Can CEOs deal with image problem?

By Kim Tong-hyung

As the global conference of business executives kicks off Wednesday evening at the Sheraton Walkerhill Hotel in Seoul, what exactly do they have here?

Organizers, who are busy inventing superlatives like ``business Olympics’’ to tout the event, claim that the Nov. 10 and 11 G20 Business Summit will be enhancing the legitimacy of the Group of 20 process as the premier forum for international economic cooperation by strengthening private-sector input.

Skeptics see it becoming the less-glamorous sister to the annual World Economic Forum in Davos _ yet another glitzy fest for the rich and powerful. The massive amount of ink and electrons spent by journalists here to cover the forum’s shaping could mean that the business summit will never have the luxury of a middle ground in public expectations.

The relevance of the business summit will obviously depend on the 120 or more CEOs and high-profile corporate figures coming around a significant level of consensus on key economic challenges and provide something close to specific recommendations to governments.

The participating companies, which have been convening in working groups in the past four months to produce the reports to be discussed in the roundtable discussions that begin today, insist they are serious about having an impact.

However, some might argue that the reports, which were unveiled by the forum’s organizing committee on Tuesday, failed to offer more than the usual platitudes on the themes of trade and investment, ``green’’ growth and corporate social responsibility.

One could detect the sharpness in the writing involving finance industry bigwigs like Standard Chartered Bank CEO Peter Sands and Deutsche Bank CEO Josef Ackermann, who will surely have the ears of G20 political leaders and finance chiefs as they dissect the attempts to fix global finance.

In the previous business summit at the Toronto G20 meetings in June, the gathered business leaders, many of them representing the banking industry, criticized governments for creating too much uncertainty in financial sector regulation and called against the ``villainization’’ of corporate leaders in the financial sector.

It appears that Sands and Ackermann will be presenting similar arguments in Seoul as they urge for the enhanced rules on banks and other financial institutions not to be pushed so quickly as they impair economic growth.

The Basel Committee, a group of bank regulators from 27 countries, and the Bank for International Settlements (BIS), agreed to introduce stricter rules on banks’ capital requirements in September, including raising the ``core capital’’ ratio from the previous 2 percent to 7 percent. Banks have voiced frustration over the new capital rules, dubbed as the Basel III, which forces them to either issue new shares to add capital or cut back on lending.

Sands has claimed that the strengthened rules will force the gross domestic production (GDP) levels in the United States, Europe and Japan to be 3.1 percent lower than it would otherwise be by 2015, which would lead to 9.7 million fewer jobs created over the five-year period.

Ackermann, also the chairman of the international bank lobby group, the Institute of International Finance (IIF), has been particularly vocal about the debates on tightening regulations for banks, claiming repeatedly that the cumulative impact of the new regulations could hurt economic growth.

In their report for the business summit, Sands and other executives involved in the discussions for financial sector policy and regulatory reforms renewed their calls for consistent regulatory standards in global finance and raised the worries over looming financial protectionism. Governments should also work closely with the financial services industry to improve the financing environment for small businesses, and establish credit bureaus in emerging markets to effectively fund investment, they said.

Ackermann will lead a group of CEOs discussing the reductions in monetary and fiscal stimulus, who in their report called for the reduction of government debt, the avoidance of tax increases and the elimination of public guarantees on the issuance of financial sector bonds.

Another particular concern for the CEOs at the business summit appears to be the area related to trade and investment, as executives called for the countries to commit to completing the Doha Development Round in 2011, shelved protectionist measures and exempt trade financing from the Basel III rules.

Although there is a possibility of tension between the G20 leaders and finance executives in Seoul, it remains to be seen whether the CEOs involved in the discussions for green technology, youth unemployment and supporting poor and developing nations would manage to deliver hard-hitting messages as well.

Judging solely from the reports, the discussions related to improving energy efficiency, renewable energy and creating ``green’’ jobs, which heavily involves Korean companies like the SK Group, appear to be in danger of turning predictable and bland.

The recommendations by the involved CEOs include providing better financial solutions to help companies invest to improve energy efficiency, support research and development (R&D), pursue market-based carbon pricing, and accelerate the uptake of renewable and low-carbon energies as well as lead the transition toward ``smart’’ electricity grids.

For enabling technology advancement and productivity, the CEOs suggested the creation of a joint commission between the G20 and other relevant organizations, such as the World Trade Organization (WTO), to identify and reduce the barriers to productivity and innovation.

In addressing the impact of youth unemployment, the CEOs advised governments to provide adequate incentives and polices for stakeholders to create jobs and also look harder to lower the barriers for entrepreneurs.

In the issue of increasing access to healthcare in developing economies, the CEOs suggested governments to include global health as a permanent G20 agenda, urge developing countries to invest a larger portion of their budgets for health, and support global financing partnerships such as the Global Fund and GAVI Alliance.