the next few years?

DR. CABRERA: Well, rankings are nice when they favor you. (Laughter.) We don't -- (laughter.) In this case we're torn. Because, yes, when the rankings look at us as an international management school, they say you're the number one. The Wall Street Journal says so, Business Week says so, the U.S. News and World Report. Everybody says we're the number one in international management. We're delighted to be number one.

If you look at Thunderbird just as a regular business school, if you apply the same kind of criteria that you would apply to Wharton, you apply to Thunderbird, then we don't show up at the top of the ranking because we're not a mainstream, normal business school. For example, many of our alumni work in non-for-profit sectors. While some alumni from Thunderbird -- the new CEO of Nike, William Perez, he's a Thunderbird, doing the big corporate jobs, top responsibility. But we also have alumni who go back to Costa Rica and do an environmentally sustainable tourism project, people who set up NGOs, people who work for the Peace Corps, people who work for USAID or for other organizations. When you look at rankings and look at how much money your alumni make three years after graduation, all those alumni of Thunderbird really aren't (inaudible) in income. Of course, they're not. We have some of them who do the big corporate jobs, others don't.

So, that's the thing. We're always thrown because, yes, they say, "You're the number one in international management," but as a regular business -- well, we're not a regular business school. We're a combination. We bring together. We do offer an MBA in International Management that brings together business content with international affairs content, with language and cultural and cross-cultural communication and a lot of, you know, development, how to work in a culturally diverse environment.

MR. BOOKBINDER: Okay. Is there a last question?

Yes, China. Let's go to China.

QUESTION: Hi, Shanghai Wenhui Daily from China.

As we know, big companies like Wal-Mart, they are -- sometimes they' hiring illegal immigrants or they are moving to China or India where they can get cheaper workers just to make their products cheaper. And given the U.S. customers' cheaper products or satisfying the U.S. customers are part of their social responsibility, what about the Chinese workers and what about Chinese people? Do you have any detailed information about how they are -- what they are doing in China, helping the Chinese workers or helping Chinese customers?

Second, in your experience, have you found any difference between students from developing countries and students from developed countries about this issue about social responsibility?

Thank you.

MR. CABRERA: Well, two great questions. Well, Wal-Mart is a peculiar case. If they go to China, it's not to find cheap employment. They go to China to sell products to Chinese because they're a distribution company. So they have to be in whatever markets there are clients. And in China, of course, it's not only a huge country, but there is a huge emerging middle class that is just flourishing there. So then the Wal-Mart case is different.

Now, of course, the first advantage that a country has to attract foreign direct investment is lower labor costs. That's always the case. But there are many parts in many countries in Sub-Saharan Africa that have even lower costs than China. And no one would go invest there because they don't find other pieces of the puzzle: a strong enough educational system where you can have talented individuals, some basic infrastructure, some institutions, some transportation and the like.

So there are other factors. The low labor cost is always one. Now, is that not responsible? Well, I would argue it is, and in fact, what happens most of the time is when a country is very successful attracting foreign direct investments, those investments create higher quality employment. They normally pay higher wages than local employment does. It starts creating a stronger local economic cycle that, at the end of the day, brings the overall society, brings economic growth.

Now that economic growth also brings inflation and brings higher wages. My birth country, Spain, has experienced this. In the '70s, when Spain had not even joined the European Union initially, all the foreign direct investment was attracted by a very nice, working country with lower wages than the rest of Europe. The problem is, as a victim of its own success, wages in Spain are no longer that much lower than in the rest of Europe. In fact, they're a lot higher than what you find in Eastern Europe.

So what happens is, there is a cycle by which you need to start building other sources of competitive advantage, where lower wages no longer do it and you're going to have to look into others.

The Chinese are doing a great job. First of all, the Chinese in the last few years have raised, you know, 400 people out of poverty by the economic practices and that's been a fabulous impact of all that amount of foreign labor direct investment. Now the question is, how are you going to make those competitive advantages sustainable once wages start going up and you start no longer being the source of competitive advantage? Technology, research, other kinds of factors will have to do it.

MR. BOOKBINDER: It's 400 million, right?

MR. CABRERA: 400 million --

MR. BOOKBINDER: -- 400 million out of poverty?

MR. CABRERA: 400 million, depending on how you do the numbers, but we're talking about an amazing impact of economic development in the policies and the income of many, many people.

MR. BOOKBINDER: And the second question was about students and developing --

MR. CABRERA: Oh, thank you for reminding me that. Yeah, well, the beauty of Thunderbird, and it's amazing, is that it really creates a field where different cultures get together. And, yes, the initial impression of the students is about the differences. Everybody talks about their story the first day in class, when they looked around the table and there was a Chinese, a Japanese, an Argentinean, a Spaniard and they thought "Oh my God, this is a disaster. It's not going to work."

And by the end of the program, it not only worked, you learned that by pooling differences, you're sometimes much better off. If you're working on a marketing case, just bringing together the different angles and the different perspectives can give you solutions that you would have never come up by yourself or with people that are with you.

When people leave Thunderbird, all of a sudden, I think the sense is that underneath the apparent differences, we are not that different after all. And people do, maintain these strong friendships with colleagues from around the world.

Interestingly, I've seen some data -- when you ask people in the developed world or in the developing world is, "Should you invest in countries that don't have the same standards of labor rights as you do?" Well, if you ask Americans -- I think it's about 28 percent, according to a poll that I saw by GlobeScan, globescan.com; you can find the data there – only about 28 percent of Americans would say that it is okay to invest in places that don't have the same kind of labor rights. If you actually go to the developing world, 60-70 percent of the people say it's absolutely okay, yes, do invest even if we don't have the same kinds of worker protections. They don't want that to be the issue that keeps investment from coming. So, interestingly, sometimes the opinions are opposite to what we would normally think.

MR. BOOKBINDER: Okay, is there a final, final question? (No response.)

Okay, then. I would like to thank Dr. Cabrera for an excellent presentation and thank all of you.

DR. CABRERA: Thank you so much.