PRME Principles for Responsible

Management EducationLatin America Regional Meeting

December 6th,2011

Miguel A. Gutierrez

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PRME Principles for Responsible Management Education

• My comments for this morning are based on my experience as a practitioner

Why am I here?

– 21 years working at JPMorgan in different positions, the last 7 years as head of Emerging Markets.

– Chairman of the Board of Telefónica de Argentina 2002-2004.

– Chairman of the Board of Grupo Concesionaria del Oeste (Argentina) 2001-2004.

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PRME Principles for Responsible Management Education

– Board Member of Telefónica Internacional S.A. (Spain) 2005-2011.

•Member of the Institutional and Government Relationship Committee.

– Board Member of Telesp (Brazil) 2005 2011.• Member of the Audit Committee.

Why am I here? (cont’d.)

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PRME Principles for Responsible Management Education

– Board Member ABERTIS Infraestructuras (Spain) 2005-2011.

•Member of the Nomination and Compensation Committee.

– Founding Partner at The Rohatyn Group, a USA Emerging Markets Asset Manager with $ 3,5 billion in assets.

Why am I here? (cont’d.)

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PRME Principles for Responsible Management Education

• The events of 2008/2009 have caused significant turmoil and confusion among politicians and regulators. Pendulum shift to an extreme position.

Observations of current situation

• Legal and regulatory environment significantly changed.

– Several laws put into effect as a reaction to market events

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PRME Principles for Responsible Management Education

•Significantly overlapping regulations. Local jurisdictions competing for control of the regulatory process in a global economy

•Many of the laws and regulations have yet to be implemented

•High cost of compliance with all regulations•People do not have the proper understanding of

all the regulations governing their businesses as a result of their quantity and wide range

Observations of current situation (cont’d.)

– Countries implementing their own set of laws and regulations

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PRME Principles for Responsible Management EducationObservations of current situation (cont’d.)

• Institutional investors redesigning their own internal procedures following their experiences in 2008/2009 – self imposed regulations.– Direct investments as opposed to fund

investments– Manage accounts as opposed to fund

managed pools of capital– Reshaping internal controls and roles of

government bodies

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PRME Principles for Responsible Management EducationObservations of current situation (cont’d.)

• Corporations trying to comply with the rules and making sure that they tick the check box on all requirements.

– Sarbanes Oxley– Dodd-Frank – Bribery Act– FCPA • Paradise for lawyers and compliance

officers

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PRME Principles for Responsible Management EducationObservations of current situation (cont’d.)

• Society at large disappointed and angered by business scandals– Significant social and economic cost of

criminal actions– Pressure to take action and incarcerate

perpetrators– Questioning socio-economic values and the

people in leadership positions– Challenging the rule of law, institutions and

the educational system

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PRME Principles for Responsible Management EducationHow we get out of here?• I strongly believe we need to come

back to individuals using common sense to govern their actions when conducting business.– While laws and regulations help to provide

a framework there is no substitute for common sense

– Culture plays a significant role on human and employee actions.

•Corporate culture key to good behavior. People look at their environment and look up for direction.

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PRME Principles for Responsible Management EducationHow we get out of here? (cont.)

• Socio-economic cultural environment also determinates behavior.– Societies with high level of corruption and

weak institutional environments– Weak rule of law– Weak judiciary – Societies with high levels of inequality

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PRME Principles for Responsible Management EducationRecommendations • The question I was asked was how

business schools can help in this process• I believe there are many ways business schools can help:

– Instilling the use and application of common sense

•Follow the laws and rules but apply your knowledge and judgment

•Train your students on the appliance of the rules as an exercise of every day business life, not merely a checklist we must apply to avoid problems

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PRME Principles for Responsible Management EducationRecommendations (cont’d.)

• Reform the way these issues are presented to students. They should be embedded in the daily student experience: e.g. it has to be part of their “total academic experience” and be part of the decision-making tree they will experience and apply at the University day after day.• Teaching students the human cost of not doing business ethically and in compliance the law, but also making them understand the cost for the society in which they operate.•Let me share a couple of slides on the current European crisis that were brought to my attention by Professor Mauricio Rojas from the University of Lund (Sweden). You will see that all the determinants of the current crisis might arise be from the economic variables and mismanagement.

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PRME Principles for Responsible Management EducationNivel de Virtudes Cívicas

Fuente: V. Pérez-Díaz y J.C. Rodríguez, Cultura moral e innovación en Europa, Panorama Social 2011.

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PRME Principles for Responsible Management EducationCalidad Institucional: Corrupción del sector público(100= totalmente corrupto)

Fuente: Transparency International, Corruption perceptions index 2010

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PRME Principles for Responsible Management EducationExcelencia académica: puntuación entre 200Universidades top (2011, per cápita)

Fuente: Times Higher Education, World University Ranking 2011-2012

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PRME Principles for Responsible Management EducationRecommendations (cont’d.)

•Business schools have a significant role to play in molding the students but also in interacting with global/regional and local institutions at large to:

– Help to establish a global/regional and local regulatory and compliance system, with adaptations for local environments.

• A base structure to be applied globally the same way that the world gets together to organize commerce or other important activities

• Work with local governments to implement the rules and regulations that make sense for their particular country or region taking into account the cultural aspects that we described before. Help local business communities to understand the importance of following the rules and the society impact of doing things right.

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PRME Principles for Responsible Management EducationRecommendations (cont’d.)

– Help to change the culture of the society in which you operate to make sure that we help to make a change that will benefit society at large. Consider working with politicians, judges, government officials to make sure they understand the importance of these rules– Work with societies via non-governmental institutions to learn their concerns and how we can channel them through your every day life at the business schools

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PRME Principles for Responsible Management EducationRecommendations (cont’d.)

•I believe this will be a long process and one that will some time and trials until we find an stable solution, so please be prepared to play a very active role and participate in every possible way in the process.

•Thank you

•Society will thank you all for your contributions!